The Smith Report - Operational Playbooks

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 2010. TPP is an operational consultancy focused on scaling private businesses safely. 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 in 2012 was ranked #2 indoors in the world for his age at 400m.

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