CRN Exclusive: 30 Questions For HP CEO Meg Whitman

Progress, But More Work To Be Done

Hewlett-Packard CEO Meg Whitman says the company has made progress, but there is a lot more work to do to accelerate channel sales growth. In an exclusive interview with CRN, Whitman discusses new initiatives such as Net Promoter Score and 24/48 and issues a call to action for HP partners. Here are excerpts from the interview, which comes on the eve of HP's Global Partner Conference, March 24 to 26 in Las Vegas.

Talk about the new Net Promoter Score initiative.

It was invented actually by Bain & Co. 20 years ago. It is a measure of the people who would recommend your product, your service or your offering and then those who would not.

We are using it across the company down to a product level. So what do you think about Vertica? How many of you would recommend it? How many of you would not recommend it? There will be a Net Promoter score for every line of business, in every geography.

It is a big initiative. We are going to comp people on it.

T alk About Early Net Promoter Scores (NPS) For The Channel?

We saw the first set of scores two months ago.

They are actually better than I thought they would be for partners. Now what we have to do is we have to even them out. There are partners we have a 98 with and partners that we have a two with.
Then what we have to do is teach people what moves NPS? Is it quote to cash time? Is it the right partner business manager? Is it their perception of your products? Is it a simplified billing system? What is it that actually moves NPS which is really the magic (of NPS).

Talk about the progress HP has made in the channel over the past year.

My headline is progress, more work to do. But I feel like we have made real progress. So I think we have a lot of forward momentum. I think there is more work to be done.

But I feel good about the progress, and you can feel it. I can feel it when I am out in the field.

What is the call to action for partners at the Global Partner Conference?

Growth. In the end what I love about the channel is they are entrepreneurs. These are guys who make money doing what they do every single day. They have got to sell the products, they have got to make the payroll and what is left in the till at the end of the month is what they take home. I love that.

So we have to figure out how to help them grow. We want them to grow. We want them to grow disproportionately with HP. But we have to first and foremost help their businesses grow.

Talk about channel sales growth.

It is growing faster than the rest of the business. It is not fast enough for me. But it is growing faster. And I think we are making a lot of progress in winning back some of the partners that sort of pivoted away a bit.

Last year before our GPC there was a survey where we were like 10 out of 10 or 8 of 10 on seven dimensions. I was not happy with that.

If you are higher [on these surveys] partners do more business with you. It is not complicated. So our aspiration over time is to be the most highly rated on every single one of those attributes.

Can you discuss HP's mission as a product-driven company that goes to market through the channel?

We will always sell products and have a huge volume business in servers and PCs and printing, but we are going to have to migrate from products to solutions.

So if you have got a VDI (desktop virtualization) challenge at one of your customers, why is our solution the right one? Just Right IT for the SMB is another example.

There will always be a product element to this, but I think increasingly the trends are what problem are you trying to solve for small, medium or big business. And our partners have to be able to migrate to that as well.

Talk about the next wave of innovation from HP.

I think [HP Enterprise Group Executive Vice President] Bill [Veghte] (pictured) is doing among the best jobs here. He is basically packaging up servers, storage and networking to actually go after a solution that the partner can deliver and then wrap services around. So I think you'll see more bundles, more packaged solutions that are aimed toward a workload.

So if you want to offload some of your data warehouse from a Teradata -- which is wildly expensive from a support and services perspective -- here is the part of the data warehouse you should offload on Vertica.

What are the solution bundles that the Enterprise Group and software are now delivering?

I have had weekly meetings on how software and [the Enterprise Group] are going to go to market. What does the hardware look like? What is the technology bundle? What are the services that are going to go with it? And it is all [being sold] through the channel.

We are learning how to do this again. I think we once knew, and we are learning how to do it again.

The biggest difference is I have got four BU [business unit] heads who actually like each other and want to do business together, and one plus one plus one plus one plus equals six -- not four.

Talk about where you have made the most progress in terms of innovation with software and the Enterprise Group.

OneView is the management plane that links it altogether. So it is not just putting servers, storage and networking together. It is the monitoring and orchestration layer. It is software that is actually making the hardware work better together.

I also think midtier 3Par is a huge innovation. This is all about a simpler architecture and the ability to manage storage.

Our commercial PC business is doing really well. [HP Printing and Personal Systems Executive Vice President] Dion [Weisler] (pictured) has done a great job in form factor, price points and in market segmentation. We have some experiments going with the phablets in India, and Officejet Pro is a runaway hit.

Discuss the change in innovation at HP.

Innovation was not actually dead at HP. It had gone underground. There was so much change in the strategic direction and change at the top, I am not sure our engineers actually knew the direction the company wanted to head. So they just went off and kept on doing. Thank goodness.

In a funny way, we just took a lot of things that needed to be commercialized and then we celebrated the engineers. We put more money into R&D. We focused the efforts. So now I think you are seeing that resurgence.

Are we going to see the pace of innovation increase this year?

I think you are going to see the pace of innovation pick up without enormous SKU proliferation. This is not helpful to us or to partners. We have got to have [innovation focused on] what market segment, what product, what price point, [innovation] designed for specific market segments so that our partners are not required to carry 1,152 printers. This is not helpful to them or us.

Companywide R&D is about 3.3 percent [of sales]. It feels a bit lower but, remember, services is included which has a very different kind of R&D than a product business.

Talk about the increased investments in HP innovation.

What we have done is actually increased that [R&D investment] number and also focused it particularly downstream in HP labs.

One of the charming elements of HP is we never met a science experiment that we did not like. The inkjet printer was invented in 1984 by two guys in HP labs, and it had nothing to do with anything that HP was doing. I want that kind of discontinuous innovation. But if you are going to let 1,000 flowers bloom, you have to weed the garden.

Talk about the HP labs strategy.

[HP Labs Executive Vice President and General Manager HP Cloud] Martin Fink (pictured) is fantastic. He is a business guy. He is our deepest technologist. He is really a gem, a 28-year veteran of HP who joined HP out of high school. Think about that for a minute.

So he has totally refocused HP labs onto a smaller number of bigger initiatives. So it is a combination of increasing the R&D, but also focusing on things that we think are going to make a difference on the medium term and the long term.

What is your vision for the new style of IT channel partner?

So I think there are two kinds of innovation. When people say ’innovation’ to HP mostly they are thinking, I believe, technology innovation. There is also business model innovation. So think about Ink Advantage. This is not a technology innovation. This is a business model innovation. Ink Advantage, of course, is for markets outside the United States -- a slightly higher-cost printer and lower-cost ink. It is the same ink. It is the same hardware. It is just we have priced it differently so it is just right for a particular market. So what we have to make sure is that we innovate on our business model, not just on our products.

Are we going to start seeing some compensation changes that turn the tide on HP and partners working together on services?

What I know is the strategic direction is that we have got to help partners either preserve their margins or increase their margins or at least offset the margin degradation that is likely to occur here. So my view is that has to be around value added services.

All of our partners I think are going to have to figure out how they are going to add more value to their customers in order to maintain and grow their margins. And cloud consulting is the perfect example of that.

What is your advice to partners to be successful working with HP in the new style IT era?

The first advice to our partners and I say this all the time is do not underestimate the pace of change even for the smallest business. Even for education institutions. Even for government. It is changing really fast. So how are you going to position yourself to use that disruption as an opportunity as opposed to a problem?

(HP PPS EVP) Dion (Weisler) said it well today- 'The more change the better.' That is the attitude that our partners have to have as opposed to being worried about the change or scared of the change.

Talk about HP's Flexible Capacity program.

We roll in a unit of compute -- server, storage and networking -- into a customer, but we can structure it on a pay-as-you-go basis. They have to buy a minimum. But we are quite happy to have them flex up and down. If they go over capacity, then they roll in another unit. And this was pioneered by our team in Western Europe and is actually a very channel-friendly thing. You just roll it in and we finance it through HP Financial Services. It is actually a really nice innovation. So it is not technology innovation per se. It is the pricing.

Talk about how important CEO participation is for the business plans?

The most senior people at the partner's need to be involved in this, preferably the CEO or the COO or the Chief Financial Officer because if you don't engage at the top of the company then there is often a disconnect.

It has to start at the top. Now once we get our momentum and we get practiced at this maybe it doesn't have to happen (like this). But I am telling you unless we have the most senior attention at these big partners they are not going to get the benefit of this. There has to be executive sponsorship. That is really, really important. Otherwise it is a motion, but it doesn't deliver the results.

Talk about how important it is to monitor partner sales trends?

This is something we learned at eBay. Because our top eBay sellers were critical to us. There was a time where we weren’t monitoring exactly how much each of the eBay sellers were selling. So then we began to monitor weekly.

Sometimes there was nothing wrong. Sometimes we had done something wrong. We had billed them incorrectly. Who knows what it was?

And then I said for top eBay sellers they need to have my home phone because if something goes wrong they need to be able to call me. So this is the kind of attention to detail that we (at HP) have to have as a company.

Talk about HP's drive to accelerate business model innovation.

What we understand deeply as we think about how we interact with our partners is that there is not only technology innovation, but there has to be business model innovation. And then we have to make sure they are making money on how we do business together. And that was the genesis, obviously, of PartnerOne -- no gates [for partner payouts], no caps [on compensation], how do they make more money. So we are not done at all on business model innovation.

I think there is going to be real rewards for people who can figure out the business model innovation in this new style of IT.

What is the new 24/48 initiative?

We are trying to move faster as a company, and you know what happens at big companies -- decisions go into the ether and sometimes they never come out. So I have said, ’Listen, if there is a decision that is really important to a customer and we sort of spin on ourselves, you have got to elevate it in 24 hours and we have to resolve it in 48.’ And I have encouraged the organization to go up through their chain of command, but if they can't get resolution they have an obligation to raise it to me.

Talk about the experience with 24/48 so far.

If they know it is going to me, somehow it gets resolved earlier than you might think. I'd say we are getting 20 a week. The first one got raised to me. There was just one the other day between services and software. And I said, ’If you guys cannot resolve this then [HP Executive Vice President Software] George [Kadifa] (pictured) and [HP Executive Vice President Services] Mike [Nefkens], I need you at my house on Saturday morning and then we will figure this out. Guess what? It got resolved.

What is the importance of making decisions quicker in HP?

You know this in big companies. These decisions sort of go off and they languish. My view is a ’fast no’ is better than a ’long no.’ And sometimes even a ’fast no’ is better than a ’long, convoluted, messed-up yes.’ We just need to make decisions. Make a decision. Move on. Make a decision. Move on. And then if we have made a mistake then we go back and fix it. But sometimes the desire for perfection, the desire for complete consensus actually really hurts you in the marketplace.

Talk about the vision of HP Services as it relates to the channel.

I think our services company is probably more big-enterprise-oriented. Our top 200 customers in the services business are Fortune 1200 customers around the globe.

I think what is more relevant to the partners is Technology Services [TS], both consulting and TS break fix. This is an opportunity for partners to resell TS, to resell the consulting services, to learn from what we do and then have them go do it themselves.

So I think there is real opportunity for our partners to get into the services business because as we continue to see margin pressure, which I think we will, then how do they make that up in their own business model?

Where are you on the drive to make sure HP is the No. 1 most profitable vendor for partners?

I think about it as rate and volume. So what is your return on sales of HP's business and then how much are you selling? Because, in the end, this has to be about the absolute dollar amount that you are making.

It is a function of the profitability per item and then the number of items that you sell. So we have to work both of those. We have to make sure that we are a volume player but they make money on each individual item. And it is always a balance. I'd say we are making real progress on that.

What is the difference in conversations you are having today with partners vs. two years ago?

I think it is a very different conversation. The conversation when I came in was, 'What is the strategy?’ ’Are you going to be in the hardware business?’ ’Are you committed to the channel?’

Now the conversation is, ’How do we grow our business together?’ It is a fundamentally different conversation. It is now all about the opportunity as opposed to explaining.

When you are in politics, when you are explaining, you are losing. And it is like that with the channel. When you are explaining, you are losing.

Talk about Unison and the business plans you are seeing from partners.

It is a very powerful tool. You know that old saying, ’If you don't know where you are going, any road will get you there?’ We cannot have it be like that. There has to be a growth plan for every single one of our partners.

The devil is in the details here. It is not let's grow servers 5 percent. That is not a plan. That is a wish. So what customers, with what products, in what geographies, in what market segments, at what price points are you going to grow your server business 5 percent? We pushed very hard on this. It has to be in Salesforce. And it has to be inspected.

What are you doing to win partners back that may have pivoted away from HP?

We have to reach out to them. We have to have the right partner business manager if they are big enough to have a partner business manager, and we have to earn our way back in.

It is just as simple as earning your way back in. There is no silver bullet here. It is, ’Here are our products, here are our programs, here is our commitment.’ And it is communication, communication, communication.

What do you say to partners looking at partnering with Dell?

You have got to watch for consistency of execution. Culture is very hard to change. The reason we were able to swing back to the partners really fast is because it was in the DNA of the company.

Dell is a direct company. Remember Dell Direct. Do not underestimate trying to change the culture in the field on a day-to-day basis. There may be sort of near-term opportunities that people can take advantage of. But my experience with partners is they want to make long-term commitments. It is not like grocery shopping.

I just would say: be cautious, be thoughtful because this is not in their DNA.

What has been the key to how much progress you have made turning around the HP channel?

You have to remember I have been at this for two and a half years. People forget that.

Partnering is in the natural DNA of this company. In a funny way, I reverted back. I got the organization to go back to what they knew, and that is a lot easier than learning a whole new skill.

In fact, it felt right to the company. You can't underestimate having that wind at your back. I wasn't asking them to actually climb Mt. Everest; I was actually asking them to ski down Mt. Everest. And that is different.