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R&D at Hewlett-Packard

(pp. 118-119 in Collinson, Narula, & Rugman 2020)

Founded in a small garage by William Redington Hewlett and David Packard in 1939, The Hewlett-Packard Company (HP) is a multinational American organisation that develops a range of computer hardware components. HP also provides software and IT-related services to SMEs and large organisations and is headquartered in Palo Alto, California, US. In 2014, HP split into two separate entities, with one being Hewlett-Packard Enterprise, which sells servers and enterprise services, and the other one being HP Inc which focuses on PCs and printers. The deal was motivated by the opportunity to save around $1 billion in operating costs.

Before the split, HP primarily had seven basic R&D centres: in Palo Alto, California; Cambridge, Massachusetts; Bristol, England; Galway, Ireland; Grenoble, France; Haifa, Israel; and Tokyo, Japan. These explored a wide range of technologies more or less linked to its product range. Its Advanced Studies Research Labs include a sub-group doing information theory research, linking the Mathematical Science Group based in Bristol with experts at US universities at Stanford and Berkeley. Grenoble specialises in business PC design and development and Israel in image and document processing, among other areas. These centres of research excellence were linked to HP’s global product divisions, mainly headquartered in the United States, and its national subsidiaries around the world, which encompass most of its 85,500 employees. The Palo Alto centre pioneered HP’s thermal ink-jet technology, for example.

Its Consumer Products group, headquartered in San Diego, California, designed, developed and led the manufacturing of a range of imaging products using this technology. The firm’s subsidiary in Singapore customises the design and produces thermal ink-jet printers for the Japanese and Asian markets. The R&D structure of the firm evolved a step further when the Singaporean subsidiary took the lead from San Diego for the design, development and manufacturing of a new range of portable ink-jet printers. It had built up a range of specialist capabilities, through learning from other parts of the internal network and through local Asian technical partnerships and subcontractors, which made it the best place to lead innovation efforts in this area for the firm as a whole.

HP has developed a strong culture of creative innovation, going back to its roots as a garage-based start-up. In addition to the ‘formal’ R&D function, with its global network of R&D centres, HP promotes innovation across all of its functions and employees. Continuous improvement of technologies, products, services and solutions which exploit new technological trends and match these to the changing needs of customers is encouraged across the firm. HP focuses its efforts on areas where it believes it can make a unique contribution, which at times also include forming partnerships with other leading organisations.

In 2015 HP invested US$3.5 billion into R&D, up from US$3.45 billion in 2014 and US$3.14 billion in 2013. But the firm’s R&D investment as a percentage of sales (a standard measure of R&D ‘intensity’) declined from 3.9 percent in 2006 to less than 3 percent in 2015. With the help of its R&D centres, HP has recently been able to develop new products and services around the cloud storage platform and related to ‘big data’. In 2015, HP opened an 87,000 ft2 Innovation Center in Ballybrit, Galway, Ireland, with a workforce of 700 engineers, consultants, and support team. With the opening of this new Innovation Center, HP is striving to become a leader in software R&D, cloud technology and service innovation. Similarly, the 2017 opening of its new research centre in Singapore is aimed at allowing engineers to experiment, design, and find solutions for improving the company’s manufacturing processes.

Conclusion

Even though HP’s expenditure on R&D has been increasing, it is still relatively low compared to some of its competitors and particularly low as a percentage of sales. For example, Microsoft spends approximately 15 percent of its revenues on R&D; IBM 5–7 percent; and SAP 14 percent. However, in consecutive annual reports, HP states its intention to invest larger sums into R&D. The central belief of HP’s founders, David Packard and William Hewlett, from the days of the garage in Palo Alto, that investing in R&D to drive continuous innovation is necessary for long-term competitive advantage, still runs strong.

Website: https://www.hpe.com/uk/en/home.html

Source: HP, Annual Report, 2014; Cliff Saran, ‘HP CEO Meg Whitman pushes hardware R&D strategy’, Computer Weekly, 10 May 2012; ‘HP opens new Innovation Facility in Galway’, ARUP, 13 May 2015, arup.com; ‘Invest in the West – MJ Conroy & HP Ballybrit’, Irish Building, 9 February 2015. https://www. businesstimes.com.sg/technology/hp-unveils-s100m-campus-home-to-its-first-advanced-manufacturing-centre.

CASE QUESTIONS

Use all class resources you have learned thus far and:

1. Competitive advantages & Dynamic capabilities: Deliberate and discuss in detail whether HP has competitive advantages.

1. If yes, what are they? If no, argue why HP has no competitive advantages.
2. Outline examples of dynamic capabilities HP has. If you argue there are none, state why.
3. Discuss the interaction of CSAs and HP’s FSAs in developing the firm’s competitive advantages.

2. Consider whether the Singapore R&D subsidiary is: centre-for-global, local-for-local, local-for-global, or global-for-global. Make an argument for (using examples) for the classification you choose.

Submit maximum 3 A4 pages (=ca 250 words double-spaced per page) = max 750 words.

Answers should be well structured, concise, and logically argued.

Use of relevant external resources must be cited appropriately. Choice of citation style is up to each student (e.g. APA, MLA, etc.), but whichever style chosen, it must be correctly and consistently applied in the assignment. For example, this means that if you choose to use APA style, then use ONLY APA style accurately from start to finish.

Cases of plagiarism will not be tolerated and will earn a failing grade for the assignment.