Compass Points Reviews The HP Way: How Bill Hewlett and I Built Our Company

Paul Minton reviews

The HP Way
How Bill Hewlett and I Built Our Company
by David Packard
Harvard Business School Press, 1995 - 212 pages $10.40 (at Amazon.com)

Before his recent death, David Packard wrote a very accessible book about one of the 20th century’s great business success stories. The Hewlett-Packard Company, which he and Bill Hewlett started in 1938, grew steadily over more than five decades to its position today as one of the Dow 30 Industrials, a global brand name, and an exemplar of sound management practices that were dubbed The HP Way and provided the title of the book.

This book is filled with many examples and values that are consistent with the principles of Simplified Strategic Planning and will appeal to users of the process. It is also short enough that many executives can fit it into their crowded days.

Packard describes HP’s history anecdotally throughout the book, and devotes a chapter to each of the seven commitments of the HP Way. These commitments are:

Profit - “the ultimate source of corporate strength”
Customers - “continual improvement in the ... value of the products and services we offer customers”
Field of Interest – seeking opportunities for growth but limiting them to complementary products and services based on capabilities (Strategic Focus in Simplified Strategic Planning)
Growth - “a measure of strength and a requirement for survival”
Employees - provide opportunities,share in success, job security based on performance, and personal satisfaction
Organization -“foster individual motivation, initiative and creativity with wide latitude of freedom in working toward established objectives and goals”
Citizenship - “contributions to the community and to ... society”

In addition to explaining the central tenets of the HP Way, Packard presents numerous other insights for managers. Readers will find stimulating ideas and examples for themselves and colleagues.

It is difficult to select the most important or relevant items, but the following quotations are representative.

On common sources of failure:

“a single product rarely made a successful company”
“more businesses die from indigestion than starvation”

On pricing, profitability, and market share:

“One of our most important management tasks is maintaining the proper balance between short-term profit performance and investment for future strength and growth.”
“Often a product will be introduced to the market at a price too low to make an adequate short-term profit.... Often pricing also falls prey to the goal of ‘market share’.”
“Our policy at HP was to regard increased market share as a reward for doing things well.”

On communication:

“...personal communication was often necessary to back up written instructions. That was the genesis of what became ‘Management by Walking Around’ at the Hewlett-Packard Company.”

Other topics that may interest our readers include HP’s expected returns on R&D investment, methods for analyzing the importance of new products, principles for investing in training, evolving organizational structure, and use of Management by Objective. The book also displays examples of HP’s “vintage charts,” which show the mix revenues from products of various ages (see chart).

In reading this book one can easily understand why Jim Collins and Jerry Porras, the authors of the recent business bestseller, Built to Last, chose to study Hewlett-Packard in their research to identify attributes that many highly successful companies share. Readers have much to gain from understanding the sources of HP’s success and applying them in their own businesses.

For more information or to order your copy of The HP Way from Amazon.com, click on the title.

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