Is Hewlett-Packard Lean?

Hewlett-Packard is not a company one normally thinks of as pursuing a lean strategy. Indeed, as far as I can tell, lean terms are not ingrained as part of HP’s vocabulary.

            But HP is doing well, and at least one profile I’ve seen implies that some of that success involves lean principles – consciously or not.

            A recent issue of Forbes declares HP to be “Tech’s New King,” noting that, for the first time, HP’s sales – $92 billion in 2006 – have passed those of IBM.

            The story gives a lot of credit to CEO Mark Hurd, who assumed his job on April 1, 2005. After the mediocre performance under Carly Fiorina and the spying scandal that brought down chairman Patricia Dunn, Hurd has quietly cut costs, reorganized, and boosted sales, profits and the stock price.

            How has he done it? Several of the methods mentioned in the story embody what a lean strategy is all about. For example:

            An unrelenting desire to improve. “The day you feel like you’ve won, you need to drive out of the parking lot and not come back,” Hurd is quoted as saying.

            Dedication to measuring performance. The story describes how Hurd questioned top executives about their divisions. One was Steven Nigro, a senior vice president.

 

            'If you can't explain this better than I can,' he told Nigro at one point, 'come back in two months and tell me then what's going on.' When they met again as planned, Hurd recalled every number Nigro had told him, without resorting to notes. News of such meetings flooded management, and the message was clear: You must understand how the revenue moves through your business and how your business fits into HP.

 

            That’s also an example of policy deployment and aligning goals (hoshin kanri).

 

            Adopting a lean organizational structure based on products. Hurd found that HP’s most powerful executives controlled only 30 percent of their budgets. Marketing and selling were run by the Customer Solutions Group (CSG), set up by Fiorina to get rid of autonomous product-line fiefs. She succeeded in reducing the number of brands, but the structure blocked direct feedback from the sales force to product designers.

            Hurd eliminated CSG and handed budget control over to product division heads. The result:

           

            'Now I have 80% control of my P&L. Sales, marketing and supply are all under my control,' says Ann Livermore, who runs the servers, software and services division. Todd Bradley, head of HP's PC division, adds: 'It's a no-place-to-hide model. Accountability is a big part of the strategy.'

 

            Hurd is still dealing with the aftermath of the spying scandal, and much remains to be done. But it sounds as if he understands, perhaps implicitly, what lean is all about.