Hewlett Packard Printers

In the early 1980s then-senior Hewlett Packard (HP) engineering manager Richard Hackborn identified a promising market opportunity in desktop and office printers and convinced HP senior management to move quickly to capitalize on it. The actions he took and decisions he made in leading HP toward the opportunity and building HP s printer division from scratch into a multibillion-dollar operation exemplify reconnaissance pull and its four components in the business environment.

The Opportunity. Impact-style dot-matrix and daisy-wheel printers that were clumsy, slow, loud, and messy to change and that generally produced poor-quality documents dominated the market for affordable desktop printers in the early 1980s. Incumbent competitors NEC, Epson, and Panasonic were enjoying fat profit margins for an altogether outmoded technology. Moreover, the dramatic proliferation of personal computers in the early 1980s would eventually require higher-resolution graphics and color printing, features not possible with dot-matrix or daisy-wheel printers.

Targeting Critical Vulnerabilities and Decentralized Decision Making. Observing low-cost Canon ink-jet printer technology for the first time in 1981, Hackborn sensed a great opportunity: ^[3] he surmised correctly that the potentially huge market for desktop printers was critically vulnerable to new printers, made possible by new technology that offered capabilities at lower costs than previously possible. Incumbent competitors were unlikely to abandon or cannibalize their entrenched positions and equally unlikely to risk losing existing sales by adopting an unproven technology. Said Hackborn in a 1993 interview, The impact vendors were sitting atop a fortified hill, and I knew we couldn t attack it directly and expect to win. The key was to change the basis of battle. ^[4] Instead of conducting a frontal assault on the hill, Hackborn sought to circumvent incumbents entrenched positions by introducing new laser and ink-jet technology at a relatively low price.

Hackborn developed the unconventional idea that HP deviate from its existing high-end business strategy and begin designing, producing, and marketing inexpensive, mass-produced printers that could connect directly to personal desktop computers. While these printers were not truly inexpensive, they allowed individuals and small businesses to acquire world-class technology that had been previously unaffordable or in some cases unavailable. He acquired the rights to the technology from Japanese camera and printer maker Canon, which failed to see the market opportunity and in 1982 presented his plan to then-CEO John Young. Young gave him the go-ahead and the latitude he needed to build the business, thereby pulling HP in an entirely new direction.

Knowing that the business would require sweeping changes in marketing, sales, and manufacturing, Hackborn secured approval from Young to headquarter the business in Boise, Idaho, far removed from company headquarters in Silicon Valley. HP had long been heralded for its entrepreneurial spirit and decentralization, and Hackborn s printer business was no exception. Consistent with the HP Way, he established business groups in dispersed nontraditional technology locales throughout the western United States, and he gave the managers of these dispersed locations the same latitude to run their operations that Young had afforded him. Division headquarters and LaserJet groups were located in Boise, the inkjet line in Vancouver, Washington, and supporting departments in San Diego, California, and Corvallis, Oregon.

Tempo. With Young s rapid-fire approval of Hackborn s plan, the printer division was off to a fast start. Hackborn in turn created a constant sense of urgency among his people and decentralized decision making, which further accelerated tempo. While building a completely new global business out of an unproven technology was fraught with uncertainty, he confidently made quick decisions and set ambitious time-to-market goals. He then stepped back and relied on his dispersed operations to build and introduce products before incumbents could respond effectively with comparable offerings.

Within a mere three years of its conception , Hackborn s printer business rolled out the first HP LaserJet in March 1984. This model sold for $3,495 and printed 300 dots per square inch (dpi) at 8 pages per minute. Two months later the group launched the first-ever ink-jet printer offered in the United States, the HP ThInkJet, which printed 96 dpi (today s standard is 600 dpi). Though the products were initially far from perfect, HP aggressively filed patents on the technology, thereby creating formidable barriers to entry for the competition.

Preempting the competition and erecting barriers to entry were not the only benefits of tempo. The rapid establishment of a sizable installed base of customers also contributed significantly to the success of Hackborn s strategy, which relied heavily on sales of high-margin printer peripherals such as printer cartridges, paper, and cables. Given that a printer s purchase price implied a multiyear commitment and that most peripherals were not interchangeable among brands, selling a large number of printers quickly enabled HP to lock up almost all of the customer s expected purchases during the printer s lifetime. To illustrate , an HP inkjet cartridge currently offers a 60 percent margin on a $25 sale price, and the average customer replaces the cartridge several times each year.

Focus. CEO Young committed hundreds of millions of dollars to Hackborn s idea. HP built new facilities, initiated an ambitious laser and ink-jet technology R&D effort, created new mass-production capabilities, and established a network of relationships with suppliers, third-party manufacturers, and channel partners . In addition to these physical investments and external alliances, HP made the human investment necessary to ensure the success of this new venture; Hackborn and his staff hired thousands of new employees , most notably talented engineers and managers with skills outside HP s existing capabilities. For example, the company needed engineers and scientists to run thousands of ink tests and create a reusable, inexpensive, and durable design for the masses, as well as marketing experts who could develop successful strategy and tactics to launch a new product into the retail channel.

Within ten years of its launch, HP s printer division had sold twenty million printers. Today the company is the undisputed world leader in general-purpose personal, small business, departmental, and work unit printing products ”odds are you have a Hewlett Packard LaserJet or inkjet printer either in your home or at your office. With at least 50 percent market share in LaserJet and inkjet printers, the printer division regularly accounts for 40 to 50 percent of HP s overall profits. Peripheral sales drive over 50 percent of the printer group s revenue. Additionally, the printer business has helped transform the company into a high-volume manufacturing leader and has paved the way for a new lineup of profitable end-consumer products such as color printers, cameras , desktop and handheld computers, and compact disk recorders . Hackborn, who served briefly as the chairman of HP s board of directors, is now retired , but his legend lives on at the company.

Leadership Lessons

Hackborn was in a unique position to identify firsthand both emerging technology and market vulnerability, and he put the two together to identify value for both HP and a large group of potential new customers. That he had the latitude to develop such a maverick idea and present it to the CEO was a testament to the decentralized environment at HP, where employees felt comfortable creating and acting on new ideas. Tempo played a key role in both planning and execution: by the time incumbents had mustered a response to HP s infiltration of their market, they were stopped short by superior products, patents, and a sizable installed base of customers. Finally, the nonlinear results that Hackborn achieved would not have been realized without Young s full commitment.

^[3] Pitta, Julie, It Had to Be Done and We Did It (HP s Management Strategy Keeps HP Profitable), Forbes , April 26, 1993, 148.

^[4] Hewlett Packard Marks Sale of 20 Millionth Printer, BusinessWire , November 9, 1993.