Hewlett-Packard has had some bad luck with CEO’s. Carly Fiorina and especially Mark Hurd have certainly made contributions to the company. Although I am still not convinced that Fiorina’s acquisition of Compaq was best for HP, she certainly created a marketing vision and boosted the visibility of a company that was generally lacking in both. Hurd meanwhile, provided the financial discipline and accountability that HP so desperately needed and approved some key acquisitions that have dramatically enhanced the scale and value-add of HP’s software, networking and especially its services businesses (see my 2009 report, “Can HP TSG and EDS Transform Each Other?). This being said, I still puzzle over the recent acquisition of Palm.

But while both CEOs provided their own types of value, both proved to be largely incompatible with—and fundamentally disruptive to—the HP culture. Fiorina was too shameless of a self-promoter for the traditionally collegial organization and did not provide the type of discipline the company so desperately needed. Hurd provided discipline in spades. Unfortunately, his no-prisoners style alienated and demoralized employees and his lack of focus on—and lack of funding of—marketing perpetuated one of the company’s greatest, oldest weaknesses.

There’s no question. HP’s culture certainly needed disruption. The company had become too bloated, complacent and sclerotic. But was it really necessary to destroy so much that was good in the company? So much that defined a unique organization?

I don’t know the real answers to these questions and I don’t intend to dwell on the past. But the questions of HP’s needs and culture do bring up a number of other questions that are fundamental to the board’s critical decision as to who to select as the company’s next CEO.

We have heard all types of speculation on the most likely candidates—everyone from Mark Andreessen to Steve Mills and Ann Livermore to Vyomesh Joshi. Such speculation, however, is putting the proverbial cart before the horse. Before HP can even begin decide who it wants for a CEO, it must decide what it needs from a CEO.

To decide this, it must first ask and answer a number of fundamental questions. Among the most important are:

• What kind of company does HP really want to be in the future?
• What are the qualities that it most needs in a CEO?
• Where should it look for its next CEO—and the one after that?

Questioning HP’s Future

HP is really multiple companies. It currently divides itself into three separate, essentially product-focused groups, each based on different classes of technology and solutions. One is focused on enterprise computing products and services (primarily servers, switches/routers, software and services), one on printers (from consumer through commercial) and one around personal systems (primarily PCs, and a dabbling in PDAs). I, however, look at the company’s divisions a bit differently—more as a 2×2 matrix (see below figure), with the:

• Horizontal axis representing whether the value-proposition is based primarily on product features and price (as it is for PCs, PDAs, industry-standard servers, basic printers and so forth) or a service-based solution to an underlying customer need (as with enterprise servers, enterprise services and commercial printing and imaging systems); and the
• Vertical axis representing the target market and whether the people that influence and make the purchase decision are individual consumers or businesses.

The HP Business Matrix

When you look at it this way, HP must decide whether the company’s real value-add and differentiation lies primarily in:

• Being a products company (such as Dell) or a solutions company (like IBM);
• Focusing primarily on business customers (like IBM) or consumers (like Apple), and/or
• As a technology portfolio company (like IBM used to be, or what GE has long been).

Although each model certainly has advantages and drawbacks, I (of course) have very definite opinions as to:

• Which is best suited to HP’s current strengths—products (primarily business products, with consumer a distant second); and
• Where its greatest opportunities lie—all classes of business solutions (from SMB through large enterprises).

But whichever model HP selects as its primary strategic focus, it should decide before it begins compiling a list of CEO candidates. It must then identify the qualities that are required for a CEO of that specific type of business and identify a pool of candidates with the inclination, skill set and perspective that are best suited to that business.

It should then measure these candidates against such critical filters as:

1. Who best shares—and can most effectively communicate (both to HP employees and customers)—the vision of what HP aspires to become and how it will get there;
2. Who has the experience in and a unique ability to effectively market and organically grow this business; and
3. Who can best maintain the discipline imposed by Mark Hurd while simultaneously identifying and fostering a new unifying corporate culture and reviving the morale that was lost over the last decade. [The original HP culture is too far gone to resurrect. The new culture must somehow integrate the remnants of what is left to the old component cultures (HP, Compaq Digital, EDS and so forth) into something that is totally new.]

The need to redefine HP’s culture and morale all brings up some even more fundamental questions:

• Why, when each of HP’s last three CEOs were forced to leave, did the company have to go back to square one to identify a successor; and
• Why, after assessing all the options, could the board not find anybody within the company who was capable of taking the reins? Why was it forced to run the risk (realized in both of the previous cases) of introducing a “foreign antibody” who did not understand, was generally incompatible with and who ended up diminishing the company’s culture and morale?

Has HP’s board ever heard of the concept of succession planning? Why does it not practice the type of functional and geographic rotations that are so central to the employee development practices of other world-class corporations? Will the company ever again be in a position to choose from a list of highly qualified internal candidates who truly understand and are compatible with the company’s culture—whatever that culture is determined to be?

This all leads to an even more fundamental question about succession plans. Is it time for a succession plan for the HP board?