In an article titled “Does H.P. Need a Dose of Anarchy?”, the New York Times asks whether Mark Hurd’s management is causing exploitation to drive out exploration–the classic “productivity dilemma“. From the article:
Mr. Hurd, hired four years ago in the wake of Carleton S. Fiorina’s tumultuous departure as chief executive, forced a steady, boring diet of performance benchmarks, heavy-handed cost-cutting and data-mining down H.P.’s corporate throat. …
But with the most brutal cuts behind it, H.P. faces a fresh set of challenges as the second stage of Mr. Hurd’s tenure begins. Most pressing is widespread concern that Mr. Hurd has built an inflexible, solipsistic giant so obsessed with schematics and data-driven fiscal machinations that it has lost the ability to deliver that prized and perennial Silicon Valley trick: to surprise and astound.
This is a clear statement of what my colleagues Brad Staats, Mike Tushman, and Dave Upton and I label the “conflict school” in our working paper “Wellsprings of Creation: How Deliberate Perturbation Sustains Exploration in Mature Organizations”. Conflict school theorists argue that the very tools organizations use to exploit their accumulated knowledge–standardized, stable, and streamlined operating procedures–also squelch innovation. Consequently, the most efficient and productive organizations adapt poorly to environmental changes, leaving them vulnerable to attacks by more creative (albeit perhaps less streamlined) competitors. In HP’s case, those competitors appear to include Apple, Amazon, and Acer:
It arrived late with a line of netbooks, the low-cost, compact laptops that have taken the world by storm, opening doors for its rival Acer. …
With its software gurus, its newfound penchant for design and its deep ties to retailers, H.P. might have been expected to disrupt the cellphone market with new devices or even to concoct an electronic book reader that would complement its printer business. Instead, it’s Apple and Amazon that built vibrant new businesses around such products.
According to the article, Mr. Hurd is not too worried:
“In spite of the fact that there are things we could always do a better job on, innovating and so forth, I don’t think we have ever felt stronger about our portfolio of products and services and our opportunity to serve the market,” Mr. Hurd says. “I don’t think we think we’re confused about what the market wants.”
Perhaps he should be more concerned: academic research suggests that the productivity dilemma is very difficult to overcome. Our research on Toyota suggests that organizations can sustain exploration in the midst of intense exploitation, but it’s extremely hard to do. Unless HP is tackling the problem head on, rigidity and inflexibility may be real risks.
What HP probably doesn’t need, however, is anarchy. Anarchy would simply negate the impressive efficiency gains that the company has made over the past few years. Instead, we would recommend deliberate perturbation: selectively and strategically destabilizing processes throughout the organization. The mechanics of deliberate perturbation are not yet well understood, but we try to provide some ideas in our paper.