First and foremost, HP has a problem with image. So much negative news surrounds the company that investor, employee and customer concerns all reduce the firm's ability to execute.
Both Steve Jobs and Louis Gerstner, IBM's turnaround CEO, focused on image early on in their tenures. Both succeeded because this focus on image gave them the time to survive what is a five- to seven-year process. Since this buys time, getting HP's image to a point where people trust the brand again has the highest priority.
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Next, HP should package the parts of the company that are no longer core to the "new HP" and sell or spin them out to investors. This improves HP's balance sheet, removes much of the complexity of the problem from the remaining executive staff and leaves the new firm focused on a single industry with the resources it needs to successfully compete.
HP Can Learn From Chrysler, Apple and IBM
Chrysler, IBM and Apple all went through successful turnaround efforts. (In fact, Chrysler CFO Jerry York ended up at IBM for its turnaround and was on the Apple board of directors when Jobs came back.) While Chrysler slipped again for other reasons, all three companies followed the paths I've outlined.
The problems facing any company in need of a turnaround effort are overwhelming. It isn't that the people in charge aren't smart; they're overwhelmed. If you don't fix that part first, then a turnaround tends to be unprofitable. This is rarely a CEO problem, either; in fact, HP's tendency to rapidly replace CEOs has only made things far more difficult to fix.
This problem starts with the board. On paper, HP's board of directors is world-class, but it has to step up for HP's turnaround to succeed.
Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.
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