Hewlett Packard (HP) - Restructuring & Separation Analysis (Designing Work Organization Project Presentation)

Group A8 – DWO – WMP Term 2 – IIM Lucknow Noida Campus

Organizational Separation & Igniting Organizational transformation of Hewlett Packard

Presented by: Aditya Kumar, Alok Goel, Anand Kishor, Nasir Javed and Mayank TiwariWMP 11 IIM Lucknow Noida Campus


Background – Internal & External Challenges

Restructuring – Transformation - Separation

Key Advantages

HP Enterprise Group

HP Enterprise Ignite Program

Agenda

Reflections and Future Steps


BackgroundInternal & External Challenges

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DRevenues and profit pools for most profitable businesses were declining

HP’s portfolio was heavily weighted towards low growth assets

Portfolio Mix

HP was facing a number of execution challenges – lack of competitive focus, sub-optimized GTM, complex partner programs, under-investment in R&D and culture

Execution Challenges

HP had high cost structure relative to revenue performance

Cost Structure

Board issues & missed earnings impacted stock performance

Earnings Performance

Technology industry was experiencing a tectonic shift driven by a number of factors including explosion in data, shift to cloud, rise of social and mobile and associated security risks

Changes in IT Industry

Revenue & Profit Pools


Compelling Rationale for SeparationSeparation will accelerate the turnaround

OperationalStrategic

Sharper, stronger, more focused companies

Drive more customer intimacy

Better able to compete against a distinct set of

competitors

Faster to respond to changing customer

requirements and market dynamics

Improves alignment between rewards and

results

Simplifies organizational structures to make

decisions faster

Financial

Optimize the financial profiles of each

company to enable distinct investment and

growth opportunities

Enhance capital allocation to R & D and

M& A each company needed. efficiency and

investor clarity on future cash flow use


Transformational JourneyIn FY12 HP Launched its five year transformation journey

Diagnosis & Foundation

FY 2012

Fix & Rebuild

FY 2013

Recovery & Expansion

FY 2014

Acceleration

FY 2015

Industry Leading

Company

FY 2016


Confidence

Improved credibility with customers, investors, and

employees

Enhanced channel relationships with industry leading programs

and tools

Inspired workforce and management teams

Position of Strength

Rebuilt financial foundation – stronger balance sheet, predictable performance

Right leadership team

Very strong innovation pipeline

Speed of Market Transition

Accelerating technology transitions require agility to respond to evolving market

conditions and customer demands

Increasingly competitive markets necessitate

concentrated and distinctive responses for each of the new

companies

Right Time!After three years of work, HP was in a position of strength in 2014


In early 2015 HP was in the middle of a five-year turnaround effort, and in October 2014 the company had announced it was splitting the $111 billion, 75-year old

company into two independent, publicly traded companies.

Hewlett-Packard Enterprise HP Inc.

Separation StrategyHP to separate into two new industry-leading public

companies

Defining the next generation of technology infrastructure,

software and services for the New Style of IT

Build upon HP’s leading position in servers, storage, networking,

converged systems, services and software as well as the company’s OpenStack Helion cloud platform

Meg Whitman to be President and Chief Executive Officer of Hewlett-

Packard Enterprise; Pat Russo to be Chairman of the Hewlett-Packard

Enterprise board

Leading personal systems and printing company delivering innovation that will empower people to create, interact and

inspire like never before

Strong roadmap into some of the most exciting new technologies like 3D

printing and new computing experiences

Dion Weisler to be President and Chief Executive Officer of HP Inc.; Meg

Whitman to be Chairman of the HP Inc. board


“The market is changing tremendously, and the separation is important to give us the ability to be nimble and make faster

decisions. HP was not a company that was recognized for making quick decisions in the past but we are changing that. We have all the assets and the elements to deliver against

what the customer needs, but we have not been good about putting it together in a way that the customer can always see

the full value of our portfolio.”

Antonio NeriSenior Vice President and General Manager of HP’s Enterprise Group


Separation Strategy (contd.)

Two new independent publicly traded companies

Revenue Mix

Leadership

Key Markets

Financial Metrics

Enterprise Group 48% Enterprise Services

39% Personal Systems 59% Software 7% Printing 41% Financial Services 6%

Revenue: $58.4B Operating Profit: $6.0B Operating Margin:

10.2%

Revenue: $57.2B Operating Profit: $5.4B Operating Margin: 9.4%

• Servers• Storage

• Networking • Software

• ConvergedSystems

••

Notebooks • Mobility

• Ink Printing• Laser Printing

• Managed Print Services

• Services

• Cloud

Desktops

• Graphics

Meg WhitmanChief Executive Officer

Dion WeislerChief Executive Officer

Hewlett-Packard Enterprise HP Inc.


More focused innovation in GTM, business models, products & solutions

Increased executive & customer engagement

Tighter set of metrics to drive the business

More focused and defined strategy

Increased focus on growing revenue

Performance management

More competitive cost structure

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Advantages of SeparationWhat the separation will enable Hewlett Packard Enterprise to do differently


Creates two powerful industry-leading, Fortune 50 companies with strong financials and technology

roadmaps

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Enables enhanced focus on distinct opportunities for

long-term growth and profitability

Partners and customers will have simpler and more nimble organizations with which to conduct business

Provides two distinct investment opportunities with clarity on capital allocation priorities

Better positions the two new companies to generate long-term shareholder value and accelerate performance

Separation Transaction SummaryThe turnaround progress has significantly strengthened HP’s core businesses

making this the optimal time for separation


Restructuring UpdateSignificant updates as of Q3 ’14 as the restructuring plan continues

Restructuring plan continuesAs of Q3’14, approximately 36,000 employees had left the company as part of the program

Total plan expected to be higher than previously communicatedEstimated employee reductions were communicated during the Q2’14 earnings announcement at 45,000 to 50,000 with charge, savings and cash payment guidance provided at the low end of the range

Incremental opportunities for reductions have been identified and now anticipate a total of 55,000 reductions, independent of the separation transaction

Charges, savings and cash payments will increase versus previous guidance

Net incremental savings from increasing the headcount reductions to 55,000 are planned to be used in FY15 to fund investment opportunities in R&D and sales


HP Enterprise GroupDevelopment of capability for designing and driving the execution of

key strategic change initiatives

EG Ignite – Internal Transformation program


HP Enterprise Group – Business ModelThe Enterprise Group had $6.6B in revenue and $950M in operating profit in

second quarter ending April 2015.

Servers Technology Services Storage Networking Business critical systems

Global Business Units (GBUs) Americas Europe, Middle east & Africa Asia-pacific & Japan

Regional (Sales)

Functional Units

Business operations & transformations

Sales strategy and pricing Sales operations Marketing

Finance & Pricing Supply Chain & quality Human resources Legal Communications


EG IgniteEG Ignite was designed to provide a framework and problem-solving support for

the most critical transformation initiatives

Served as interlock point between different functions, BUs and regions keeping a big picture view of the changes and inter-dependencies

Small central team (10 members)

HP was not known to be a sales & GTM company – Ignite was envisioned to make HPEG competitive and aggressive, going forward

Go-to-market strategy changes

Ignite was to focus on the few critical areas that drove the biggest impact while stopping or de-prioritizing the less important ones, and it operated on the belief that 20 percent of activities drove 80 percent of the results

Focus on impact areas

Ignite is to focus on results and not mere lite-weight project management. It is also supposed to have a meaningful P&L impact with quantifiable results

Quantifiable results


EG Ignite - Key Initiatives and Framework

EG Ignite had a nine-box operating framework for its strategic initiatives

PRICING STRATEGY

Two-tiered pricing strategy with low cost

Fuel hedging, Point to point flight, faster turnaround time of 15 mins, frequent flights, multitasking of employees

Efficient Operations

Short haul (less than 500 miles), Booking on basis of online ticketing and vending machines

HR STRATEGY

Employee profit sharing, open environment for innovation and creativity, university trainings and recognition, low turnover

EG RegionsAmericas, Europe middle east and Africa, Asia Pacific, Japan

Communication & management of change

Sales operations Supply Chain Sales & operation planning

Contra (Trade discounts) Technology services New business incubations

Sales Pricing Workforce

EG Ignite LeadershipAntonio Neri and Arun Chandra


EG Ignite – Score CardScorecard to measure the impact of the program and quantify the expected

results of the initiatives

Delight

Win

Execute

Metrics for specific product categories Revenue Revenue growth vs market growth Change in relative market share

Customer & Partner experience metrics Delivery performance Customer and partner satisfaction Quality metrics

Financial and operational metrics Revenue vs margin Supply chain metrics Ignite Metrics

Delight

Talent Development metrics Employee engagement Performance management Career development

Score card category Sample Metrics


Human Resources and IgniteHuman Resources cuts across functions and BUs, so tight integration with Ignite

was key to its success and implementation

Integrating the HR performance metrics into Ignite processes helped drive focus and accountability

More formalized performance management structure was created by identifying high performers and reward systems were increased accordingly

Managers were trained in constructive performance discussions to help them identify top and average performers in their teams

A hybrid structure was promoted to augment performance with an aim to drive collaborations and effective development processes


Branding & Sustained CommunicationManagement of change and communication was the foundation element of the

Ignite

Since inception Ignite tried to engage ~ 50,000 employees on its jour-ney

Engagement

Branded as “Wining the speed, focus and sustainability” to foster sense of connect to Ignite

Aggressive Branding

Content rich website and newsletters were flashed all the time in internal communications

Content Marketing

Ignite communicated with employees through fun animated videos

Regular Communication

Ignite viewed it as important to have a wide range of speakers and content to credibility

Credibility

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Reflections & Future StepsFuture vision and roadmap

The most import question was how long Ignite will continue ?

How to continue to drive strategic initia-tives? One option was for Ignite to change positioning away from “transformation” to “ strategic initia-tives”In future Ignite needed ongoing strong leadership to succeed. This type of role required unique leadership, qualities and experience

In rare instances where line managers did not buy into ignite program, It was important to find out a strategy for handling such situations as they come up in future


Thank You!

Created by:Aditya Kumar (WMP 11002)

Alok Goel (WMP 11003)Anand Kishor (WMP 11009)Nasir Javed (WMP 11029)

Mayank Tiwari (WMP 11023)