[MUSIC]
We were looking at companies that had been able to transform themselves multiple
times because Intel had to do that too.
Transform itself from a semiconductor memory company to a microprocessor
company and Grove at the time was the CEO of the company that was now Intel,
the microprocessor company.
And so we looked around and we said, well, we had one close by.
HP has been able to transform itself four or
five times in its history up to the mid-90s.
And so then by the late 90s, when Carly Fiorina became the CEO, Andy and
I thought wouldn't it be interesting if we now wrote a new case about HP and
track over time how the new CEO is going to try to bring the company
to the next level of performance and so I did that.
So I got to know Ms. Fiorina and wrote case studies, and then I got to know Mr.
Hart to follow up with her, and I was able to write some case studies as well.
And so, I continue to be interested in trying to understand what
is it at HP that allowed it to do this multiple transformations and try to come
up with explanations that would go beyond just that it was a result of luck.
Or some random process or
just the fact that in place were some external factors that made it possible for
that company to continue to exist almost independent of who was running it.
So, that's why I focused on HP.
[MUSIC]
First of all, no board of directors,
even a dysfunctional one will want to hire a CEO
that they believe is incompetent and badly intentioned.
So we must assume, the null hypothesis would be that boards of
directors always try to hire, to appoint people that they believe are competent and
well-intentioned, but I think that is reasonable.
Yet, it turns out that these people sometimes end up doing things that
in retrospect may not look the wisest or the best.
And so, that's kind of interesting.
It would not be interesting if we could assume that boards just appoint anybody.
Dummies as much as smart people.
So that's one thing and I find that interesting to how do we learn from
the activities of people that we must assume were pretty smart to begin with and
that may nevertheless end up with less positive consequence.
So, that's one thing.
And the second thing is in some ways, I think in some ways,
at least equally important, maybe even more,
is that I try to adopt an emphatic approach
based on my belief that every CEO who comes in is
well-intentioned and reasonably smart.
And then try to understand that in fact the performance of every CEO,
except maybe the founders is actually cannot fully be understood in
terms of the actions that they took themselves because they are dealt
a hand that includes all the challenges left over by their predecessor.
And in turn, they will [COUGH] solve some of these challenges, but
they will leave some others for the next CEO.
So for instance, in the case of HP if you wanted to try to understand
the financial performance for instance of the company,
you know the stock market evaluation of the company.
If you were only to look at the period that someone was CEO,
an attribute that market performance only to that CEO,
we would be missing a very important piece I think.
So those are two things to try to understand.
Why do very smart people end up doing things that may or may not be so smart?
And secondly, how do we try to get a better understanding about
the time interdependency of performance of CEOs in long-lived companies?
[MUSIC]
One of the insights that I proposed is that messy beats perfection.
Now that sounds a little bit almost like,
it sounds almost a little bit simplistic, but
the underlying rationale for that is actually reasonably,
it has reasonably profound and the reason is as follows.
So, if you look at HP that we have been discussing.
HP really has never been a completely dominant player in
the industries in which it has been.
Printing came close, but never fully.
So as a result, HP always has been struggling and always has been looking for
something to make a contribution because David Packard had three principles.
Maybe I should say that.
One was we always want to make a contribution to our customers and
that contribution has to be big enough that it creates enough value,
that the shareholders will want the company to continue to be independent.
Those are the two key things.
The second thing that he basically put forth is we want to focus on
external competition not internal competition and the third thing was
we want to find new areas of technology where we can make that contribution.
That's the three principles and I try to examine throughout all these CEOs
to what extend did they adhere to those principles.
There was also yet something really interesting that late in his career
David Parker came up with and that created consternation within the company,
he cited the poem that is called a 19th century poem called One-Hoss Shay.
Nobody knows what a One-Hoss Shay really means, I didn't either.
But it means it was the one horse cart
that was perfectly designed that it would continue to exist for 100 years.
But at the time that it reached 100 years,
it would explode in thousands of pieces and
I think what Packard was trying to say was that's not what I want HP to be.
We don't want it to be a One-Hoss Shay.
So therefore, what is the link?
Well, some companies become like One-Hoss Shays because they
become locked in with the environment in which they operate and
they become very dominant in that environment.
But by being so dominant they must also do more and more to stay dominant.
And thereby, they become very specialized to that industry.
One of the reasons I believe that HP is a long-lived
organization company is that it has actually been,
I would say, lived in an ongoing way,
in a situation that's messy rather than perfect.
And by perfect, I mean, it has never become so
dominant in any given product market environment that it became so
dominant that it had to actually continue to do things to stay dominant and
environment became locked in with it and specialized to it.
And thereby lost its capacity to evolve,
which is to find new areas in which it could be
successful as opposed to staying in this one area.
And basically become locked in with it and have no escape from that prison.
[MUSIC]