Hp's Printer Unit: From Rule Breaker To Role Model

Hewlett-Packard Co. isn't known for going out on a limb. But in the early 1980s, when then HP Vice-President Richard A. Hackborn and his team of engineers decided that there was a huge potential market for inexpensive laser printers to work with personal computers, they threw away the rule book. That worked so well that the Boise (Idaho)-based printer business now serves as something of a model for the rest of HP.

What was so different about the printer group? For one thing, it made decisions quickly because it wasn't hamstrung by the overlapping committees that then ruled other HP computer businesses. And, instead of building its own printer "engine," it struck a deal to buy the hardware from Japan's Canon Inc. When it came to marketing, the unit made a key decision: to go after the entire PC market, not just HP's own customers. Engineers made sure the laser printer worked with all IBM PC clones--at a time when HP's own computer division hadn't yet built an IBM-compatible PC. To ship large volumes quickly, they signed on hundreds of computer dealers, who eagerly stocked the printers.

Boise was allowed its independent attitude because the printers were stand-alone products that didn't have to fit into a corporate computer strategy. Because minicomputers and workstations did, they were subject to oversight by HP's committee structure.

But no one at the company's Palo Alto headquarters complained once they saw the results. Debuting in mid-1984, HP's LaserJet was the first successful desktop laser printer, basically a small office copier that uses a laser to etch the dots that form words and images on the copier drum. Even before Apple Computer Inc. promoted "desktop publishing" in 1985, HP was selling the original $3,495 LaserJets by the thousands to PC owners who wanted better output than noisy dot-matrix machines could provide. When desktop publishing came to PCs, sales accelerated. And in 1990, when HP started selling LaserJets designed for the Apple Macintosh, they sold like hotcakes. Seven years after the introduction of the LaserJet, Hewlett-Packard still has nearly 60% of the $3.6 billion market for laser printers.

HP's thriving, $2 billion-plus printer business--which now includes about a dozen models of low-cost, ink-jet and laser printers--has presented to HP executives new alternatives for doing business. "LaserJet really blazed a trail here," says HP software group General Manager Bob Frankenberg.

And HP's laser printers have proven that HP can be nimble enough to keep ahead. Boise has brought out new models at an aggressive pace, giving competitors little opportunity to grab a bigger slice of the market. IBM, the nearest rival, has only an 11% share. To keep pushing prices down, HP has continually cut costs with new manufacturing techniques. And managers have kept a tight lid on expenses, despite 40% annual revenue growth. "That is a major lesson for the rest of HP," says Hackborn.

As competition at the dealer level intensifies, HP is keeping pace. When it replaced the $2,695 LaserJet II with the LaserJet III a year ago, it added more features and cut the price to $2,395. Then, in February, HP dropped the price on its LaserJet IIP to $1,295 from $1,495--just in time to match Apple's new $1,299 Personal LaserWriter LS, introduced in March.

If not an out-and-out role model, the printer business has become something of an inspiration for HP managers. Last year, 150 HP executives crowded into a meeting to hear Hackborn share some of his management secrets. The most obvious lesson? Sometimes, it pays to break a few rules.

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