Hewlett-Packard is furthering its reorganisation that began in earnest last month, forming four decentralised business units, each with its own chief executive officer and the latitude to formulate business and partner strategy independent of the other groups.
The formation of the four units - enterprise computing solutions, computer products, inkjet imaging solutions, and laserjet imaging systems - was announced last week by chairman and CEO Lew Platt, who announced his forthcoming retirement in March when HP spun off its test and measurement business, resulting in two separate companies.
Although the payoff could be several years out, this latest phase of HP's reorganisation will allow the company to focus more directly on each of its key markets, while fostering cooperation among the units where needed, according to Amir Ahari, a US analyst at market researcher International Data Corp (IDC).
"It makes sense, trying to focus groups around specific markets and core positions where they can focus on core issues while working together," Ahari said. "One example is the printer business, which has a strong channel strategy. It makes no sense [having them exclusively] bundled with HP systems from the start. They and the systems groups often conflicted with each other. So really, by building core groups, HP gets around that."
Working independently, the four units can more easily keep an eye on and respond to market conditions, according to Ahari.
"The focus of each unit needs to be on cost advantage in low-end products. They need to be nimble in how they manage inventory and control costs."
All four of the new CEOs will continue to report to Platt, but now have "full authority to adapt their business models to their own competitive landscapes", Platt said in a prepared statement. Ann Livermore will head up the enterprise computing solutions business; Duane Zitzner will take over the computer products business; Antonio Perez will lead the inkjet imaging solutions business; and Carolyn Ticknow will lead the laserjet imaging systems business.
Platt also said the separate businesses will address issues such as acquisitions and alliances according to their own terms, rather than being dependent on corporate policy. But certain aspects of the business will remain centralised, such as the HP brand, intellectual property, and HP labs.
While the fine-tuning of HP's business model may result in trimmer, more efficient groups, the four-unit structure will require some investment, Ahari added.
Better late than never
"It's a double-edged sword. They can reduce redundancy, but there are overhead costs in trying to find the right person for the right role. Though, ultimately, that's a secondary concern, since they're moving to a better business model and better bottom-line opportunities."
Overall, the recasting of HP is late in coming, according to Ahari.
"I would've advised them to do it about three years ago, when they maybe wouldn't have had to do the breakup. I'd have encouraged them to do more collaboration on the hardware side, a la IBM, using the service organisation to win sales and follow up with the products," Ahari said.
Under the latest plan, each unit will be able to establish product alliances and corporate deals with third-party organisations and keep them separate from the overall HP organisation, essentially establishing HP as a holding company for the four business units.
While the decentralisation is another step in the right direction, it could be as long as three years before the benefits are realised, according to Ahari.
"[Reorganisation] is never a painless process. I expect HP to hold its own, but I don't think it'll be able to capitalise on the changes initially. It takes time for business units to get used to each other and work with each other, and to focus on a concerted message. But, in two to three years, they should be back on track, assuming they've learned to execute this new business model."