Companies like HP must split to survive, is like the evolution of new species | Hacker News Reader

Companies like HP must split to survive, is like the evolution of new species

gsb.stanford.edu

There's an alternative explanation for corporate splitting, which also covers merging, and, as a bonus, corporate name changes, reorganizations, and logo updates:

It gives the Board and CEO something to do.

Think of it: Company MediumGuy buys OtherMediumGuy, creating BigGuy and issues press releases proclaiming "this will create great synergies and economies of scale!"

Then 10 years later, BigGuy splits into MediumGuy and OtherMediumGuy, and issues another release, "This will enable management to focus on the unique opportunities and diverse customer bases that MediumGuy and OtherMediumGuy now face!"

Ideally, the CEO doing the split is not the same as the one who did the merge, so he doesn't have to face awkward questions about his reasoning 10 years ago.

Yes, but business schools wouldn't get as many donations from their alumni if they started publishing research saying that most of what executive management does is at best pointless.

Nah, it is about making investor numbers go up.

HP split off its test equipment business because it was steady supply of profit. It wasn't growing so it had to fuck off to separate company (then that test company split into making EE test equipment and "other" test/lab equipment).

All to perpetuate the myth of eternal growth

> the myth of eternal growth

Exactly. Trees die. Animals die. People die. Why shouldn't an old company, too?

Or split off something that's eventually bigger than the parent. I explore that in the "What PARC Actually Did Later" section of this:

https://www.albertcory.io/lets-do-have-hindsight

Same thing with outsourcing and inhousing projects.

I lived through all those splits as an hp employee and I think this is a very good analysis. A few more anecdotes:

- When we got the news that Fiorina left you could hear "ding dong the witch is dead" being sung across the entire floor. In retrospect maybe she wasn't as bad as we thought, but completely lacking empathy

- We (hp) were saddled with a lot of debt when Whitman took HPE, the thinking was that Enterprise had a brighter future. Luckily we came out okay out of the split

- EDS acquisition was awful, we got like 200000 employees that never delivered on the promised Enterprise synergy

- It's amazing that we survived "burn the furniture" Hurd (RIP) and completely clueless Apotheker (purchased criminal con man Lynch's autonomy)

Given the stream of terrible CEOs it's kind of amazing that any part of HP survived at all.

I think a more appropriate biological analogy is HP evolved into Agilent and defecated Compaq and a crap CEO into a new business and this article is standing around the pile clapping its hands.

Source: ex HP/Agilent.

So as far as I understand it's basically old guard HP (calculators, pa-risc, multimeters, etc.) who formed Aglinet in 1999. Following this, "Consumer PC Clone Manufacturer" HP under very questionable leadership bought Compaq who themselves contained the mummified corpse of DEC somewhere in their folds. That company lumbered along for a bit and then later themselves split into modern HP who still sells PCs of varying quality and HPE who primarily sells servers and associated backend services, possibly leaning more toward the ladder than former nowadays.

This shit feels like napping out the royal family, no wonder it's compared to a petri dish.

The calculator dudes stayed with HP for some reason and were phased out recently, probably due to old age and retirement, in favour of crap produced by the only calculator manufacturer on the planet: Kinpo.

I think the only old school folk left are working in the bowels of Keysight and any semiconductor companies Agilent spawned off.

Swiss Micros make some fancy stuff if you're for the old RPN thingy.

My DM42 even works with original HP printer.

Fun fact: the replacement printing head was available for buy as late as 2020 (Seiko MTP201-G166-E ), I bought used HP 82240B printer which had problems with the printing head and just... managed to buy a new one. From what I remember the head itself was widely used in other gear and that's why production ran so long

I looked at the DM42 but I can't really justify the cost.

I've got an original 15C and a 41C I still use that are going strong. I had a 48GX for a bit as well but someone stole it.

> in favour of crap produced by the only calculator manufacturer on the planet

What about TI?

TI use Kinpo as well. TI, Casio, HP, Sharp are all the same calculators now with different enclosures and minor software differences.

...even TI Nspire?

No they are made by Nam Tai in China with the TI89. The other TI8x series are made by Kinpo.

Yep, as a current Keysight employee, it certainly feels like more of the original HP philosophy and values have stayed with us, while HP themselves have become unrecognizable.

It's named Keysight now lmao. It split again into "the stuff to do electronics with" (Keysight) and "everything else" (Agilent)

Yes aware of that. I sit with a pile of Keysight stuff in front of me all day.

> reflects a process that’s analogous to biological adaptation and the evolution of new species. Like living organisms, he says, corporations are constantly adapting to changes in their environment. > corporate speciation

Complete and utter word salad bullshit - there is no metaphorical similarity between biological evolution and business “evolution”. Biological evolution is the most procreation of the least unfit. And evolution works at the individual gene level: the only incentive for a gene is to reproduce (selfish genes), and an organism is just a blob of genes.

This misuse of the words of biology means that most people misunderstand biology, because they use the wrong metaphors in reverse to try and help them understand, based on human systems that have very little to do with biological evolution. Admittedly most clichés don’t help with understanding either (“survival of the fittest” is not the point but merely auxiliary to reproduction; the Darwin Award would only be able to be awarded to people or children before they reproduce, not older people after they already reproduced).

In this case they are talking about an organisation modifying itself to the organisation’s environment. That would be like you deciding a mechanical arm would be useful, so just growing one. There is no intent in biological evolution, a cell doesn’t split because each half will fit their environment better - duhh.

I disagree and i think this is the most important part:

> Investors were increasingly unhappy. HP’s market valuation sank to a point where it was lower than the value of its individual businesses

This+change for the sake of change are the most important factors. I refuse to believe that e.g. GE's CEO is incapable of delegating specific strategy to the Director/CEO/whatever they're called of each division. When you have that, how exactly is the fact that it's a conglomerate stopping anyone from anything? You just have bigger backing/other revenue streams to cover any problems/etc.

The main advantage of diversification I see are protection against market downturns in some areas, and some potential for economies of scale/synergies. Take Bombardier, who had to sell off everything (obligatory fuck Boeing and fuck US courts for dodgy attempts at protectionism) and are now only in aviation, and more specifically private jets. That's a very specific niche to be in, and is subject to a bunch of things (e.g. Russian oligarchs getting sanctioned, high prices of fuel, legislation against this, etc.) that could impact them. Had they remained a more diversified company, they would have had much more leeway.

Of course the biggest problem is that bigger companies are more complicated to manage, but that's why one would delegate.

I always suspected it was a fixation by investors who are fixated on price discovery.

It's easier for the Almighty Market to weigh and punish a company with a simple narrative and narrow product line. It encourages snap judgements. You're making desktop computers? There's no chance for 200% YoY growth anymore, you may as well be selling steam locomotives. Gotta save the budget to invest in non-fungible tulips, ya'know?

A conglomerate tends to have cross-bracing that makes this harder. You can't say "Well, the Red Widget Division is worth investing in, but their Blue Widgets lose money, except Red Widget builds their stuff out of Blue Widget's waste products sold at sweetheart prices, and the whole operation is being bled to finance R&D for Taupe Widgets that won't hit the market until 2030." You have to buy the package and trust that it's all being competently managed to actually harness the synergy and opportunity.

But Apple, MS, Google, Amazon, etc. use their size to control formal and de-facto standards, giving them a competitive advantage.

Give them twenty more years. Chances are some of them devolve into what IBM and HP were before breaking up.

Well, Apple and MS have already been around since the late 70s and have both shown the ability to evolve without splitting up.

Competent leadership can hold back the tide for a while, but eventually you get incompetent leadership and things go to hell. This is why good democracies only permit authoritarian/oligarchic dictatorships in corporate form, there's no decades of civil war when a bad CEO runs a company into the ground.

I saw personally some of these happening; while not working for HP, I was working with HP and GE and around the same time my employer divested part of the business. The reason, in all cases? the companies had very different business divisions that had almost nothing in common, there were no synergies or economies of scale and even sharing some stuff like HR made no sense when they tent to treat people in mass, in a way that works for most, but can hurt really bad some (I am one of these cases, well known in my company).

If the HP printer division has nothing to do with the enterprise service division, keeping it together brings nothing. The GE aviation has nothing to do with medical or manufacturing. Moving people from one division to another is rare because the skills are not easy to transfer, there are major differences in standards and processes, legal constraints and specifications.

In our case the 2 divisions that were divested are more successful now; our management tried to treat them like the rest of the business and this hurt a lot, they were different. The management of each division was not good enough (expertise, trust, etc) to operate independently, but under our umbrella was worse than alone. We sold them to other companies that are specialized in these areas, everyone is happier.

When I was at IBM at the turn of the century the new CEO fought splitting the company up. He figured they were better off having everything together. It worked a little while he was there.

https://en.wikipedia.org/wiki/Lou_Gerstner#IBM

"In his memoir, Who Says Elephants Can't Dance?, he describes his arrival at the company in April 1993, when an active plan was in place to dis-aggregate the company. The prevailing wisdom of the time held that IBM's core mainframe business was headed for obsolescence. The company's own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called "Baby Blues." Then-CEO John Akers decided that the logical and rational solution was to split IBM into autonomous business units (such as processors, storage, software, services, printers,) that could compete more effectively with competitors that were more focused and agile and had lower cost structures.[12] Gerstner reversed this plan, realizing from his previous experiences at RJR and American Express that there remained a vital need for a broad-based information technology integrator.[11] He discovered that the biggest problem that all major companies faced in 1993 was integrating all the separate computing technologies that were emerging at the time, and saw that IBM's unique competitive advantage was its ability to provide integrated solutions for customers"

Apple is the everything under one roof company. Johnson & Johnson mentioned in the acticle has always been a "family" of companies.

> with competitors that were more focused and agile and had lower cost structures

so do economies of scale apply as a principle, or not?

There’s also such a thing as diseconomies of scale. My inexpert opinion is that you have to work at enabling economies of scale and that it’s very easy to fall into patterns that turn into diseconomies.

They do, it is the only reason very large companies survive: they live on economy of scale and die of corporate ice age (get large, bureaucratic, slow until freezing). Scale and inertia.

For manufacturing, yes. For corporate governance, nah.

> In a new paper, Robert Burgelman argues that the decision to split often reflects a process that’s analogous to biological adaptation and the evolution of new species. Like living organisms, he says, corporations are constantly adapting to changes in their environment. If those changes push different business segments in diverging and even conflicting directions, a company may need to evolve into a different — and smaller — kind of species

> “The splits of many multibusiness corporations involve a form of corporate speciation. A corporation that was previously viable reaches a point where the ecosystems of its different businesses have diverged and the CEO can no longer develop a viable strategy for all of them. The original species needs to split into multiple new corporate species that are better able to pursue their specific opportunities.”

This is not strictly biological: Companies grow sort of like unicellular organisms, absorbing things they can, and then transform into complex multicellular organisms. The complexity of companies and their reach typically grows over time until they reach a stage where it’s no longer possible to be managed well (as the author indicates). They then split to create smaller companies that are easier to manage. Those smaller companies again grow by mergers and acquisitions to become large and complex, and have to be split.

It’s the nature of the market and the competition dynamics that companies go through these cycles periodically.

It takes a lot of focused effort and staying private (and preferably not taking VC funding) to resist the temptation to absorb many other companies and become unwieldy and complex.

This happens in nature all the time, and interestingly it's to prevent competition. The classical model of this is Darwin's finches. A species of finch landed in the Galapagos millions of years ago, but over time began to speciate into different ecological niches.

Rather than evolving into a generalist bird that ate every type of food, the birds evolved to specialize on specific trees and nuts. Each species became best for its given niche.

AWS and Amazon desperately need to split. The retail business is a massive drag on AWS, and if it can't stand alone then it should be allowed to modernize or die without being kept on life support.

Similar splits for the other major clouds would be less important, but probably still beneficial for the market overall.

Amazon, definitely.

The retail business is gaining market share by having every product and delivering it right away. Who doesn't love that?

Only the shareholders, eventually.

I see the cutting edge of this in the Dell Technologies saga. Pulling in EMC, VMware, Pivotal, and other storage vendors to bolster it's "Enterprise" chops, then pretty quickly restructuring and spinning out all the software groups as public companies.

So now Dell has two divisions with serious synergy: Dell EMC (storage, enterprise software, consulting), and Dell (servers, PCs, etc).

Spinning out VMware and Pivotal ensured that each could grow without having to answer to specific hardware vendor affinity.

As other big bets grow fruit they will likely get sold off or spun out as well. The cutting edge is that as they spin, the shareholders get pieces of the NewCos, and the process renews again.

The process reminds me of map-reduce: first you aggregate a bunch of small companies for economies of scale, then slice them the other way to separate out the similar functions. No idea if or how often it actually works out that way :-)

The old HP seems like a much more interesting company. Probably better to work for and higher benefit to society as well.

It's not obvious to me how the split was beneficial to the industry, to technology, to customers, or to employees.

> HP’s market valuation sank to a point where it was lower than the value of its individual businesses

Or to shareholders, for that matter.

> HP executives were slow to grasp the huge shift toward cloud computing in the early 2010s.

2012 - https://www.youtube.com/watch?v=9ntPxdWAWq8

We Have App

This was bitterly funny when I worked for HP in 2012.

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No mention of "disruptive innovation" in these comments or the article. Interesting.

Even after HP and HPE had split, when HPE acquired Cray I had a lot of fun asking Cray employees how things were going in the printer business.

Splitting to make companies leaner makes sense, but does pose some brand-confusion difficulties, beyond the mild trolling by people like me.

Curious why you mentioned HP specifically in your submitted title. The actual title is Why Some Big Corporations Must Split Up to Survive.

The first company mentioned in the article is General Electric.

EDIT: Oh, I see that HP takes up the bulk of the article.

I do not understand the problems of multi-billion dollar companies. Are revenues disappearing? in an age of record military spending, this seems more like a story to cover whatever princely back room deals are emerging.

Some of the problems are real, the article mentions that sometimes having conflicting portfolios of products can be a real problem. Before the HPE split, for example, hp was forced to use HPE cloud, which was garbage, over AWS. Conversely, HPE customers were asked to use hp HW instead of buying whatever commodity stuff was the best deal.

The HP product I worked on was being forced to shift to HP cloud, and we hated it. I seem to recall that within a day or two after the announcement, we immediately halted that work and went back to AWS.

More stupidity, HP was chopped up in an LBO that separated the head from the body, and trashed one of the worlds most productive tech innovators.

This babbling bullshit from stanford "What drives companies, some that date back more than a century, to transform themselves in such a radical way? Did the anticipated benefits of “synergy” and diversification become a drain on profits and corporate value?".

Yea, that's it, they leveraging synergy, sure.

Maybe they were involuntarily sucked dry by the same kind of pathological assholes the spew this vacuous bullshit.

No wonder the world is so fucked up, apparently even engineers and scientists fall for this hateful, capitalist, greenwashing of the pillage that's cratered american innovation.

Sure, we still have innovation, Albertson's grocery just gave a $4B dividend while fucking your stupid asses everytime you shop.

Maybe they're leveraging synergy too!

Some body should give them a prize for that...

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