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The Ballad of H-P & the Wake Up Call for SMBs

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The Ballad of H-P & the Wake Up Call for SMBs

Wednesday’s WSJ headline read: “What’s Gone Wrong With H-P”?  Well first the backstory from the article:

Backstory
  • 9 months to July 2012 $5.8Bn loss – compared with 9 months to July 2007 when they made $5.1Bn profit
  • Same period sales declined 5%. In 2007 sales were growing at 13%
  • PE ratio now 5.5. At the end of 2007, 25.
  • Recent Case Study by Kimberly Elsbach, professor at University of California states: “There’s an anxiety that permeates the workforce that has a chronic impact on people.”
  • Four CEOs have run H-P since 2005.
  • Overpaying for acquisitions – wrote off $8Bn of the $13Bn EDS deal and within a year of the Palm $1.2Bn acquisition closed it down. Last year H-P spent $10Bn on software group Autonomy. 66% of that price or $6.6 billion was goodwill or the premium they paid over the balance sheet assets.  H-P had spent so much on Goodwill on of all their deals that it exceeds the value of the whole of HP.
  • R&D spending has dropped
  • Sales expenses continue to climb as sales drop.
  • As Martin Reynolds, an analyst at Gartner puts it, “while H-P has some compelling products, the company is unable to communicate the value of H-P.”
  • Current CEO Meg Whitman states that there are no silver bullets and that H-P won’t achieve meaningful growth until at least 2015.
And you thought you had problems growing your business from $10m to $100m! If you you have time, please read  the full article and ask yourself, ignoring the size of the numbers, could this happen to my business over the next 5 years.
Wake Up Questions
  • Do I have a focused plan to monopolize my special niche of the market with products that really connect with the customer?
  • Am I relying on legacy products to keep me ahead of the competition?
  • Am I zooming out to look at my industry and how to change it or am I spending way too much time zooming in inside the weeds?
  • Are my staff engaged in the cause, or are they punch drunk from the struggle to get through each week?
  • Am I translating my company’s core value propositions right down to a compelling story at individual product or service levels?
  • Is my balance sheet compatible with the 5 year road ahead? Is it fit for purpose?
  • Do I have alignment between my costs, my sales and my long term goals?
  • Am I really just trying to grow my business instead of scaling it for long term sustainability?
  • Is it time to jettison those non core activities that never generate a decent return and that you aren’t very good at?
  • Working on your business instead of in your business is the duty of a CEO. Your staff deserve it.
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About the Author

Ian founded The Portfolio Partnership (TPP) in 2009. TPP is an operational consultancy focused on scaling private businesses organically and by acquisition. He believes his resume of building 4 previous businesses from publishing, investment banking to software in Europe and the States gives him a unique set of skills and a sense of humor. He remains a competitive masters track & field athlete and was ranked #4 indoors in the world for his age at 400m in the recent 2015 indoor season.

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