I had a chance to chat with HP’s current CEO, Enrique Lores. The company had a tough quarter last quarter but still showed one of the strongest financial outlooks of any of the vendors I cover. HP’s ability to execute under extreme adversity is now very well known. It fosters a company environment that is like family for both employees and partners, making it a stand-out against its competitors in these hard times.
Let’s talk about the importance of culture during times of economic disruption and change.
Facing unprecedented change
Every company, tech or otherwise, is now facing an unprecedented level of pressure and change. The pandemic made a mess of logistics, manufacturing capabilities, and prices, combined now with almost legendary inflation and government responses, all making for a very difficult sales environment.
Hybrid work flux, government uncertainty, wars, the surprise of generative AI, and buyers who are being pulled in every direction at once don’t make for an easy market to operate in. As a company, HP is a bit of a unique mess, as well. With its big footprint in PCs and printers, HP’s product set is unmatched by its peers, meaning it can’t easily slipstream another company even if it wanted to.
HP was structured poorly when it split off from HPE. Both units are still struggling with the broken synergy and significant resulting animosity between the units, making it more difficult for both to compete with growing multi-product, scale-out giants like Dell and Lenovo.
But HP also has the potential to focus better on its PC business because it lacks the distractions that having a more complete enterprise portfolio would create.
This focus has allowed HP to come up with unique products like its 3D printer line that now extends into colors and metals and unique PC and workstation products that have design and performance advantages. For instance, HP’s Dragonfly Folio laptop provides a far better solution for highly mobile folks, and its Z4 G4 Tower Workstation is the quietest I’ve ever tested.
Why culture is important
When times are tough, a positive company culture often keeps a business together and executing when all else fails. HP’s unique ability to embrace employees and partners helps keep both loyal and focused during hard times like these when distractions can overwhelm them and make recovery all but impossible. HP’s strong outlook shows that HP’s employees and partners are riding out this storm with the company and remaining focused on execution, which will be critical if HP is to meet the aggressive goals it has set for the year.
But HP has always been conservative in its outlook, suggesting that management isn’t seeing the kind of internal degradation that seems to be plaguing other firms that don’t have as strong a culture and whose actions may have, in contrast, alienated their partners and unfocused their employees.
HP’s unique ability to weather hardships and execute out of the corner it’s in remains an advantage for the company going forward.
Still, problems ahead
HP isn’t out of the woods. It will have to weather several storms for the remainder of the year, some unique to HP and some shared with the industry. Unique to HP is that its 3D printing effort doesn’t scale up or down well, meaning that as other markets (consumer/education) open to 3D printing, HP’s solutions don’t scale down yet to those markets, and they don’t yet scale up to full production capability, either. in HP’s defense, additive manufacturing in general has a scale-up problem.
On the PC side, we are approaching an AI disruption event that could result in a blending of PCs and smartphones where AI becomes the dominant user interface. Unlike Apple, Lenovo, Samsung (and a host of emerging Chinese vendors), HP does not have a smartphone product. Should these segments combine, HP would be unable to pivot with the market.
Finally, the cloud is emerging as an overall threat to the PC status quo and managing that has been a problem for every technology vendor, even those with a significant cloud presence (Amazon, Google, Microsoft).
Wrapping up
HP has been able to weather some impressive storms on the strength of its leadership and family-like culture, which has helped keep partners and employees focused. But there are significant additional storms ahead that will force HP to evaluate product lines, services, security platforms and technologies like generative AI. If the company doesn’t break its leadership and culture, I have every expectation it will be able to weather these coming storms and emerge stronger when things clear. That’s the importance of leadership and culture. It can make the difference between failure and success when times are tough, and times are very tough this quarter.
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