Lew Platt: Creating a Culture for Innovation

In a speech this year, Lewis E. Platt offered a bit of sage advice for guiding an organization in a time of rapid and turbulent change. "You must anticipate," he said, "that whatever made you successful in the past won't in the future."

The chairman and CEO of Hewlett-Packard Co. is acutely aware that many once-successful companies, including several of HP's chief competitors, managed to undermine their competitive vitality by clinging too long to outdated strategies -- a particularly foolish stance in the fast-paced world of high technology. Lew Platt is determined to see that HP avoids that mistake.

"Fear of complacency is what keeps me awake at night," he says.

Both within HP and in remarks to external audiences, Mr. Platt preaches the gospel of innovation. But more important, he understands the necessary ingredients -- and what management must do to encourage innovation.

"Senior management's role," he contends, "is not to tell business units what opportunity to take. Instead, our role is to create the environment that encourages business managers to take risks and create new growth opportunities. In other words, vision at HP isn't a straitjacket that constrains our managers, but rather a view of the many opportunities ahead."

In recognition of his leadership -- and his talent for fostering an environment in which entrepreneurial innovation flourishes -- the editors of IndustryWeek have chosen Lew Platt as the winner of IW's 1994 "Technology Leader of the Year" award.

A 28-year company veteran, Mr. Platt joined the Palo Alto, Calif.-based firm as a process engineer in 1966 after earning an engineering degree from Cornell University and an M.B.A. from the University of Pennsylvania's Wharton School of Business. Now 53, he held a variety of marketing, manufacturing, and general management posts prior to being elected president and CEO in 1992.

In September 1993 he was chosen to succeed David Packard, one of the company's two founders, as chairman of the board.

Under Lew Platt's leadership, which is focused on deftly managing change while remaining firmly anchored in the company's traditional values, HP has been operated as a collection of highly autonomous, entrepreneurial businesses. Within a product group, the business units have an unusual degree of freedom to invade each other's turf to accelerate innovation and rapidly respond to marketplace needs.

The results are almost startling: Sales have been rocketing upward at a $4-billion-a-year clip, and profits have been growing at a 30% pace -- at a time when other large computer-makers have been shrinking and losing money. In 1993 HP surpassed Digital Equipment Corp. to become the No. 2 computer manufacturer in the U.S., behind IBM. It is No. 1 in computer printers and No. 2 in the market for powerful workstations.

As impressive as HP's bottom-line results have been, perhaps the most telling statistic is this: Products developed within the previous two years accounted for more than two-thirds of the company's sales in 1993.

"We are continuously looking at the next wave -- using revenues from today's products to develop our next products," says Wim Roelandts, a senior vice president who succeeded Mr. Platt as general manager of HP's Computer Systems Organization (CSO).

Thanks to Lew Platt's emphasis on maintaining a decentralized corporate structure, Mr. Roelandts adds, "If any part of the company grows complacent, another part of HP may eat its lunch. . . . We're very good at eating our own lunch, at obsoleting our own products. . . . Basically, Lew is fostering not only internal entrepreneurship, but also internal competition."

One example: The company competes with its popular LaserJet printers by offering lower-priced inkjet printers. Similarly, in designing set-top interactive TV devices, HP chose not to incorporate its own RISC chips, which pack more power than is really needed. Instead, it specified perfectly adequate (and less costly) chips made by another company in order to reduce the product's cost and selling price.

The Right Guy for the Right Time

Under Lew Platt's guidance, the company has shown increased willingness to forge strategic partnerships to stay in the fast lane of technology innovation. It has an alliance with Intel Corp. to develop a new-generation microprocessor that promises to make both HP's and Intel's most-powerful chips obsolete; and it collaborated with AT&T Microelectronics to develop new local-area-network technology that offers speeds up to 100 Mbits/sec over plain twisted-pair wiring.

But Lew Platt's credentials as a technology leader extend beyond his ability to grasp the technical and strategic issues. His colleagues in Palo Alto are effusive in praising his people skills.

"Lew is the right guy, for the right time, at HP," says Rick Justice, general manager with sales and marketing responsibility for CSO/Americas. "He shows respect for people. He cares about people. He is a true leader. He definitely sees the big picture -- and he is able to get everybody to work together. . . . Even in HP, where the culture is one of teamwork, the stress of this environment can lead to conflicting objectives at times. Lew has built a team across people who could easily become natural adversaries."

Perhaps even more important, Lew Platt is a motivator.

"He's in touch," Mr. Justice observes. "He knows what is going on in the organization. And he makes sure that everyone knows that what they are doing is important. . . . Lew is not impressed with himself. . . . He hasn't lost sight of the fact that we're successful because of the people."

Moreover, Lew Platt realizes the need to create the right environment -- especially an environment in which risk-taking is encouraged and applauded. "As a manager, Lew is very forgiving," says Mr. Roelandts. "He is very supportive of people who try something that doesn't work out. He is almost protective of people who stick their necks out. . . . You can kill risk-taking very quickly if you do the opposite."

About once a month, Mr. Platt tours the HP Laboratories complex in Palo Alto, looking for "interesting stuff," notes Richard Corben, manager of new-business development at HP Labs. "He likes to familiarize himself with what we're doing as a stimulus to his thinking."

At a time when other companies have been scaling back their R&D investments, Lew Platt strongly supports the exploration of new technologies and the search for synergy between technologies.

"He puts his money where his mouth is," Mr. Corben says. "He clearly deserves an A or an A-plus for building for the future . . . for supporting innovation and being willing to abandon old businesses."

Yet, during these times of turbulent change, Mr. Platt has stressed the need for "balancing change with continuity" -- ensuring that HP doesn't lose sight of the core values embraced by the company founders, Bill Hewlett and David Packard.

Those values, reverently known as "The HP Way," include: trust and respect for individuals, a high level of achievement and contribution, uncompromising integrity, teamwork, flexibility, and innovation.

"Our values give us an anchor at HP," Mr. Platt emphasizes. "They are quite enduring. . . . But while we want continuity, we can't have stagnation. We need flexibility in order to adapt to a changing environment. So, while our values stay the same, our practices can -- and must -- change."

As an example, he points out that HP used to insist on inventing most of the technology it used -- even to the point of manufacturing its own screws.

"Today," he adds, "we have redefined our notions of innovation to include leveraging technology developed outside of our company, like going to Japan and finding Canon as a partner to provide the engines of our LaserJet printers."

Lew Platt's Perspectives on Innovation

After being notified that he had been selected for the "Technology Leader of the Year" award, Mr. Platt shared with IW his thinking on a variety of issues, including:

Fostering an environment for innovation: "Creating innovative products and solutions is an HP hallmark. It's why we've done so well. HP managers are expected to create an atmosphere where their staffs can be as creative as possible and where innovation can flourish. . . . We have a very decentralized organization that puts decision-making at the lowest appropriate level. Most decisions are made by people who really are close to customers, not some corporate council that can slow innovation through bureaucracy. I work very hard every day to make sure centralization doesn't creep into our organization and slow people down."

Cultivating a strong sense of entrepreneurship within HP: "It's vital and a key to our success. . . . I'm a great believer in making sure that each of our businesses is strong in its own right. I think it's critical. I don't think you can take weak pieces and link them together and make something stronger out of them. . . . Because we are a leader in so many areas, we have a terrific advantage when we combine our areas of expertise. A lot of very innovative solutions are coming from HP in telecommunications and in the medical business because of the combined strengths of HP's computing, communications, and measurement businesses."

Translating technological innovation into successful commercial ventures: "At HP we believe that enhancing and combining our technology strengths increases our ability to provide products that customers really want. . . . Here's an example: For a long time HP has been a leading supplier of patient-monitoring equipment. If you looked at that business today, you'd find our medical group in Massachusetts making large gains in integrating computation and communication with their established measurement product lines. . . . The management of patient information in the hospital and, for that matter, in the entire health-care system is not done very well today. So the medical group is expanding its scope somewhat to emphasize information management."

Why HP is willing to compete with -- or "cannibalize" -- existing product lines: "I don't want HP's relative success to lull us to sleep. We'll cut prices rather than wait for someone else to force us. We'll render our own products obsolete -- or 'kill' them -- before a competitor does. Even when things are going well, we have to be prepared to change. . . . Look at our printer business, for example. We keep coming out with better, faster, and less-expensive products. Cannibalizing existing products is the way to remain the leader. We also let overlaps develop among our products and let the market decide which products to buy."

The need for rapid product innovation: "I agree with something Scott McNealy, CEO at Sun Microsystems, says: 'There are two kinds of computer companies -- the quick and the dead.' . . . Speed is essential. We have to run very quickly to stay ahead because technology is moving so fast. As a result, we've addressed every part of the product-development process. Today, we use much better tools to speed that engineering process. We've also learned that certain steps can be done concurrently. That saves a lot of time. . . . We've dramatically reduced the time it takes from starting on a product until it's introduced into the marketplace. The old rule of thumb was three or four years. Today, we have lots of products that are brought to market nine to 12 months after we start working on them."

On cultivating the right corporate culture: "I'm trying to get HP people to focus on those things that will make us successful in the future. I'm somewhat worried that everyone is talking about HP's success, because it would be quite easy for us to bask in the glow too long. In a business as fast-moving as the computer business you still have to get up and earn your success each day. "We believe, for example, that a certain degree of paranoia is healthy. HP's printer business is a good example. Despite the fact that two of our technologies, inkjet and laser, have succeeded in taking market share away from dot-matrix, our printer group is not complacent. They can't be! They have institutionalized paranoia. They have been very aggressive on price, never leaving a window of opportunity open for competitors. "In short, our corporate culture's focus on high achievement is key to our continued success. It's key because we can't -- and don't -- permit ourselves to relax."

The decision at HP to support "open systems" computing environments: "Our early commitment to RISC [chips] and open systems has given us the benefits of a broad, scalable family of open computer systems. The implications of these new, open rules -- customer freedom of choice and the unbundling of everything -- have provided HP an environment to thrive in. This has earned us the position of No. 1 supplier of RISC-based open systems. . . . I was part of the team that shaped this critical company strategy, and it's very clear that it was the right path. But back then it wasn't so clear. Still, we understood that it would be essential for HP's needs and a key to our customers' needs as well. As a vendor, we couldn't afford to be locked in. The road to open systems made the most sense. It was painful, but it was the right decision."

Aligning technology development with customer needs: "We work extremely hard at understanding customer needs, and we never let ourselves think we know better than they know. We're always listening and asking questions. We have, for example, a number of customer advisory councils that are quite effective in keeping us in touch with real customer needs. All of us spend significant time with our customers. I myself am the assigned executive for the GE, GM, Alcoa, and Boeing accounts, among others. . . . Another important factor is HP Labs. We create demonstration projects in HP Labs to evaluate the contributions we can make to our customers. The business units then work closely with HP Labs to commercialize promising technologies."

On HP's new emphasis on strategic partnerships: "Once the world was simple, and so were relationships. Your partners were your allies, and your competitors were your foes. Today, people we compete with one day are our partners the next. . . . Alliances are critical. We can't do everything ourselves."