5 Innovation Rules HP Followed for Long-Term Success

Hi, I'm Evan Carmichael and welcome to another edition of Modeling the Masters. Today we're going to talk about two of the most successful tech entrepreneurs of all time, Bill Hewlett and Dave Packard, founders of the Hewlett-Packard Company.

Bill Hewlett and Dave Packard were university friends who graduated in electrical engineering from Stanford in 1935. Eager to become entrepreneurs, Packard and Hewlett established Hewlett-Packard Hewlett-Packard in 1939 in Packard's garage with all the startup money they could put together, a grand total of $538. They then tossed a coin to decide whether the company would be called Hewlett-Packard or Packard-Hewlett. Together, Hewlett and Packard created an audio oscillator. It was in fact the first practical, low-cost method of generating high-quality audio frequencies that were needed in a wide range of industries, including defense and medicine. Hoping to make it seem like the company had been around for a while, they named their product the 200A. According to Hewlett, "We really didn't know if this oscillator was any good. We simply put one together that worked pretty well, sent a letter out to universities and others, got 3 or 4 orders, and then tried it again." One of those first orders was from Walt Disney Studios, who wanted 8 oscillators for their upcoming movie Fantasia. 60 years after its founding, Hewlett-Packard has developed a reputation for innovative and reliable products and in 2009 had revenues of $115 billion, making it one of the largest companies.

So the next question becomes, how can you model the success of Hewlett-Packard? Here are 3 action items that you can put to use in your business.

Action item number 1: Think about more than money. Hewlett and Packard believed that a business had a purpose beyond just making money. Businesses had responsibilities to employees, customers, and a community at large. It was a controversial viewpoint in the 1940s, but many of the management practices that are now standard in many work environments were pioneered by Bill Hewlett and Dave Packard. Some of the initiatives they launched included worker bonuses based on productivity, profit sharing plans, flex time schedules, company-wide health insurance, pay cuts and Fridays off instead of layoffs in hard times, addressing everybody in the company by their first name, having an open-door policy, and creating a wall-free environment to encourage teamwork and the flow of ideas. As an entrepreneur, you have to worry about making money and making enough to survive and then build a lasting company. But don't make making money your only priority. Remember to think about the people who work for you, the people who buy from you, and the rest of your community to make your business a force for good. Strangely enough, when you focus on helping these people, the money comes in on its own. Action Item #2: Adopt a survival mentality. The early days of a new business can be challenging. You may not be selling the right product or the right service, and you rarely hit the targets that you set for yourself. This is where it's crucial to adopt a survival mentality. Listen to your customers until you find the product or service that will really solve their problems and in turn help you build a lasting business. When Bill Hewlett talked about the early days of Hewlett-Packard, he said, We were just opportunistic. We made a bowling alley 4-line indicator, a clock drive for a telescope, a thing to make your urinal flush automatically, and a shock machine to make people lose weight. We did anything to bring in a nickel. The best way to build a business is around customers with problems who will pay you to solve them. Adopt a survival mentality like Hewlett-Packard and look for opportunities to help your customers. In the midst of solving their problems, you'll find a business idea that you can build into a successful and enduring company. Action Item #3: Make innovation a part of everything you do. For a business to succeed today, it needs to always be thinking about what's next and how it can innovate. If you can offer a more innovative solution that your competitors don't have yet, it can be your chance to win new business and grow your company. In the company's early days, Hewlett and Packard had one rule above all others: The Golden Rule. To encourage innovation, no part bins or storerooms should ever be locked. To outsiders, this was mind-boggling. Visitors to the company's headquarters would be shocked that millions of dollars' worth of parts and equipment were lying around free for anybody to use, and nobody ever suspected anyone else's theft. Are you innovating enough with your business? Do you take time every week to think about ways to make your product or service better? So follow Hewlett and Packard's lead and stay on the cutting edge of technology, and your customers and pocketbook will thank you for it.

So remember, think about more than money, adopt our survival strategy, and make innovation a part of everything you do. I wanted to end today's video with one of my favorite true stories about Hewlett-Packard.

Hewlett and Packard's management style was so unique at the time that it was given a name: the HP Way. In Bill's words, the HP Way is a core ideology which includes a deep respect for the individual, a dedication to affordable quality and reliability, a commitment to community responsibility, and the view that the company exists to make a technical contribution for the advancement and welfare of humanity. Here are the core beliefs of the HP Way: We have trust and respect for individuals. We focus on a high level of achievement and contribution. We conduct our business with uncompromising integrity. We achieve our common objectives through teamwork. And we encourage flexibility and innovation.

Thank you for joining me for another edition of Model Masters. I would love to hear your thoughts and comments if you want to post something below. And stay tuned for the next edition.

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