From laggard to leader in the laptop business

In 1996, Hewlett-Packard's laptop business was going nowhere: it was a small, money-losing business with negligible market share. Then, Richard Archuleta, now senior vice president at Hewlett-Packard‘s personal systems group, started a dramatic turnaround that was completed under the leadership of Diana Bell, who took over the position as the general manager of HP‘s Mobile Computing Division in 2000. By fall 2001, HP became the largest vendor of laptops in the US consumer market.

But how did HP get there?

When Richard Archuleta took over the laptop division at HP in 1996 it scored low in External Information Awareness, the first principle of Organizational IQ. The organization had lost touch with the market and the target customers.  "Customer needs information which reached the design teams was filtered to emphasize the small percentage of the market that liked a particular feature and negative feedback was suppressed.  The result was that the organization incorrectly believed that they were doing a great job in designing products to meet the market needs," recalls Archuleta. "In order to help the organization quickly gain an understanding of the market and an external view of our products and business, unfiltered customer letters and analyst reports were widely distributed and key quotes and statistics were emphasized in all-employee meetings that were held each month. Open dialogues were held between design teams and key external constituents:  customers (won and lost), industry analysts, sales personnel." 

To create an Effective Decision Architecture, decision-making power was re-balanced.  Says Archuleta: “Decision making power was not balanced in the organization.  R&D held the keys to all major decisions which left Manufacturing (cost focus) and Marketing (customer focus) without the tools to do their jobs and contribute effectively to the business.   To emphasize the change to a balance of power, some key decision areas were visibly taken away from R&D and assigned to other areas to lead with R&D involvement.  One example was the selection of ODM partners -- this was traditionally led by a director in R&D and was reassigned to be led by a director in Manufacturing.”

One of the most important steps in the turnaround was to achieve laser-sharp Organizational Focus, another key principle of Organizational IQ. Archuleta canceled a number of projects once he and his team had sized up the situation. But this was not enough: "After the organization thought it had cut down to a minimum set of activities, we forced ourselves to take out another product program. Cutting deeper than what all thought was needed proved to be very powerful in gaining the organizational behavior changes that were needed as well as allowing the organization to execute to its plan better than it had ever done in the past," comments Archuleta.

In 2000, HP commissioned a project with Synesis to systematically evaluate and further improve Organizational IQ at its laptop business. The results were put into action and progress was rigorously tracked by the division’s management team.

In 2001, after applying core principles of high-IQ management for half a decade, HP became the number one vendor of consumer laptops in the US as well as a major player in the commercial laptop market.


Note: A brief summary of this turnaround case was published in the August 2002 edition of Harvard Management Update.



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