1. HP and Nokia have lost the ability to grow organically
  2. Both need CEOs that can attack old decision-making processes to overcome barriers and move innovation to market much more quickly
  3. Unfortunately, both companies hired new CEOs who are very weak in these skills
  4. HP’s new CEO is from SAP – which has been horrible at new product development and introduction
  5. Nokia’s new CEO is from Microsoft – another failure at developing new markets
  6. It is unlikely these CEO hires will bring to these companies what is most needed

Leo Apotheker is taking over as CEO of Hewlett Packard today.  Formerly he ran SAP.  According to MarketWatch.comHP’s New CEO Has a Lot To Prove,” and investors were less than overwhelmed by the selection, “HP Shares Slip After CEO Appointment.”  Rightly so.  What was the last exciting new product you can remember from SAP, where Apotheker led the company from 2008 until recently?  Well? 

SAP is going nowhere good.  Its best years are way behind it as the company focuses on defending its installed base and adding new bits to existing products  It’s product is amazingly expensive, incredibly hard and expensive to install, and primarily keeps companies from doing anything new.  Enterprise software packages are like cement, once you pour them in place nothing can change.  They reinforce making the same decision over and over.  But increasingly, that kind of management practice is failing.  In a fast-changing world software that can take 4 years to install and limits decision-making options doesn’t add to desperately needed organizational agility.  And during the last 10 years SAP has done nothing to make its products better linked to the needs of today’s markets. 

So why would anyone be excited to see such a leader take over their company?  If Apotheker leads HP the way he led SAP investors will see growth decline – not grow.  What does this new CEO know about listening carefully to emerging market needs?  The move to install SAP in smaller companies hasn’t moved the needle, as SAP remains almost wholly software for stodgy, low-growth, struggly behemoths.  What does this CEO know about creating an organization that can moving quickly, create new products and identify market needs to position HP for growth?  His experience doesn’t look anything like Steve Jobs, under who’s leadership Apple’s value has increased multi-fold the last decade.

Unfortunately, the same refrain applies at Nokia.  Just last week I pointed out in “Another One Bites the Dust” that Nokia was at grave risk of following Blockbuster into bankruptcy court.  Although Nokia has 40% worldwide market share in mobile phones, U.S. share has slipped to about 8% this year.  In smartphones Nokia has nowhere near the margin of Apple, even though both will sell about the same number of units this year.  Nokia once had the lead, but now it is far behind in a market where it has the largest overall share.  And that was the problem which befell Motorola – #1 for 3 years early in this decade but now far, far behind competitors in all segments and a very likely candidate for bankruptcy when it spins out a seperate cell phone business.

According to the New York Times in “Nokia’s New Chief Faces a Culture of Complacency” Nokia had a very similar product to the iPhone in 2004 but never took it to market.  The internal organization made the new advancement go through several rounds of “review” and the hierarachy simply shot it down in an effort to maintain company focus on the popular, traditional cell phones then being offered.  Rather than risk cannibalization, the organization focused on doing more of what it had done well.  Eschewing innovation for defending the old products is shown again and again the first step toward disaster.  (Would your organization use layers of reviews to kill a new idea in a new market?)

Meanwhile, when an internal Nokia team tried to get approval to launch the smart phones management’s responses sounded like:

  • We don’t know much about this technology. The old stuff we do.
  • We don’t know how big this new market might be. The old one we do
  • We can’t tell if this new product will succeed. Enhanced versions of old products we can predict very accurately.
  • We might be too early to market.  We know how to sell in the existing market.

Even though Nokia had quite a lead in touch screens, downloadable apps, a good smartphone operating system and even 3-D interfaces, the desire to Defend & Extend the old “core” business overwhelmed any effort to move innovation to market.  (By the way, do these comments in any way sound like your company?)

The new CEO, Mr. Elop, is from Microsoft.  Again, one of the weakest tech companies out there at launching new products.  Microsoft had the smart phone O/S lead just 3 years ago, but lost it to maintain investment in its traditional Windows PC O/S and Office automation software.  And again you can ask, exactly how excited have people been with Microsoft’s new products over the last decade?  Or you might ask, exactly what new products?

Both HP and Nokia need CEOs ready to attack lock-in to old technologies, old business practices, old hierarchies and old metrics.  They need to rejuvenate the companies’ ability to quickly get new products to market, learn and improve.  They need experience at early market sensing of unmet needs, and using White Space teams to get products out the door and competitive fast.  Both need to overcome traditional management approaches that inhibit growth and move fast to be first into new markets with new products – like Apple and Google.

But in both cases, it appears highly unlikely the Board has hired for what the companies need.  Instead, they’ve hired for a stodgy resume. Executive who came from companies that are already in bad positions with limited growth prospects.  Exactly NOT what the companies need.  We can only hope that somehow both CEOs overcome their historical approaches and rapidly attack existing locked-in decision-making.  Otherwise, this will be seen as when investors should have sold their stock and employees should have begun putting resumes on the street!