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Fiorina: My Observations on Hewlett-Packard's Reorganization

HP is the world’s largest technology company.

It matters. With this in mind, I offer the following observations, from my “been-there, done that” vantage point.

1. Cost-cutting may be necessary for efficiency and effectiveness, but it is never sufficient for growth and the creation of long-term, sustainable value. While difficult on employees, cost-cutting is actually the easiest of management challenges. The harder trick is to make the right trade-offs between short-term gain and long-term success. Over the last several years HP has seen too much cutting for short-term gain and not enough investment for long-term success.

2. Any company’s success is based upon a fundamental understanding of what makes it unique. Put another way, long-term value requires real competitive differentiation. HP’s unique assets include its supply chain, its distribution network, the breadth and depth of its product portfolio, the diversity of its geographic presence and the size and loyalty of its customer base.

3. Successful differentiation results in growth and margin expansion. For HP , differentiation means consistent investment in R&D for ongoing innovation as well as investment in marketing to persuade customers that this innovation translates into unique benefit for them. Both R&D and marketing have been cut too much for too long.

"Cost-cutting may be necessary for efficiency and effectiveness, but it is never sufficient for growth and the creation of long-term, sustainable value." -Former CEO, HP, Carly Fiorina

4. While solid execution is always required, execution without a strategic direction leads to nowhere. A strategy for HP should capitalize on its unique assets. Acquisitions are not strategies. And even the best acquisition will fail if too much is paid. Solid acquisitions should accomplish well understood strategic goals. And while strategies shouldn’t change every year, constant strategic review is the hallmark of good management teams.

5. Growth and margin expansion require the right structures and processes but re-organizations alone cannot create value. Sustainable value creation also requires a focus on long-term goals, relentless measurement of progress and metrics that reward both risk-taking and success. HP employees have always been smart, committed and disciplined. Management needs to ensure that they are also optimistic, confident and innovative.

6. There has been too much dysfunction for too long in the HP Board room. This has destroyed value. The Board needs more people who understand large companies. Board members need to focus on long-term strategic direction as well as talent development and management succession.

HP’s legacy and history have always been important. And my personal history with HP obviously has special meaning for me. But the most important thing for any company, and particularly a technology company, is not the past, but the future. This is very difficult stuff and it will take time, but HP has the potential to create a great future.

Carleton S. (Carly) Fiorina was president and chief executive officer of Hewlett-Packard Company from 1999 to 2005. She served as chairman of the board from 2000 to 2005.

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