HP's new approach to R&D

Wednesday, 24 November, 2010

Ovum's Principal Analyst Roy Illsley comments on the change of culture at HP when it comes to R&D.

Former CEO Mark Hurd changed the culture at HP and made it one of the most efficient technology companies. Hurd did this by focusing on reducing the cost of doing business, but he also reduced R&D spend at the same time.

An organisation can only squeeze its cost base for so long, and Leo Apotheker, HP’s new CEO, was faced with a dilemma: continue cost cutting to drive up margins or take a brave new approach in what are difficult times for many large enterprises. Apotheker has decided that for HP the future is to develop a strategy that does not rely on acquisitions alone for new growth, rather that new growth is a combination of organic development and acquisitions.

This new emphasis on finding the future revenue streams from within makes sense. HP has a great deal of talented people, but spending on R&D alone is not a guarantee of success. HP must also adopt new management processes to foster innovation and embrace an entrepreneurial culture if it is to succeed.

The increase in spending on research and development at HP is a signal that the company recognises the need to move beyond the current cash generator activities and efficient business processes, and to find new profitable revenue streams in the future.

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