HP Inc: The difference a year makes

HP Inc is trying to invent its way to a new business. We speak to UK managing director George Brasher about its innovation mojo

Market data over the past few years has shown a continued decline in PC sales. It is a challenge that George Brasher, managing director of HP Inc, is taking on.

As the UK chief of the company created after the split of HP a year ago, Brasher is confident the company has the right recipe for success. “I have been excited about our first year,” he says. “We have our mojo and innovation engine running. We have had more innovation in the last 12 months than we have in the last 12 years.”

Brasher says the separation has allowed HP Inc to focus and drive the printing and PC businesses. “You have to start with your strategy,” he says. “PC and print, commercial mobility and emerging technologies is a $600bn market and the biggest thing to do is continue to take share in core.”

The PC market relies on a simple formula, dictated by Moore’s Law to create demand for new devices. In essence, manufacturers are able to sell people devices that enable them to do more, for less than the cost of the PC they currently use. 

It has been a compelling business model, fuelled by chip innovation, but while the pace of technological development has continued upward, people’s appetite to upgrade has diminished. Windows 10 did little to stimulate upgrades in business. According to analyst Gartner, the annual selling price of ultramobile premium devices will have a negative compound annual growth rate of 5.9% until 2019.

While HP Inc is vying with Lenovo to be the biggest PC maker, Brasher says: “We don’t think of it as the PC market. It is the personal systems market.”

This is an industry trend that recognises that the era of the PC is well and truly over. Yes, HP Inc and others will continue to sell PCs. But HP Inc will not be repeating the mistakes of 2011 and try to shift focus away from its core strengths. But the term “personal systems” represents the kaleidoscope of devices that meet the computing requirements of users, from PCs, notebook PCs and laptops to tablets, hybrid devices and smartphones.

In October, during an update to analysts, HP Inc announced its fiscal 2017 outlook with a message to tackle operational costs, which will lead to up to 4,000 job losses by 2020 in a bid to save $200m-$300m a year.

Global economy

But HP Inc is also battling with the effects of the global economy. In the highly competitive and price-sensitive PC market, manufactures are beginning to counter the strong dollar with price rises, putting further pressure on already-tight IT budgets.

HP Inc’s strategy has been to develop a set of products aimed at the high end of the consumer and business markets – where price tends to be less of an issue.

Its fourth-quarter 2016 earnings showed that the company grew its personal systems division by 4% in net revenue. According to its chief financial officer, Cathie Lesjak,  personal systems operating profit was 4.3%, up 0.6 points year-on-year due to scale, operational cost savings and a focus on higher-margin units.

Brasher says that in commercial mobility, HP Inc is leading the way with its Elite X3 three-in-one device. “It’s a great phone, with a desktop in a phone,” he says. “It is a device designed for large enterprises.”

The Elite X3 is an example of HP Inc trying out new ideas in personal systems. Brasher believes the office of the future will not be built around a sea of desks and says: “Office trends are changing. Millennials want to engage differently in where they work and how they work.”

HP Inc’s office vision is a shared work area, with breakout zones for impromptu meetings, and meeting rooms where people can wirelessly connect their laptops to projectors to run presentations.

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“We want to create devices that work in these spaces,” says Brasher. HP Inc has developed privacy screens to avoid passers-by in a shared work area from viewing someone else’s laptop screen. It has also worked on improving the audio to focus sound more clearly, and the webcam to support applications such as Skype for Business.

In September, the company announced the HP Elite Slice, a modular commercial desktop with cableless connectivity. It is HP’s smallest desktop and has been built for communications and collaboration.

The Elite Slice is a stackable PC with cover and base expansion options. Customers can choose from different covers when configuring their PC and expand the device at any time with additional modules to create the desktop that fits their needs.

The HP Collaboration Cover turns the desktop into a Microsoft Skype for Business phone. There is a wireless charging cover and an audio module with Bang & Olufsen 360-degree speaker design, dual-microphone array with a range of five metres and HP noise cancellation software. HP Inc also sells an ODD module for backup or to archive files and access legacy content on CDs.

Printer business

The other big chunk of HP Inc’s business is printing, which is in need of a thorough revamp, says Brasher. “Twenty years ago, the printer and copier market was very different,” he says. “Printers were desktop devices; copiers were central.”

But now offices run multi-function devices, which all look very similar. They connect to the corporate network, and send and receive email. Brasher describes the modern printer as a converged device: “The a printer is  PC. It has an operating system, a hard drive and firmware.”

Although HP Inc is a leader in the A4 printer market, it saw an opportunity with A3 devices, leading to the announcement in September that it would be acquiring Samsung’s printer business for $1bn.

One of the areas HP Inc is looking into is 3D printing. Brasher says it is still very early days for the technology, but the company is developing printers for industrial applications with the ability to print parts on demand. The first of these, the HP Jet Fusion 3D printer, was unveiled in May.

Brasher says HP Inc is working with a number of companies, including BMW, on 3D printing proof-of-concept applications. “With initial customers, we are doing joint discovery,” he says. “3D printing offers a way to create short-run parts. It is very cost-effective. As we scale, there will be a lot of latent need.”

Worldwide manufacturing is a $12tn market, and this is the opportunity HP Inc has set its sights on. Manufacturers need to balance speed, cost and customisation, and Brasher says HP Inc’s 3D printer could be used to create certain components in long production lines. “For certain parts, it makes more sense to print on a 3D printer,” he says.

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