Why Bill Hewlett and Dave Packard Made HP What It Was

on November 6, 2014
Reading Time: 3 minutes

In my discussion of PC maker’s problems in a piece on the industry’s struggle with Apple, commenter David Olson wondered what had gone wrong at Hewlett-Packard: “Lots of success, lots of brains, lots of potential. What happened?” Although some of HP’s mistakes were the result of some odd bad moves, history contains some important examples of how a big and successful company can go seriously wrong.

A pair of electrical engineering grads from Stanford, William Hewlett and David Packard founded the company famously in a garage in Palo Alto in 1939. From the beginning, HP’s business was manufacturing electronic test equipment. It stayed out of the new growing computer industry (more based on the east coast of the US in the early days), though it came to dominate the high end calculator market. After Fairchild Semiconductor launched the chip industry, HP did start making semiconductors, mostly for internal use.

It also started making computers as they became a key to the test materials. Unlike others, HP had no interest in challenging IBM in the computer business, focusing on smaller devices useful to engineers and laboratories. Although HP eventually entered the standard PC group, its first important move in the industry was the introduction of the laser printer although it was not a HP invention. The original work was done by Canon and Xerox and one of the first desk laser printer was the Apple Writer. But the Apple Writer was expensive and Mac only. HP brought the product to the mass market.

HP, as run by Hewlett and Packard (the order of the names was chosen by flipping a coin by in 1939) was, somewhat like IBM, governed with a deep sense of the company’s virtues. A set of rules on integrity, teamwork, and trust of individuals, for as long as “Bill and Dave” ran the company and for years afterward, shaped the company. Hewlett remained CEO until 1978, but he and Packard both were active in the corporation for a decade after and there was never any doubt their replacement, John Young, followed their leadership. The next CEO, Lew Platt, also continued the tradition.[pullquote]A set of rules on integrity, teamwork, and trust of individuals, for as long as “Bill and Dave” ran the company and for years afterward shaped the company.[/pullquote]

Things started change with the hiring of Carly Fiorina, an AT&T and Lucent executive, in 1999. One of her first acts was to oversee getting rid of HP’s original instrument business (now Agilent), but the bigger move was the 2000 acquisition of Compaq. HP became a lot bigger, but also a company whose main competition was the mass computer business. It also set off a fierce, long fight in the board room between Fiorina and Walter Hewlett, William’s son. Fiorina,  of course, won, but never maintained the support of the Hewlett-Packard tradition. After another fight with the board, Fiorina resigned in 2005.

HP had been a successful company. It led in PC and printer sales and expanded corporate services with the purchase of 3Com and EDS. But the top management was an ugly mess. Mark Hurd, the CEO of NCR, was named to replace Fiorina. The tension between the CEO and the fractious board was never really healed and Hurd gradually lost popularity. In 2010, the board got rid of him after he was embarrassed by an affair with a woman who was an exhibition contractor. He was replaced by the unpopular Léo Apotheker of SAP, who spent a year trying to move HP into a more IBM-like position, proposing the sale of the PC and printer operations. He was done in by a $9 billion loss in the purchase of Autonomy, a British big data company, and that was that. Meg Whitman, an early CEO of eBay, took over in 2011, cleaning up HP. The company had failed to find a major role in the phone business (if you ignore Apotheker’s catastrophic management of Palm) and has had to deal with shrinking volume and profits. The current plan is to spin the PC and printer business off as HP Inc. — a business with a challenging future.

The management struggles since the arrival of Fiorina has hurt in an era when the competition has often had much more stable leadership. Apple has been led by Steve Jobs and Tim Cook. IBM, brought back from a near collapse by Louis Gerstner, has had steady management by Sam Palmisano and  Ginnie Rommety. Except for an ill-fated three year period when he stepped down from leadership, Michael Dell ran Dell himself.

It’s hard to predict just how the choice of management leadership will support a top corporation. But you can be sure big fights and and endless plots among leaders will chase success away.

Photo of Bill Hewlett and David Packard by HP.