Harvard Case - Hewlett-Packard: The Flight of the Kittyhawk (A)
"Hewlett-Packard: The Flight of the Kittyhawk (A)" Harvard business case study is written by Clayton M. Christensen. It deals with the challenges in the field of Operations Management. The case study is 18 page(s) long and it was first published on : Jan 26, 2006
At Fern Fort University, we recommend that Hewlett-Packard (HP) adopt a comprehensive strategy focused on digital transformation to address the challenges posed by the rapidly evolving computing landscape. This strategy should encompass a combination of operational excellence, innovation, and strategic partnerships to ensure long-term success.
2. Background
This case study focuses on Hewlett-Packard (HP) in 1999, a time of significant change in the computing industry. The company faced challenges from the rise of personal computers (PCs), the emergence of the internet, and the increasing demand for lower-cost products. HP's traditional strength in the high-end printer and workstation market was being challenged by competitors like Dell and Compaq, who were leveraging their cost advantages to gain market share.
The case study's main protagonists are Carly Fiorina, HP's CEO, and the company's executive team, who are grappling with the need to adapt to the changing market dynamics.
3. Analysis of the Case Study
The case can be analyzed through the lens of Porter's Five Forces, a framework that helps assess the competitive landscape.
- Threat of new entrants: High. The low barriers to entry in the PC market, driven by the availability of off-the-shelf components and the rise of contract manufacturers, made it easy for new players to enter the market.
- Bargaining power of buyers: High. Customers had a wide range of choices, and the increasing commoditization of PCs gave them leverage to negotiate lower prices.
- Bargaining power of suppliers: Moderate. While HP had strong relationships with key suppliers, the availability of alternative sources for components provided some leverage to suppliers.
- Threat of substitute products: High. The rise of the internet and the emergence of cloud computing offered alternative ways to access computing resources, potentially displacing traditional PC-based solutions.
- Competitive rivalry: High. The PC market was highly competitive, with numerous players vying for market share.
HP's operations strategy at the time was based on a vertical integration model, where it controlled most aspects of the value chain, from component manufacturing to product assembly and distribution. This model had served HP well in the past, but it was becoming increasingly inflexible and costly in the face of rapid changes in the industry.
4. Recommendations
To address the challenges outlined above, HP should implement the following recommendations:
1. Embrace Digital Transformation:
- Invest in digital technologies: HP should invest in cloud computing, artificial intelligence, and data analytics to enhance its product development, manufacturing, and customer service capabilities.
- Develop a digital strategy: This strategy should encompass a roadmap for migrating core business processes to the cloud, leveraging data analytics for improved decision-making, and developing innovative products and services that leverage digital technologies.
- Transform the organizational culture: HP needs to foster a culture of innovation, agility, and collaboration to embrace digital transformation effectively.
2. Optimize Operations:
- Implement lean manufacturing principles: HP should adopt lean manufacturing principles to streamline its production processes, reduce waste, and improve efficiency. This can be achieved through value stream mapping, bottleneck analysis, and Kaizen initiatives.
- Adopt a Just-in-Time (JIT) inventory management system: This will reduce inventory holding costs and improve responsiveness to changing customer demands.
- Optimize supply chain management: HP should leverage outsourcing for non-core activities, such as component manufacturing, and focus on building strategic partnerships with key suppliers.
- Implement a robust Enterprise Resource Planning (ERP) system: This will enable better planning, forecasting, and coordination across the entire supply chain.
3. Enhance Innovation:
- Invest in research and development (R&D): HP should allocate resources to develop innovative products and services that meet the evolving needs of customers. This could include investing in new technologies like 3D printing and augmented reality.
- Foster a culture of innovation: Encourage employees to generate new ideas and develop innovative solutions. This can be achieved through internal innovation contests, hackathons, and dedicated innovation teams.
- Acquire promising startups: HP should consider acquiring startups that possess cutting-edge technologies or innovative business models that align with its strategic goals.
4. Leverage Strategic Partnerships:
- Form strategic alliances with technology companies: HP should collaborate with companies like Microsoft, Google, and Amazon to develop integrated solutions and leverage their expertise in cloud computing and other emerging technologies.
- Partner with software developers: HP should partner with software developers to create applications and services that enhance the value proposition of its products.
- Expand into new markets: HP should explore opportunities in emerging markets, such as China and India, where there is significant growth potential for computing devices.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: HP's core competencies lie in its expertise in hardware design, manufacturing, and distribution. These recommendations align with HP's mission to deliver innovative computing solutions that meet the needs of customers.
- External customers and internal clients: These recommendations address the evolving needs of customers in the computing industry, who are demanding more affordable, reliable, and connected devices. They also aim to improve the efficiency and effectiveness of internal operations.
- Competitors: By embracing digital transformation, optimizing operations, and fostering innovation, HP can effectively compete against its rivals like Dell, Compaq, and other emerging players in the computing market.
- Attractiveness: The recommendations are expected to improve HP's profitability and market share by reducing costs, increasing efficiency, and developing new growth opportunities.
6. Conclusion
HP's success in the future hinges on its ability to adapt to the rapidly evolving computing landscape. By embracing digital transformation, optimizing its operations, and fostering innovation, HP can position itself for long-term success in a highly competitive market.
7. Discussion
Other alternatives not selected include:
- Divesting non-core businesses: HP could have chosen to divest its non-core businesses, such as its printing and imaging division, to focus solely on the PC market. However, this would have been a risky strategy, as the printing business still generated significant revenue for HP.
- Merging with a competitor: HP could have considered merging with a competitor, such as Compaq, to gain economies of scale and market share. However, this would have required significant regulatory approvals and could have resulted in cultural clashes.
Risks and key assumptions:
- Execution risk: Implementing these recommendations requires significant investment and organizational change, which could pose challenges to HP's execution capabilities.
- Technological risk: The rapid pace of technological change could render some of HP's investments obsolete.
- Competitive risk: Competitors may adopt similar strategies, making it difficult for HP to maintain its competitive advantage.
8. Next Steps
To implement these recommendations, HP should:
- Develop a detailed implementation plan: This plan should outline the specific steps, timelines, and resources required to execute each recommendation.
- Establish a dedicated team: A cross-functional team should be assembled to oversee the implementation of the digital transformation strategy.
- Communicate effectively: HP should communicate its strategy and progress to employees, customers, and stakeholders to ensure buy-in and support.
By taking these steps, HP can successfully navigate the challenges of the evolving computing industry and position itself for long-term success.
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Case Description
Hewlett-Packard decided that, to grow more rapidly, it needed to design a revolutionary disk drive product that would create an entirely new market or application for magnetic recording technology. The company followed most of the "rules" good managers follow in such situations: heavyweight project team, lots of senior management support, etc. But it still failed.
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