Notes from The HP Way

David Packard’s memoir about Hewlett-Packard’s growth is notable mostly for its consistency. The book’s “rah-rah” tone is consistently upbeat, so much so that I often doubted he was telling everything about the story. But the examples of his and Bill Hewlett’s decision-making were consistently good and from a consistent point of view that was inspiring and refreshing. As we go through yet another dot-com craze, it’s good to see the history of a company that has lasted longer than the fads.

### Notes

Packard talked about his famous “management by walking around” strategy, which sounds a little too much like _Office Space_’s “Peter…what’s happening?” boss:

> That was a very important lesson for me–that 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. – 27

> We have a technique at HP for helping managers and supervisors know their people and understand the work their people are doing, while at the same time making themselves more visible and accessible to their people. It’s called MBWA–“management by walking around.” – 155

Interestingly, they priced their products the same way Google priced their secondary stock offering–by the number’s similarity to famous numbers:

> Our pricing was even more naive: We set it at $54.40 not because of any cost calculations but because, of all things, it reminded us of “54-40 or Fight!” (the 1844 slogan used in the campaign to establish the northern border of the United States in the Pacific Northwest). We soon discovered we couldn’t afford to build the machines for that price… – 42

One of their first partners held meetings to help him learn about things; great idea!

> He loved to expound and philosophize on new ideas. And whenever he wanted to learn more about something, he’d organize a seminar at his shop and invite me and a few other people, usually from Stanford. – 43

Advice from an engineer the bank sent to check out the new company; to be careful how much money and opportunity to take early on:

> He said that more business die from indigestion than starvation. I have observed the truth of that advice many times since then. – 52

HP’s original company objectives are fascinating:

>1. Profit…”profit is the best single measure of our contribution to society”
2. Customers
3. Field of Interest…”limiting our involvement to fields in which we have capability and can make a contribution”
4. Growth
5. Employees
6. Organization
7. Citizenship…”making contributions to the community and to the institutions in our society which generate the environment in which we operate” – 80

More on profit:

> If we do a good job, customers pay us more for our products than the sum of our costs in producing and distributing them. This difference, our profit, represents _the value we add to the resources we utilize_. – 83

Again similarities to Google, this time in choosing products. It’s easy to do this when your customers are all engineers too. Google should be careful about this now, though:

> We called it the “next bench” syndrome. If the idea for a new instrument appealed to the HP engineer working at the next bench, it would very likely appeal to our customers as well. – 97

But they had profit (a.k.a. “the measure of our contribution”) make the final product decisions, which biased them toward especially innovative products:

> At HP we often used to select projects on the basis of a six-to-one engineering return. That is, the profit we expected to derive over the lifetime of the product should be at least six times greater than the cost of developing the product. – 97

The famous award for “extraordinary contempt and defiance”; an example of big company process trying to kill a really good idea, something many growing companies should watch out for:

> He found that I, among others, had requested it be discontinued. He persuaded his R&D manager to rush the monitor into production…representing sales revenue of $35 million for the company. Several years later…I presented Chuck with a medal for “extraordinary contempt and defiance beyond the normal call of engineering duty.” – 108

Interestingly, they took the opposite approach that Google’s “Founders Awards” do:

> We had to try to emphasize and strengthen [teamwork]. That’s one of the reasons we didn’t single out divisions or groups that were doing particularly well…It’s imperative that there be a strong spirit of helpfulness and cooperation among all elements of the company… – 128

One weird quirk about hiring back ex-employees, often whom had left to start their own companies:

> We’ve always taken the view that as long as they have not worked for a direct competitor…they are welcomed back. – 138

HP’s strategy for growth, splitting along product lines:

> So it became our policy…to split off part of the division, giving it responsibility for an established, profitable product line and usually moving it to a new but nearby location. – 146

The power of prototypes!

> I wanted to build two prototype fighter planes…The F16 has become the best air force fighter plane, and the F17–renamed the F18–has become the best navy fighter. – 181-2

There will be more…

> When I think of the phenomenal growth of the electronics industry over the last fifty years, I realize how fortunate Bill Hewlett and I were to be in on the ground floor…I remember lamenting that I had been born one hundred years too late, that all the frontiers had been conquered, and that my generation would be deprived of the pioneering opportunities offered our forebears. But in fact, we went on to make breathtaking advances in the twentieth century. – 191