Naresh Shanker was named CIO of HP Inc. prior to the company's separation from Hewlett Packard Enterprise (HPE) This was the apotheosis of a remarkable career. He had been an IT executive in the technology industry for many years, including the CIO role at Palm until its acquisition by HP. The separation would be the biggest challenge he would yet face in his career.
At the time of the separation, there were some who believed that HP Inc. would be substantially weakened by this separation. Moreover, Meg Whitman, who had been the CEO of HP Inc. remained as Chairman of the company and would take over the CEO role of HPE. HP Inc. would be led by a new CEO Dion Weisler. Remarkably, the separation proceeded with few issues and was on time, and the company has flourished.
Since the separation, Shanker turned his attention to a major digital transformation of the business. The legendary OEM that had been the founding company of Silicon Valley would need to truly become a digital enterprise. Shanker noted that with the hyperconnected economy that we now have, HP Inc. needed to reflect this in its own business. In this far-ranging interview, he covers all of the above, and offers essential lessons for other companies who must transform in a comparable fashion.
(To listen to an unabridged audio version of this interview, please click this link. This is the 47th interview in the CIO’s First 100 Days series. To read future articles in either series, please follow me on Twitter @PeterAHigh.)
Peter High: You are the Chief Information Officer of HP Inc. HP Enterprise [HPE] separated from HP Inc. in November of 2015. This was one of the biggest separations in corporate history, and you were involved on both sides of that transformation. Can you talk about the scale of separation, and how you thought about planning the separation of a roughly $120 billion revenue company into two roughly $60 billion revenue companies?
Naresh Shanker: We first looked to determine the mandatory minimum requirements that we had to meet from a regulatory and compliance perspective. Our goal was to prioritize and execute the separation into an independent company within 12 months. That is not a small feat, and it has never been accomplished before with a high-tech company of this magnitude, scale, and complexity.
After defining the scope of the mandatory requirements, we looked at what it would take to fundamentally stand up two public entities. HPE focused on our compute network storage solutions coupled with HP Software, as well as HP Enterprise Services. HP’s focus is predominantly around our printing business, our personal systems business, and our 3D additive manufacturing business.
A major task was to separate out the architectures from the infrastructure layer, the wide area networks, local area networks, and the underlying solutions, which is the applications fabric. Several facilities and sites worldwide had to be separated and secured so that we could deem ourselves separate identities and meet all the financial and regulatory requirements of standing up our public companies.
We successfully achieved that in 12 months. After that separation was completed, we were able to stand ourselves up as two public companies. We then embarked on using this opportunity as a catalyst for each of our independent companies to transform and reinvent ourselves. We took advantage of the separation so that we could compete in our independent markets more aggressively and in a more focused manner.
The first thing we did was lay out a five-year roadmap. 2015 was the separation year. 2016 was the year of standing up the company and our independent operations. IT had a lot of work to do here, including rebuilding all the operations and capabilities ground up, from the infrastructure layer to the applications layer, and putting in place all the operational metrics and SLAs so that we could stabilize and run our operations on a 24/7 cadence.
2017 was focused on starting our transformation journey. Our goal from 2017 to 2020 is to complete the execution of our transformation journey. A significant portion of that is in flight, and a lot of it has already been completed.
Our current strategic focus is pivoting from being a transaction-oriented company, where our systems are designed around transactions and physical goods flows, to being a more contractual and digital-centric organization. How do we move from a hardware player to being more of a solutions and services player? That is what we laid out from an IT architecture point of view to start building the foundation of this journey so that we could pivot ourselves to being a digital company.
We focused on two things: one is supporting an omni-channel go-to-market strategy, and the second is everything-as-a-service play, which involved solutions and services across all lines of business. The separation served as the catalyst to help us pivot from a physical goods and hardware OEM manufacturer to more of a digital goods solutions and services technology company.
As we go forward, we will continue to evolve our solutions and services with more user-centered experiences and designs in mind. Our focus is ensuring that the user experience, the partner experience, and the customer experience are delivered with a digital mindset. Using the separation as a catalyst, we have fundamentally transformed ourselves to become a digital player in the industry.
High: The transformation that you have been leading is in many ways the transformation that is necessary across a number of industries. As the CIO of one of the original Silicon Valley companies, and one which is now transforming from a manufacturer of physical goods to being focused on digital solutions, can you talk about the changes that are necessary from an IT perspective to deliver that transformation?
Shanker: When you step back and look at what customers, partners, and end users expect in today's world, we live in what I call an instant-on economy. You consume technology when you want to consume it and you pay for it when you use it. All companies are designing their user experiences for this world.
For us to enable this real-time and dynamic experience the customers, partners, and users expect, we must fundamentally decompose the entire architecture of a legacy company and transform to the digitally oriented mindset. We must be able to meet the objectives of an instant-on, on-demand economy.
As we move towards being more solutions and services oriented, we had to incorporate a lot of design thinking principles into the ecosystem. When we talk about digital, digital is nothing more than the new world business models that we must enable. That is how I see digital. It is a new world of business models where you are catering to a more instant-on and on-demand economy.
We needed to reorganize for the hyper-connected economy. For us to be able to deliver real-time experiences, the first thing we needed to do was take the organization, which was focused around a set of legacy capabilities, and pivot it to having capabilities that were focused around things like product management, user-centered design, agile methods to deliver solutions, and more focus on time-to-market and time-to-value metrics. This was the first thing we had to do – take the fabric of the organization and its capabilities and make sure it was designed to be able to meet the new challenges of the digital economy.
The second thing we had to do was focus on ensuring that the architectures that were once designed to support a heritage company were pivoted into being more of a plug-and-play architecture. A more superior application integration framework would enable us to move quickly and stitch services end-to-end, so we could deliver these solutions to market rapidly.
The third thing we did was to move from a Capital Expenditure (CapEx) model of cost structures to Operational Expenditure (OpEx) and more variable-ized cost structures. That meant moving from fixed data center costs to on-demand compute. This was another big pivot we had to do.
We also had to move from a system of record to a system of engagement. We had to move away from our legacy, transactional-based system to a more digital experience that utilized user-centric design.
These were waves of shifts that we had to rapidly make to prepare ourselves for launching these new capabilities to support an instant-on, on-demand economy. In terms of architectural changes, the first thing we focused on was the applications infrastructure. We have numerous Telco providers that support the wide area networks worldwide. The biggest challenge with having numerous players was that we could not get a consistent delivery of services across our wide area networks. We were unable to provide a consistent user experience because all the solutions were heavily network sensitive. We transformed the entire wide area network, and we are on a journey to consolidate to a single wide area fabric worldwide. This will allow us to provide a consistent delivery of capabilities and experiences at a global level.
The second thing we did was move towards a consistent Wi-Fi fabric worldwide, which was completed last year. This was fundamental to deliver the right capabilities at the start of experiences.
The third area we looked at was the front-office solutions that touch customers, partners, and end users. We embarked on a global CRM transformation journey to automate all our sales and operations, including all our consumer commercial call centers worldwide. This was a priority because these areas touch customers every day, so this was a key area that had to use a digital mindset to provide more digital experiences.
The goal was to make sure that we had a consistent end-to-end user experience. The first thing was to digitize the entire user experience in the CRM fabric for both sales and commercial consumer call centers worldwide. The second thing was to make sure that we have a back-office operation that supports the front office. We are currently consolidating our global back office operations, and that is on track to complete in 36 months. The goal is to ensure the front-end and back-end are stitched, and that they utilize cloud architecture to deliver a digitized end user experience. We must provide the seamless delivery of solutions and services to our customers and meet the time-to-market and time-to-value goals.
High: There are many CIOs who have profound impacts and touch points to internal processes and operations, but the average CIO does not always have the same opportunities to transform customer facing experiences. You have had your hands in both sides. Can you explain the method of engagement around the user experience when the users are customers? How do you and your work team engage customers of the company?
Shanker: We have a governance framework that looks at the investment portfolio. It is important that we stitch the company's business strategy against the IT strategy, especially as the business strategy evolves as we move from being a hardware manufacturer to more of a digital player. It is critical that we have a clear understanding of what the business strategies are as we go forward.
We rapidly put in place the enabling portfolios in terms of where and how we are going to invest to deliver this 360-degree end-to-end experience. On the back-end, we have a sophisticated analytics roadmap. We had to understand the business strategies and how we cascade those strategies into the enabling portfolios and the architectures. We have a stringent process for how we develop the business cases for the business strategies we are going to invest in. Those have a governing body that reviews this company-wide and determine where the investments are going to be.
Starting out, we made decisions on key strategies regarding where we would pivot to bring key services and solutions to market. One key solution that we deliver today is called “Instant Ink,” and it is a subscription-based set of services. Another key set of services are around Managed Print Services (MPS), and a full suite of print services for SMB and commercial customers worldwide.
Another focus for us is device as a service. This is to provide SMBs and commercial customers with a full 360-degree managed service for all their client computer solutions and end-user compute solutions, whether that be a phone, a tablet, a PC, or any of the various form factors computers take. In some businesses such as the more advanced printing solutions we developed, a lot of solutions utilize click revenue and pay-as-you-go.
We are gradually moving our entire set of hardware solutions to be extensible where you can now launch various services and solutions off our platforms. The personal system has platforms of its own. The printing group has platforms. We also have our 3D Additive Manufacturing Group which is enabling hardware architectures in the form of platforms.
The moment you move to a platform play across these various business units and business properties, it gives you the opportunity to launch a set of solution services off these platforms. Especially because you are designing for the end user experience up front in the lifecycle, you can quickly deliver these solutions to market using a lot more back-end plug and play architectures.
We have a governance structure in place that determines how investments are going to be made across the company based on key business strategies. We then map that to the underlying enabling architectures and portfolios within IT that we put in place to enable this experience. We work closely with the business to stitch this entire 360-degree view around the solutions and services we deliver. More importantly, we must ensure that we can deliver this digitized experience that both customers, partners, and end users have come to expect.
High: You are going through a large transformation from a CRM perspective. Can you share some anecdotes from that?
Shanker: The priority for us was to first build out an experience for our customers, our partners, and our employees. What we embarked on was a journey to look at how we could stitch a great user experience that transcends the spaces around the sales experience and the consumer and commercial experience for everyone that touches the HP ecosystem and everyone that wants to engage with us and consume our technology.
How do we make it simple for them to consume the technology and support services? How do we make it simple for them to have access to all the cross-seller opportunities when they are looking for a total solution experience? In the past, we had numerous disparate systems that have been built over 15 to 25 years through several acquisitions.
We redesigned and reengineered all our processes across sales operations, including all our processes around consumer and commercial call centers. Our goal was to ensure that the agents were well equipped, both on the sales side and on the consumer and commercial call center side, to support customers globally. We had to give them a simple way to engage this consumer technology not just from a solutions point of view but also from a systems point of view.
First, we completely reengineered the entire landscape. Next, we focused on ensuring investments we were going to make yielded the savings we expected. We made a set of investments, and the business case enabled us to deliver these advanced capabilities that resulted in $90 million in cost savings. Of course, this was a significant business case.
This would also end up being our first instance of enterprise-grade service, support, and sales globally on a single footprint of technology supporting over 6,500 sales representatives, over 200,000 partners, 17,000 call center agents, and over 50 million plus customers worldwide. These are some significant metrics, and we had to ensure that the solution could manage both the scope of the scale and the complexity. This is especially true as we were coming from a legacy landscape built over numerous acquisitions over the last 15 to 25 years.
This was a daunting task, but we were successfully able to deploy the solution in 12 months. The expected benchmark for most other companies to deliver these solutions would be over a 24 or 36 month cycle.
High: This is not the first time your team has undertaken herculean efforts and delivered results in record delivery time. To what do you attribute your team's ability to go through these massive exercises successfully in record setting times?
Shanker: A lot of it had to do with focus, speed, and accountability. That said, there are some fundamental tenets in terms of what we put in place when we embark on these large-scale transformations. The first thing is the governance, and the second is executive sponsorship. When you look at transformations of this scale, you start with strong executive sponsorship all the way from the CEO down through the ranks of the company.
It is critical that the right governance and operating structure are in place to deliver this program. There must be strong business accountability and strong IT accountability to drive this program end-to-end and achieve the desired results. Everyone must be on the same page in terms of what we want to achieve from both a time to market and value perspective. We must ensure that all stakeholders are on the same page to achieve the results before we embark on this journey. There must be a fundamental expectation set that this is a company-wide priority.
We also learned a lot from the separation. We had full support in terms of managing escalations and execution coming off the separation. If a material issue was raised during our transformation exercise, we had 48 hours to close it with a plan for a resolution. This whole mindset around ensuring that we address material issues without letting them fester was important for the governance that we put in place. Several of these principles are derived from the principles we established around our separation journey.
Finally, I would be remiss if I did not mention the important partners we worked with to understand the importance of the journey. We were able to partner with world-class players to help us work together as a single team to develop and deploy the experience worldwide.
Peter High is President of Metis Strategy, a business and IT advisory firm. His latest book is Implementing World Class IT Strategy. He is also the author of World Class IT: Why Businesses Succeed When IT Triumphs. Peter moderates the Forum on World Class IT podcast series. He speaks at conferences around the world. Follow him on Twitter @PeterAHigh.
