PC RIP?
When the world’s largest personal-computer maker decides to stop making personal computers, eyebrows get raised.
This week, Hewlett-Packard announced that it’s weighing whether to spin off its PC business, a move that HP projects would raise profit margins even as it reduces revenue by a third. Rival Michael Dell mocked the idea, and The Wall Street Journal dinged HP Chief Executive Leo Apotheker for engaging in “a strategic flip-flop.”
But flip-flops aren’t necessarily an indication of bad decisions as much as an indication of new (or newly considered) data. And HP’s decision was apparently made after an analysis of market trends indicating that PCs face an inexorable decline—what Apple’s Steve Jobs, for one, has dubbed a “post-PC era.”
Image credit: Frank LaRosa
As we’ve noted before, Peter Drucker repeatedly emphasized the benefits of purposeful abandonment. “The change leader puts every product, every service, every process, every market, every distribution channel, every customer and end-use on trial for its life,” Drucker wrote in Management Challenges for the 21st Century. “And it does so on a regular schedule.” Drucker told managers to ask themselves a simple question: “If we did not do this already, would we, knowing what we now know, go into it?” If the answer is no, then the groundwork for abandonment has to be laid right away.
1. When a product has a few good years of life, but only a few. Such products require lots of attention, Drucker noted, and “tie down the most productive and ablest people.”
2. When the only argument for keeping something is that it’s been fully written off. This “has its place in tax accounting, but nowhere else,” Drucker said.
3. When an older product on the wane is diverting resources away from new products on the rise.
Is HP’s possible abandonment of the PC good business? What other kinds of products and services should other corporations be abandoning right now?
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14 Comments
Juat Muay
August 19, 2011Can’t agree more. The big question to answer is “What are people buying?”.
Manny Cervantes
August 19, 2011I agree but is the tablet or smart phone going to replace the PC-I don’t think so; I cannot visualize doing the sort of tasks that may require the right environment and tools while on the run or hunkered down over my cell phone like a praying mantis. How much productivity can you really do on an iPad or smart phone while on the run doing “more important ” tasks or things (what’s the hurry anyway?).
My iPad is great when I need instant information now or maybe read a few chapters of a good book, but for serious work? Don’t think so. I think the lemming mentality is at work here, just because a few current “gurus” say it’s time for change.
James Hinkler
August 19, 2011As Ms. Muay asked: “What are people buying?” The markets indicate that it is not PC’s, however the growth in electronics is with hand held devices, (i.e., smart-phones and tablets.) So I agree with HP’s decision to spin off their PC operations. Great long-term view!
Sergio
August 19, 2011HP’s move remimds me of the importance of putting Charles Handy’s Sigmoid curve into action:
Matt Bryan
August 19, 2011More importantly, and possibly counterintuitive to the move away from PCs, is their decision to dump their Tablet and put WebOS into hibernation. It’s unfortunately (for them) the correct decision because it is a poor executed iPad knockoff. Not so sure that dumping the PC line is a good move from an Enterprise Customer perspective since they are increasingly looking for single-vendor solution from end-to-end.
Dan
August 20, 2011As important to “What are people buying” is the more difficult “Why do your customers buy from your organization?” To really get people uncomfortable, “If your organization stopped doing business today, would the market care?”
I’ve always believed that a critical part of strategy is to decide on a direction but also deciding on what NOT to do.
Mike Grayson
August 20, 2011Asking the question “what are people buying?” is important but you could find your company outgunned by the competition because it presupposes that a product has already been introduced into the market. The “johnny come lately” position is not exactly one of strength – and then there’s the issue of dealing with those pesky patents.
Henry Ford said, “If I asked people what they wanted, they would have said a faster horse”. Innovation is the key to leading a company into the future. Simply dropping the PC business might be a very foolish decision when they could retool it so that it can offer innovative products – after all, they have spent decades building manufacturing, distribution and support organizations.
A decision to experiment with new products and treat them as independent “new ventures” that would pave the way to the future would be a much better approach. It might also secure them valuable patents that would insure a foothold in the future. Systematic innovation is the key to success. Abandonment without innovation is the beginning of the end.
George L. Williams
August 21, 2011My careers have been in government-funded technology research directed toward winning the Cold War. I have watched over the past 50 years or more much of that technology integrated into products in space, medicine, personal computing and consumer gadget markets. I think we have gnawed on that bone for far too long and made a religion of technology — as our “savior”, masking serious lacks in investment in education, infrastructure, and creation of new career paths for our youth. That job belongs to us all, perhaps with government help, but not government leadership.
This finance-driven phenomena we’re seeing, driving unbridled and unfocused concumerism may mean that Apple signifies a death rattle for our ecoonomy. What comes after Jobs? No jobs?
Maverick18
August 21, 2011Drucker once remarked that GM is better at buying and selling companies than it is at making cars.
One of the crimes of the Obama administration has been keeping GM from going under due to its gross mis-management and the steady decline of its US car business. The real question is whether the Government just postponed the inevitable at tax payers’ expense. Think twice before you pay extra for an extended warranty on your Chevy truck.
Dennis Howard
August 21, 2011H-P also announced it was discontinuing its tablet and smartphone efforts, after disappointing sales and unfavorable comparisons to Apple Inc.’s iPad and iPhone. H-P also cut the price of its least-expensive TouchPad to $99.99 from $499.99. This sounds like an “abandon ship strategy.” Apple has an estimated 90% of the tablet market; everyone else splits the rest. Innovation, to succeed, has to exhibit a leadership edge. Apple did this from the beginning by maintaining its distinct character as a company and a producer. Microsoft essentially commodified the rest of the computer industry. IBM was one of the first to bite the dust in PC’s. And that’s why Dell’s stock price is lower than it was 10 years ago, while Apple’s has gone up 17 times. It kept its “edge” as a fundamental element in its strategy.
Alba Patricia Valencia
August 21, 2011All is possible. The variations of demand produce different effects in distinct temporary horizons. Enterprises can enter and/or exit of market freely because the power of the market has the capacity to significantly influence market prices.
Todo es posible. Las variaciones de la demanda producen efectos diferentes en los distintos horizontes temporales. Las empresas pueden entrar y/o salir libremente del mercado porque el poder del mercado tiene la capacidad para influir considerablemente en los precios del mercado.
Brendan
August 22, 2011It seems HP is jumping on the smart phone and tablet band wagon, with not much succes. Is the PC dead or merely in need of serious reinvention? This could be the area that HP can be truly innovative and occupy a niche of the market that it can enjoy dominance. Trying to come late to the tablet party is, in my mind, futile. HP should be looking at new opportunities to forge new ground in the technology arena, perhaps redefining the PC can present new technology breakthroughs the same way the ipad did for mobile computing.
David McCormick
August 24, 2011I think by stableizing a organization that is commited to contribute a down fall or to exempt their chances to continue a product or invention which has enhanced the economy for years, this company should not be taking out of the melting pot by the goverment. Why should we pay for their mistakes and enhance their pockets with success and suffer the loss of modern technology of our future. It is enough that Pres. Obama has orquistrated a bail out for main street and left the side strees unprotected and which today we are paying off the defecits.
A Topic We Just Can't Seem to Abandon | The Drucker Exchange
January 4, 2012[...] we last addressed this topic, our focus was on Hewlett-Packard. At the time, HP Chief Executive Leo Apotheker had announced a plan to spin [...]