The hp way

Hewlett-Packard's journey began with an innovative audio oscillator, the Model 200A, designed by Bill Hewlett. This device was a breakthrough, offering a cost-effective way to generate high-quality audio frequencies for use in various fields such as communications, geophysics, medicine, and defense. Despite being their first product, they named it the Model 200A to give an impression of an established product line.

By the end of 1939, Hewlett-Packard had expanded beyond its original garage workspace, leasing a small building 3 kilometers away. Founders Bill Hewlett and David Packard were deeply involved in every aspect of the company, from product development to marketing, manufacturing, and even janitorial tasks. To support their growing business, Packard secured a $500 line of credit from Palo Alto National Bank, a relationship that would grow significantly over time.

The early business climate in the United States allowed for a more collaborative competition, exemplified by General Radio's founder, Melville Eastham, who provided valuable advice to Hewlett and Packard despite being direct competitors. By 1940, the company had grown to 10 employees. However, the onset of World War II saw Hewlett leave for military service, while Packard managed the company, which thrived due to its contributions to the war effort, growing to over 200 employees and nearing $1 million in annual sales by the war's end.

Hewlett-Packard (H-P) transitioned from a partnership to a corporation in 1947 to accommodate its rapid expansion and allow for broader ownership. Throughout the late 1940s and 1950s, the company saw exponential growth, with its product line expanding to over 100 items by 1952 and sales doubling annually. To attract top engineering talent, H-P initiated a scholarship program at Stanford University, offering full pay for engineers to attend graduate school in exchange for a commitment to work at H-P post-graduation.

This strategy, coupled with the construction of two new buildings in the Stanford Industrial Park, strengthened H-P's ties to Stanford University. By 1957, H-P's workforce had grown to 1,268 employees, prompting the company to go public and offer 10% of its shares at $16 each. Additionally, H-P began establishing international sales offices, notably in Switzerland and West Germany, paving the way for its global presence in over 120 countries by 1994.

Bill Hewlett and David Packard, shaped by their experiences during the Great Depression, believed that survival in tough economic times required avoiding long-term debt. Consequently, they established Hewlett-Packard (H-P) on a principle of self-funding, diverging from common business practices that sometimes endorse borrowing. As H-P grew, it introduced an employee stock purchase plan, enabling staff to buy shares at a discount, thus supporting further company growth through internal funding.

Recognizing the importance of innovation for a tech company, H-P allocates 8-10% of its sales revenue to research and development (R&D), viewing it as an essential investment for future success, even if it impacts short-term profits. When pricing new products, H-P opts for setting prices that reflect the product's value, ensuring room for price adjustments in the face of competition. The company prioritizes making significant technical contributions and explores new markets that offer technological advancements.

In the 1960s, the significance of computers in scientific instrumentation was clear to all. Bill Hewlett and David Packard considered acquiring a small computer firm and even negotiated with Digital Equipment Company, which was available for purchase at approximately $25 million. However, they decided not to proceed with this plan due to various complexities.

By 1964, HP had created its own minicomputer, the Model 2116, initially intended to work with control systems but soon sold more as a standalone computer. Despite the potential to lead technically in the computer industry, HP was hesitant, influenced by Bill Hewlett's caution against challenging larger competitors like IBM. HP's computer business still grew substantially; from zero computer sales in 1964, it reached $20 billion by 1994, constituting 78% of their revenue.

David Packard once emphasized that Hewlett-Packard's success hinges on its ability to satisfy customer needs. This philosophy underpins the company's approach to innovation, focusing on creating new products that anticipate and meet future customer demands. Speed and efficiency in product development are crucial, but HP also prioritizes excellent after-sales service.

Sales engineers are even encouraged to advocate for the customer in disputes, highlighting HP's commitment to solving customer problems rather than just selling products. This customer-centric approach was pivotal when HP ventured into the consumer market with its first LaserJet printer in 1984. By licensing technology from Canon, HP was able to introduce a new line of affordable, high-quality laser printers.

Hewlett-Packard, founded by David Packard and Bill Hewlett, is renowned not just for its innovative products but also for its unique corporate culture, famously known as the HP Way. This culture emphasizes trust and respect for individuals, encouraging employees to be innovative and to continuously seek better ways to accomplish their work. Management is expected to lead with enthusiasm, fostering a similar spirit among their teams.

Unlike traditional, hierarchical organizations where orders flow top-down, HP champions a participatory management style. This approach grants employees significant freedom and flexibility, promoting teamwork and leveraging collective input to tackle challenges. HP's commitment to long-term success is evident in its efforts to build a stable, dedicated workforce.

Bill Hewlett and David Packard initially did not focus on the organizational structure of Hewlett-Packard until the late 1950s. Initially, the company operated from a single location with a straightforward organization. However, as HP grew, the need for a decentralized approach became apparent.

In 1957, HP was divided into four divisions, with additional divisions added as the company expanded internationally or through acquisitions. By the mid-1960s, HP had over a dozen divisions, each with significant autonomy to foster creativity and initiative. The 1960s also saw the formation of HP Associates and HP Laboratories to focus on solid-state R&D and new technologies, respectively.

Hewlett-Packard (H-P) is renowned for its distinctive management approach, which is characterized by a philosophy of decentralization and management by objective. This approach entails setting clear, mutual goals while granting employees complete autonomy in achieving these objectives. Complementing this, H-P's management practices include MBWA, or 'management by walking around', encouraging managers to leave their offices and engage directly with every company project.

This hands-on involvement allows them to grasp the nuances of each project, contributing to a comprehensive understanding of the company's operations. Additionally, H-P promotes an 'open door policy', enabling open communication where employees can freely share ideas, opinions, and concerns with any manager. This policy is facilitated by the physical setup of the company, where even the CEO works in an open, doorless office space, enhancing accessibility despite its potential drawbacks.

Hewlett-Packard is deeply committed to being a responsible corporate citizen, a commitment that goes beyond achieving financial success for its shareholders. This commitment encompasses contributing to the overall welfare of society and extends to every community where HP operates globally. The company encourages its employees to engage in local community projects and organizations.

Notably, David Packard and Bill Hewlett have set high standards through their significant public service roles at Stanford University and its medical center. When choosing locations for new facilities, HP prioritizes environmental sustainability and community well-being, preferring communities that view the company's presence as beneficial. Moreover, HP emphasizes public service, exemplified by David Packard's tenure as Deputy Secretary of Defense, during which he donated over $20 million to charity.

Reflecting on the remarkable expansion of the electronics industry over the past five decades, I'm struck by the serendipity that placed Bill Hewlett and me at the inception of this era. The last century has been marked by rapid advancements, largely rooted in longstanding scientific knowledge. Today, breakthroughs in genetic engineering signal an era ripe with even more profound scientific possibilities. The potential for progress now eclipses anything witnessed in the previous century. The concept of exponential growth suggests that outcomes are directly tied to the effort invested. As we venture deeper into the twenty-first century, the intensity of our endeavors will undoubtedly surpass those of the last.