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How a bad board of directors could kill HPE

Rob Enderle | Feb. 27, 2017
Columnist Rob Enderle writes that the trouble with HPE stems from its board of directors. Just replacing a CEO, if the board lacks core skills, just changes the problem.

The telecom mistake

I spent a lot of time analyzing the IBM acquisition of ROLM Systems and the old AT&T acquisition of NCR. At the heart of those failures was that while both markets were technical in nature and used similar names, how they actually worked was very different. This was actually worse than someone coming in from outside of tech because they assumed they already knew what they needed to know and then screwed up a ton more.

I’ve worked for both kinds of firms so I’ll give you an example: in computing centralized performance is important so processor speed is critical; in Telecom you use distributed processing so interconnect speed is far more important than processor speed. But that little difference had computing executives in telecom jobs and telecom executives in computing jobs screwing up priorities and creating products that couldn’t compete. Bottom line, there actually are situations where people with the wrong background are worse than people with no background.  

The Louis Gerstner exception

Often, when I argue this, someone points to Louis Gerstner who successfully turned around IBM. I have spoken to both Gerstner’s board and several of his aids. What made that situation different is IBM had been a career for life company up until Gerstner took over making those underneath him all experts in IBM and the technologies surrounding the company.

The IBM process surrounded the CEO with folks who were considered the sharpest of their age and also experts, and before Gerstner took the job IBM’s board hired Jerry York as CFO and Jerry was the strongest executive turnaround expert in the market at that time, having just turned around Chrysler. So, while Gerstner was light, he was surrounded by IBM lifers who were anything but (granted that did initially create a bigger culture problem), and he was given a CFO who had wicked good skills at fixing big companies. Gerstner then handed the reigns of the firm to Sam Palmisano who was again a subject matter expert.

Look at Apple. When it initially went into decline it was because it put ex-Pepsi CEO John Scully in as CEO and got rid of Steve Jobs. Jobs came back the company recovered. And man, did it ever.   This doesn’t mean that technical skills alone will make the difference, you need good business chops as well, something that is currently missing and killing Uber.  

It is hard to look at Uber and not ask yourself WTF, but yet another case where it is very clear core skills, in this case core business skills just don’t exist at the top. Look at Uber’s board, how many nonemployees have a background in apps, services, or personal public transportation? (The guy from Google (Alphabet) is an attorney). Though I think the big problem there is a lack of multi-national skills, image management and marketing at the top.

 

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