Silicon Valley is all about creating products, and I would argue that no company in history has done that better than HP. HP had an absolutely unmatched record of consistent product innovation in a wide range of markets. That’s why they’ve personified Silicon Valley better than anyone else. Many companies, even large successful companies like IBM and Oracle, are essentially one-product companies – they ride the wave of their big product for decades, but essentially they don’t innovate past that. But Bill Hewlett and Dave Packard were able to create a company that was unique in that they created a culture and mechanism for breeding new products and new businesses. HP has created literally thousands of breakthrough products in its history. I know of no other company in the world today or in the past that has managed to do this. Even more important for this valley, HP spawned hundreds of other Silicon Valley companies.

Most importantly, Bill and Dave understood the power of startups and the problems of large companies, so they organized their growing company into a collection of loosely related and largely autonomous product divisions. Every time a business would grow past a certain point, they would split the business into multiple divisions, or they would spin off a new division. In fact, when I was asked to start a new division for them, they put us in our own separate building and told us to run it like a startup, which we did. HP essentially acted as the Venture Capitalist in that they funded our idea and asked for quarterly progress, but they left us to go after the market the best way we saw fit. In its very DNA HP was a product company; driven by a desire to innovate and create products that customers love.

Bill and Dave are unfortunately gone, but I think they’d be glad we have people like Larry and Sergey of Google with the same passion for creating great products. The resurgence of truly great product companies like Google and Apple has been great to watch, and I admire these companies for their thirst for new and better ways to solve problems.

As to HP, I think there are additional lessons to learn. After Bill and Dave retired, the company lacked their inspirational product leadership, and after stagnating for a few years, rather than searching for another great product leader, the HP board felt they needed to “reinvigorate” the company by bringing in someone from the outside with a fresh perspective.

They ended up hiring a sales person from the east coast – Carly. No big surprise, she proceeded to try to turn HP into the type of business she knew and understood, which was a very large and centralized IBM-like sales and distribution channel. Product creation moved to the margin, and reselling other company’s products and leveraging a newly centralized sales and service organization became the focus.

Sadly, many of the strong product people of the company left, and Carly replaced them with people that she felt could help her change the company into this new direction. Of course we all know now that this didn’t work as she hoped, but the worst part was that she didn’t seem to understand what made the company great in the first place.

I don’t know the new CEO, but he seems like the right sort, and I’m hopeful that it’s not too late, but he will have to undo a lot of damage, so the layoffs I think are very necessary and certainly no surprise. I do hope he can get the company back to what it does so incredibly well, and I will always root for them.

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