Excellent piece by Cringely:

The decline of HP began, I think, with the spinoff of Agilent Technologies in 1999…

You see Hewlett Packard was in 1999 an instrument company that made a hell of a lot of money from printers, not a printer company that also built instruments…

Hewlett and Packard were instrument guys: had they still been on the job in 1999 they would have gone with Agilent.

The point is to say that the things that made HP great weren’t recognized by the people who ran it (“into the ground!” we’d like to shout) in its later years. ‘Professional managers’, as opposed to founders, need to really really understand why and how a company makes money.

It’s a key understanding that profitability isn’t in the numbers, it’s in the culture, in the people. Looking at HP’s numbers in the 90s, someone would say: “well, they’re a printer company that does all this other crap”. They’d also say about Apple: “they’re a computer company that makes a few cool accessories”.

HP’s power was the innovative capacity of its engineers, supercharged by its culture.

We’ve all heard how great it is that Google allows its employees to spend 10 percent of their time working on their own projects. Google didn’t invent that: HP did. And the way the process was instituted at HP was quite formal in that the 10 percent time was after lunch on Fridays. Imagine what it must have been like on Friday afternoons in Palo Alto withevery engineer working on some wild-ass idea. And the other part of the system was that those engineers had access to what they called “lab stores” — anything needed to do the job, whether it was a microscope or a magnetron or a barrel of acetone could be taken without question on Friday afternoons from the HP warehouses. This enabled a flurry of innovation that produced some of HP’s greatest products including those printers.

Understanding that point, that the printers were a lucky strike that emerged from an excellent, innovative culture was was absolutely critical to keeping HP on top. Such a culture could get lucky again and again.

But now the culture is a wreck.

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