Hewlett-Packard: The Flight of the Kittyhawk

Résumé du document

The technology industry is a market of change, due to innovative breakthroughs. But for the firms in this sector, the challenge is to predict success. The disk drive industry provides some characteristics of how changes can cause certain types of firms to succeed or fail in choosing for instance a disruptive or a sustaining innovation.

HP was founded in 1939 by Bill Hewlett and Dave Packard. Their first product was an audio-oscillator, built in a Palo Alto garage. HP growth was driven by several innovations in high technology over so many decades. Today, HP is a leading global provider of computing and imaging solutions and services, which is focused on making technology and its benefits accessible to all. HP is still a company of inventors led by Carly Fiorina; Chairperson and CEO.

In 1992 Hewlett Packard had four major business organizations (Test and Measurement, Computer Systems, Measurement Systems and Computer Product). Among the different groups of the Computer Products organization, we could find the Mass Storage Product Group, which contained the Disk Memory Division (also called DMD), responsible for developing and launching disk drive models.

The Kittyhawk was a disk drive that HP designed to be the need of next-generation. In this study, we will try to answer the following question: how did an organization that appeared to do everything right eventually fail?

First, we will present the high-potential of the DMD and Kittyhawk project, through the disk-drive market, by characterizing the Kittyhawk innovation, and the HP way of management. Then, we will analyze the reasons for failure, defining sustaining and disruptive innovations and the market and strategic objectives that were taken. Finally, we will see how HP could have avoided this failure by suggesting some solutions.

Extraits

[...] This status gave the Kittyhawk team total autonomy to develop the drive, find new markets and cultivate a customer base. They were able to make any decisions regarding manufacturing, financial, marketing and commercial fields. One of the strongest points was the setting up of the team. It contained three functional representatives (manufacturing, marketing, and R&D). An entrepreneurial manager from R&D was assigned as group leader, and was given freedom to recruit any star engineering talent he required (mostly selected from within DMD). Above all, the two main skills were to be and “risk taker” people. [...]

[...] This deep feeling of being part of this exciting new project was a real strength and had always been maintained by the executives. Adding to this start up structure the project commanded the resources of a big structure such as HP. The latter employed a management by objective (MBO) process. They focused on financial goals and placed great responsibility on the team members so that they felt fully involved in the project. It made the work more challenging. Moreover HP executives developed Management By Wandering Around (MBWA). It allowed a decrease in bureaucratic lines of communication. [...]

[...] They bring a different value proposition to the market but simpler disruptive products generally allow lower margins and no higher profits. Successful disruptions have been launched most often by entrant companies. On the other hand, a sustaining innovation is an innovation that brings to the market a product or service that a company in the existing market could sell for higher margins to its best customers. It is a better product with more capacity. Some sustaining innovations are incremental year-by-year improvements and others are breakthroughs. Successful sustaining innovations have been launched more often than not by the established companies. [...]

[...] The financial expectations decisions handicapped Kittyhawk. The Kittyhawk as a disruptive technology should have required very different overhead structure than the one Seymour had built in his push to get the Kittyhawk into the market in a by setting modest revenue expectations. The target revenue was too large, and the division was forced to choose larger markets that wouldn't value the disruptive technology. HP wanted to satisfy customers in established markets with higher performance which led it to include features that made the Kittyhawk too expensive to customers in the emerging market, and built the wrong product for the wrong customers. [...]

[...] As a result, HP decided that its small disk should target the PDA and ultrathin laptop market rather than the video game manufacturers. Indeed, the market research led nowhere because they talked to existing customers and to the Kittyhawk team, without changing their normal methodology for finding where the larger customers would be. They were influenced by the Kittyhawk's team. The latter found several customers, but not those they had initially considered (Japanese word processors, Digital cameras, Cash registers, Telecom switching systems) except for PDA's, but they never reached the volumes expected. [...]