Mission Impossible? - Creating and Spreading New Knowledge at Hewlett-Packard

Prof. Robert Cole of the Univ. of California, Berkeley and INSEAD Assistant Prof. of Strategy Gwendolyn Lee use Hewlett-Packard to illustrate how organizational architecture affects the creation and diffusion of new knowledge related to process technologies. In the early 90s, Corporate Director of Quality Richard LeVitt was charged with "reinventing" a new quality system that could be applied across the entire corporation. Was this an impossible request?

by Gwendolyn Lee, Robert Cole
Last Updated: 23 Jul 2013

Prof. Robert Cole of the Univ. of California, Berkeley and INSEAD Assistant Prof. of Strategy Gwendolyn Lee use Hewlett-Packard (H-P) to develop a case on how organizational architecture affects the creation and diffusion of new knowledge related to process technologies. This case is about how H-P tried to devise ways to preserve the strengths of the multidivisional corporation while accommodating pressures for a corporate role in times of uncertainty and change. The challenge is to do so in a way that minimizes corporate officers imposing their will on divisions, thereby diminishing their autonomy.

Profs. Cole and Lee document the efforts of H-P's Corporate Director of Quality Richard LeVitt to both "reinvent" a new universal quality system -- a process technology for the company's 104 divisions-- and convince them to buy into it. This would take some doing. Most divisions had long histories of autonomy. And traditionally, the more successful a division, the more likely it was to resist new initiatives proposed by corporate outsiders. Moreover, H-P's reputation as a quality leader made it hard for many executives and employees alike to accept that the corporation might have serious problems in this area.

H-P has long prided itself for having an exceptional dedication to quality. But by the early 90s, many within the company felt that the Japanese-style Total Quality Control programmes that had gradually been introduced throughout the company in the past decade had outlived their usefulness. The meticulous planning, testing, and incremental analysis required by TQC policies were seen by some as too cumbersome, adding to other pressures to stay competitive in a rapidly-changing global business environment.

At the time, H-P was going through a major transition from batch production, largely in its instrumentation areas, towards high-volume, high-quality production for its rapidly growing computer products divisions. Customers were expressing a new set of expectations, and cost pressures and a more rapid product development pace were adding to the difficulties of maintaining quality standards. H-P did have a unique advantage over its competitors, though: a model and direct channel into the Japanese quality movement, via one of its own divisions, Yokogawa Hewlett-Packard.

YHP had been critical for the acceptance and spread of TQC at H-P as both a successful model for best quality practices and a template for concrete processes and outcome benchmarks that were introduced throughout the company. Corporate management was increasingly eager to find better ways of coordinating the production and marketing of complex system products, meaning that many decentralised business practices should be scrapped.

In 1992, new CEO Lew Platt sent a clear message of support for the Hoshin management model, a planning and implementation approach that seeks to align all an organisation's layers and employees towards clear company goals, while also instilling a sense of urgency about meeting them. Platt later endorsed another Japanese-style initiative, Quality Maturity System, although it evolved from being a standardised quality audit into a consultative review tool in most divisions over the next few years.

This case demonstrates how difficult it can be for major multinational corporations (MNCs) to find the right balance between allowing successful executives accustomed to autonomy to manage their departments as they see fit, and building a coherent and workable overall corporate strategy in very challenging circumstances. The ongoing recession in Japan also led many executives to feel that quality systems did not hold the keys to growth and profitability.

In 1994, LeVitt chaired an R&D committee to begin rethinking the role of quality managers. The committee was charged with the task of developing a new initiative that would help the company move from being producer-centred to also being customer-centred. LeVitt was responsible for keeping the pro-TQC camp happy, while also making the case for the need for profound change. Was this an impossible assignment?

INSEAD 2004

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