Madison, Wis. – When it comes to driving innovation, most businesses don’t have large research and development labs to fall back on.
Hewlett-Packard does, but that didn’t prevent a visiting HP executive from offering advice to privately held companies. Kristin Pugh, who is HP’s director of software marketing for the Americas, advised small businesses to “get comfortable” with a handful of customers with whom they can test and develop the beta versions of products.
Pugh was here to address the monthly program of Accelerate Madison, and to lunch with area executives. During the luncheon talk, she was asked about the innovation process.
Thomas Gosnell, chief information officer for CUNA Mutual Group, said his company has come up with innovative ideas, but it’s not easy to do it on a consistent basis in a risk-adverse industry like insurance. “How do we sustain innovation on a regular basis?” he asked.
Pugh, who has been with HP in various capacities for 18 years, said companies – especially those which lack the resources to do primary research – should build their business around finding specific needs in the market that aren’t being delivered by other partners or other companies.
“Be very focused around trying to address that need,” she advised. “Take on customers that are willing to go through a development or beta cycle with you to speed the cycles that you need to refine or develop the business premise that you have.”
Pugh said that’s what she has seen with some of the smaller companies HP has acquired. TruLogica is a company that it acquired in the security space, with about 40 employees at the time of acquisition. Most of TruLogica’s employees worked in development because it was collaborating with three established companies on a product beta. In this case, the development was a mutual activity between vendor and customer, with the eventual goal of commercially marketing the product to a broader audience.
In all cases, Pugh said this approach has an added benefit – it contributes to the development of a customer-centric business model.
HP’s software unit, based in Cupertino, Calif., is a $1.2 billion annual business in the Americas region, which would make it the sixth largest software company in the world.
Overall, HP reports $91.6 billion in annual revenue and employs 156,000 people in 169 countries. The company ships three products every second of every business day, and sells 30 million desktop and laptop computers, 50 million printers, and two million servers annually.
As such, its approach to innovation is more robust than most. Since the 1960s, it has relied on HP Labs to generate product innovations. Citing the thermal ink jet printer, digital media platforms, and video merchant services, which Pugh called the backbone of Wal-Mart’s website, she said the lab has done a good job of developing disruptive technology.
HP devotes about five percent of its $4.6 billion R&D budget to the lab, which employs 600 people, including those with computer- and materials-science backgrounds. In essence, its role is to develop a 10-year roadmap of disruptive technology.
“The fact that it is sort of a city-state of its own and doesn’t have to answer to anyone except [HP Chair, CEO, and President] Mark Hurd gives it the executive backing it needs,” Pugh said.
The R&D function, however, is not the only source of innovation at HP. With the belief that “creative DNA” exists everywhere, the lab has a team in each business unit, including the software unit, that is responsible for establishing a clearly defined, five- to six-year R&D roadmap. According to Pugh, about 15 percent of the software unit’s annual revenue is devoted to R&D.
The company, which is in the middle of an ambitious IT transformation led by former Wal-Mart executive Randy Mott, is streamlining applications to make IT more nimble and capable in areas where it wants to grow the business.
As part of a two- to three-year transformation, HP is reducing the number of data centers from 88 to 6 and the number of IT projects from 6,000 down to 400 – with the goals of reducing IT spend to a more cost-competitive level, and achieving better-defined outcomes and performance metrics.
It has involved some painful decisions, including staff reductions and moving people from remote to central locations so they can function as a part of teams, but another anticipated benefit is that employees will think more about the business side of the equation.
While the reduction in projects led to outcries throughout the business, Pugh said Mott has the necessary executive backing to re-architect information technology.
Members of Accelerate Madison got their first look at John Gee, the new president and CEO of the Information Technology Association of Wisconsin. Gee, a former Silicon Valley entrepreneur, has spent the past two weeks traveling across the state, and has come away impressed with its people and technological potential.
“I have seen immense vision, talent, and accomplishment in every region of the state,” he said, “but what is not here is the ego of the Silicon Valley.”