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Business & Real Estate

A new look at Silicon Valley's oldest startup


Courtesy of Webb McKinney
Los Altos resident Webb McKinney’s book “Becoming Hewlett Packard” is being translated into Chinese and Russian.

With startups like Uber splashed across the headlines – for better or worse – it’s easy to forget that tech juggernaut Hewlett-Packard Co. launched in a Palo Alto garage, the brainchild of two Stanford University grads.

While Silicon Valley has reinvented itself several times over since then, former HP executive Webb McKinney, a Los Altos resident and co-author of “Becoming Hewlett Packard: Why Strategic Leadership Matters,” thinks that today’s newest companies can still learn from Silicon Valley’s oldest startup.

“We wrote the book because we felt there were so many lessons in the HP story that were relevant to the new companies today,” he said of co-authors Robert A. Burgelman and Philip E. Meza. “Very few new companies are successful. Of the ones that are, very few of them are able to change when they have to change. HP was founded back in 1939 and has changed, survived and remained relevant after all those years.”

Written with both business people and academics in mind, “Becoming Hewlett Packard” was published last fall by Oxford University Press and is now being translated into Chinese and Russian. There has been a mass order for the Russian-language version, which will be used by students at Kazan State University, proving that the HP story reaches far beyond Silicon Valley.

Methodology

“Becoming Hewlett Packard” begins with two chapters of methods and charts, but the meat of the book is found in subsequent chapters. Each is dedicated to an HP CEO and explains how his or her leadership impacted the company. Chapter 3, for example, explores longtime Los Altos Hills resident David Packard’s tenure alongside co-founder William Hewlett.

“One of the factors we looked at in strategic leadership is how well can a CEO both drive strategy top down and enable it to percolate from the bottom up,” McKinney said. “The young people who are closer to the market have a lot of ideas about where business is going, while the managers a little higher up the chain are a little out of touch with that. At the same time, if you’re at the top of the company, you can see the broader strategic situation and opportunities that other people below may not see. You really need to build a culture that can do both of those things at the same time.”

Those who assume McKinney’s book is biased in favor of his former employer would be wrong.

“We actually give the later boards and CEOs not very high marks, because if you look at HP, two of the things that really went wrong was lack of succession and that they strategically got lost in the ’90s,” he said.

The book also examines times when HP’s leadership looked ahead – or lagged behind.

“Near term and long term, there’s always this question,” Webb said. “How do you deliver on your current business but make sure that you’re investing sufficiently in the future?”

Importance of culture

McKinney emphasized the importance of startup culture.

“Having a great business strategy and great products is also very important. They’re really both required, particularly as a company grows,” he said. “I think a startup can succeed based on a great product, but it can’t sustain itself without a great culture.”

But a great culture is about more than free food, shuttles and other perks that have become par for the course in Silicon Valley.

“The idea of the startup incubated at HP before being codified as ‘The HP Way,’” McKinney said. “By the time the company was ready to really scale, the culture was really well defined, and it really helped them scale.”

“The HP Way” boils down to five principles: technical contribution, profitable growth, the “trust people” mentality, contributing to the community and integrity.

McKinney believes that “The HP Way” is just as applicable today as service-based companies like Facebook Inc. strive for growth alongside product-based companies like Apple Inc.

“One of the values in the HP culture is to make a contribution,” he said. “Packard used to say that profit was the best measurement of your contribution. He was very much criticized in his day for saying this.”

So what has changed the most since McKinney left HP?

“I think the biggest difference is that at HP, people could do what I did – rise up and stay with the company for 34 years,” he said. “But now that bargain’s changed. Employers aren’t loyal, so then employees aren’t loyal.”

Looking beyond HP

When looking at today’s companies still in their first generation of leadership, McKinney said they face challenges as the industry shifts and some “get so big that it’s hard to grow.”

“The iPhone has reached a point where it’s so dominant,” he cited as an example. “That market is saturated and isn’t really growing that much. They’re probably at a point like where HP was in the ’90s, where their current business was maxing out and they had to figure out how to keep going.”

Reviewing today’s top companies, McKinney said he finds Amazon.com Inc. especially impressive.

“They’re in multiple businesses, they seem to have a very strong culture and they have a very clear set of driving principles,” he noted.

McKinney pointed to Amazon’s web services, web video and recent acquisition of Whole Foods Market Inc. as examples of the company’s strategic growth and ability to change. Referring to the ability to retain talent, he cited Amazon’s bonuses for employees who stay on every two years as an example of building loyalty between company and employer.

“Becoming Hewlett Packard” is available at Books Inc. in Mountain View and online at globaloup.com, barnesandnoble.com and amazon.com.

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