What HP’s Meg Whitman Appears to Have Learned From Steve Jobs
Among the many comments that Hewlett-Packard CEO Meg Whitman made during yesterday’s conference call with analysts, one in particular stood out to me. Here it is, emphasis mine.
First is fixing our execution, ensuring we have the right systems, processes and people. This includes things like optimizing our supply chain, including SKU reduction, to remove unnecessary complexity from the way we design, manufacture and deliver products; upgrading our sales tools and systems to respond more quickly to customers; and increasing the productivity of our sales force by rationalizing our go-to-market.
For those who don’t know, a SKU — pronounced “skew” — refers to something called a stock-keeping unit. It’s business shorthand for a particular model or type of product. A PC with a certain processor, certain amount of memory and certain capacity hard drive, and in a particular color, is a SKU. The same goes for models of printers, smartphones, or different versions of products sold into different distribution channels or with different options inside the box.
What Whitman is saying is that HP is producing too many different types and configurations of products, and this is injecting a lot of expensive operational complexity that might be getting in the way.
My ears perked up at this during the conference call, and when she repeated the phrase on CNBC today (see video below). It took me back in time to — of all things — the very first Steve Jobs MacWorld keynote I ever attended. The year was 1998, the MacWorld Expo that year was in New York and I had begged my boss at the time to let me go. Apple was in those days a company that many media organizations could afford to ignore because its relevance was limited to people who used Macs, which included me.
This was the year the first iMac was about to explode on the scene, and indeed, Jobs talked in great detail about it during this keynote. But not before he set about explaining the strategic problems at Apple he had sought to solve during the preceding several months.
One of them was the fact that Apple made a comparatively dizzying array of computers, nearly all of them labeled with numbers that had no clear meaning to anyone. During his talk (part of which I’ve embedded in a grainy video below), Jobs wiped away the complex list in favor of a four-square grid with four kinds of products. Consumer desktops, consumer notebooks, pro desktops and notebooks.
For a young business reporter just starting out, which I was, the clarity of Jobs’s argument was a revelation: A complex product offering can cause problems both for the customer and the company selling the goods. First, it muddies the waters for customers, especially when two or more versions of a product suit a particular need. Second, it adds operational cost and complexity.
One product — say, a printer — may be manufactured in just one way, but then customized in a mind-numbing set of different variations for different lines of business. There may be different accessories in the box or different service options, or whatever. Each of these is a SKU all its own that has be tracked and marketed and sold and supported, adding costs along the way.
Being the biggest tech company by revenue, working in five major business segments and operating in 166 countries adds plenty of complexity by itself. Why make it more complex than it has to be? Clarity and simplicity work.
Let’s compare Apple and HP on their choice of computers. Shop for a Mac today, and the four-square grid that Jobs showed in 1998 still stands, mostly: There are two kinds of notebooks, and they vary by screen size, and three kinds of desktop machine each aimed at unmistakably different needs, for a total of six. Of course there are variations within them for memory and hard drive and screen size, but you get my point.
On HP.com I see six different notebooks for “everyday computing,” five ultra-mobile machines, six “high performance” notebooks and four machines sold under its “Envy” brand. I count 21 different notebook options, and I haven’t even looked at the desktop models yet. Does anyone really need that many choices?
A sense of clarity is good for business, and it’s an important lesson that many companies of a certain size have to re-learn from time to time. When Jobs learned it at Apple in 1998, its product complexity was nowhere near the level that Whitman now faces at HP. But we all know how keeping it simple worked out for Apple. And while the problem is probably an order of magnitude more complicated at HP, the fundamental business lesson still stands: A stripped-down product portfolio could work for HP, too.
Here’s part of the Steve Jobs keynote I mentioned above. This is Part 2, and he goes on to describe the simplified product strategy in the the first few minutes of part three here.
And here’s Whitman’s appearance from CNBC earlier today.