Aug 19, 2011
When the world’s largest personal-computer maker decides to stop making personal computers, eyebrows get raised.
This week, Hewlett-Packard announced that it’s weighing whether to spin off its PC business, a move that HP projects would raise profit margins even as it reduces revenue by a third. Rival Michael Dell mocked the idea, and The Wall Street Journal dinged HP Chief Executive Leo Apotheker for engaging in “a strategic flip-flop.”
But flip-flops aren’t necessarily an indication of bad decisions as much as an indication of new (or newly considered) data. And HP’s decision was apparently made after an analysis of market trends indicating that PCs face an inexorable decline—what Apple’s Steve Jobs, for one, has dubbed a “post-PC era.”
As we’ve noted before, Peter Drucker repeatedly emphasized the benefits of purposeful abandonment. “The change leader puts every product, every service, every process, every market, every distribution channel, every customer and end-use on trial for its life,” Drucker wrote in Management Challenges for the 21st Century. “And it does so on a regular schedule.” Drucker told managers to ask themselves a simple question: “If we did not do this already, would we, knowing what we now know, go into it?” If the answer is no, then the groundwork for abandonment has to be laid right away.[EXPAND More]Drucker identified three cases in which outright abandonment is the correct course of action:
1. When a product has a few good years of life, but only a few. Such products require lots of attention, Drucker noted, and “tie down the most productive and ablest people.”
2. When the only argument for keeping something is that it’s been fully written off. This “has its place in tax accounting, but nowhere else,” Drucker said.
3. When an older product on the wane is diverting resources away from new products on the rise.
Is HP’s possible abandonment of the PC good business? What other kinds of products and services should other corporations be abandoning right now? [/EXPAND]