DATE

: October 20, 2014

TO

: Executive Board, Hewlett-Packard Company

FROM : Anil Gandham, AG Consultancy Services

RE

: Analysis of the strategic and leadership challenges facing the HP Spin off

The CEO of Hewlett-Packard, Meg Whitman has, earlier this month, announced the separation of
its personal computer business and printer business from its corporate hardware and software
operations. As a leading consulting services firm, we would like to take this opportunity to analyze
and propose in a detailed report, the spin off and list out possible implications and outcomes for the
benefit of the Executive board. Firstly, we would like to congratulate you on the bold decision of a
tax free spin off and are sure that the decision will open up doors to a brighter future for the
companies, shareholders, employees and the customers.
In the report, we will discuss the timeline of Hewlett-Packard from inception. We will then analyze
the strengths, weaknesses, opportunities and threats of the spin off and what measures should be
taken to take complete advantage the spin off. We will then assess the future plans and provide
recommendations.
Introduction
Since inception, Hewlett-Packard leaders had an advantage that enabled them to learn and adjust as
few others did. In the era of conglomerate, they helped Hewlett-Packard grow its product offerings
through a series of acquisitions, all within its focused field of interest, i.e. electronics
manufacturing. Later, Hewlett-Packard pursued new opportunities in data printing, medical
electronics, and analytical instrumentation and entered international markets in 1959 with
marketing operations in Europe. Hewlett-Packard was also highly successful in acquiring firms
such as Apollo Computer and in developing strong partnerships with big corporations such as Sony,
Yokogawa Electric. Over years, along with the growing competition and highly agile business
space, the corporation's focus has gradually shifted to core businesses and improvement in
operational efficiency and in focused strategy. As part of the same, Hewlett-Packard has
successfully spun off Agilent Technologies, a design and manufacturing company that manufactures
electronic and bio-analytical measurement instruments. Today, Hewlett-Packards division into two
publicly traded firms acknowledges execution failures in winning share and increasing profitability
across divergent and often competing business units. The change marks the latest in a string of
divestitures and business model shifts across the business landscape where all-in-one firms such
as IBM, Dell and Cisco have exited, gone private or sold off units.
As Packard's law states, "No company can consistently grow revenues faster than its ability to get
enough of the right people to implement that growth and still become a great company. If a
company consistently grows revenue faster than its ability to get enough of the right people to
implement that growth, it will not simply stagnate; it will fall", Hewlett-Packard's inability to adapt
to the new era of mobile and online computing, along with a deviation from the HP way of

leadership, put Hewlett-Packard in a do-or-die situation and left with no choice than to spin off.
With decline in revenues in 11 out of 12 quarters and with layoffs of thousands of employees,
shareholders and employees expected the organization to act quickly to avoid further decline.
However, Hewlett-Packard's plans to split into two companies will definitely allow the businesses
to move forward as successful companies on its own and will allow them to refocus on areas in
which each of the business sees its strengths and capability to win. It will also let the corporation
focus on the fast growing corporate services market than the dull and almost saturated, ever falling
PC business. This strategic step provides each new company with the focus, independence,
financial resources and flexibility to adapt quickly to market and customer dynamics while
generating long-term value for shareholders and in return creating two faster, more agile and more
innovative companies in their respective markets. The split will drive deeper channel investments
and higher R&D investments.
The cost of separate marketing and purchasing departments and loss of economies of scale will
definitely be a challenge post spin off that can be compensated by innovation on marketing and
effective acquisitions. The split allows that business to move forward as a successful company on
its own and allows the other half of the business to refocus on areas in which it thinks it can win.
Recommendations
Post spin off, we advise the HP Inc. to explore new hardware arenas such as 3D printers. Easy
access to top class 3D modeling and design apps and software made it accessible for many people
to start printing on their own. With a growth in disposable income and purchasing power of the
users, in not just the developed countries but also in developing countries and with very less reliable
and high quality 3D printing manufacturers, HP Inc. should definitely venture in 3D printing
solutions and capture the whole new market of budding entrepreneurs, manufacturing units etc. 3D
printing technology is prominently used in the field of medicine and in manufacturing. With a
strong roadmap into the existing new technologies such as 3D printing and new computing
experiences, HP Inc. will be a leading personal systems and printing company in the near future.
HP Inc. should look at selling its PC division to concentrate on printing solutions and portable
devices at a consumer as well as enterprise level.
Fundamental shifts in technologies related to mobile, cloud, and ubiquitous computing will
continue to influence the role that IT plays in the enterprise and in our lives. In this emerging
ecosystem, the Instant-On Enterprise is one with the power to leverage technology to capitalize on
information rather than simply adapting to these changes. Hewlett-Packard enterprises should
venture into embedded computing services and the interconnection of them, Internet of Things.
With applications varying from Environmental monitoring, Infrastructure management, Industrial
applications, Energy management, medical and healthcare systems to Transport systems, Home
Automation, and with a worldwide market of close of $2 trillion, there is a huge scope of business.
Hewlett-Packard Enterprises should leverage the manpower and develop a strong research and
development wing to stay ahead of the competition in terms of innovation and application. HewlettPackard Enterprises should also look for M&A in the areas of Big Data, Cloud and Cyber Security
to build on the current expertise on similar fields. The services industry, which has been underinvested over the last few years should be revived and invested in the appropriate amounts in its
research and development to still ahead of the extremely competitive services industry. Hewlett-

Packard Labs should continue to invent for the future by delivering breakthrough technology
advancements in areas such as nanotechnology, color science, and social and economic systems.
The spin-off is a definite disruption to the business and will definitely help competitors such as Dell
increase the market share. In order to minimize the disruption, the disintegration must follow a very
efficient and seamless process.
Strategic alignment and Leadership
"A single focus on maximizing the value of the firm embedded in a sound framework of corporate
governance is the best guarantee for corporate success and the engine for prosperity and welfare".
Hewlett-Packard should constantly measure, match and manage its strategic alignment. A good
strategic alignment has an amazing effect on organizational performance. It will help people
perform better. People do so when they fully understand and accept the purpose and goals of their
organization, and they develop a better sense of ownership when they understand what difference
they make in achieving those goals. Hence, Hewlett-Packard Enterprises and Hewlett-Packard Inc.
should define the key business purpose, fitness criteria and core values, align the strategic goals,
align the business model and processes, align people and culture and move with a strong focus on
growth and innovation.
One of the most important asset to Hewlett-Packard is the workforce. A series of layoffs and hard
charging leadership has, over years, cratered the morale of the workforce. Over years, lack of L5
leadership has been reflected publicly and the company should look at change. The HP way of high
trust for individuals, extreme focus on high level of achievement and contribution, common
objective of achievement by team work, along with encouragement to flexibility and innovation
should be reintroduced in order to gain trust from the current and prospective employees. With
business dialogue, the leadership should learn to lead beyond control providing the human
resources the space to innovate.
To sum up, we advise you to revert to the HP way of governance, disintegrate the PC and Printing
business, pay utmost importance to Research and Development and venture into various innovative
enterprise services to be the next generation leader.
Best wishes,
Anil Gandham,
AG Consulting Services,
Amsterdam,
The Netherlands