Wizards In The Valley


How Hewlett and Packard Built

the World's Greatest Company

By Michael S. Malone

Portfolio; 438pp; $26.95

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Editor's Review

Star Rating

The Good A solid HP biography and business history.

The Bad Sometimes, the author's enthusiasm is a bit hard to take.

The Bottom Line Malone is an HP believer, but there's more here than boosterism.

At a Hewlett-Packard (HPQ ) company event in the late 1960s, a brash young Japanese manager cornered the company's two founders and asked them to appoint him head of HP's underperforming Japanese business. Right then and there, William Hewlett and David Packard agreed. And within a year, the unit's performance had improved dramatically, particularly with regard to product quality. A lucky hunch? No, says Michael S. Malone: Despite the company's 10,000-strong workforce, the founders kept "close track of the most promising employees well down the organizational chart." They just knew the cocky fellow was the man for the job.

Whether or not you completely buy this story may indicate how much you'll like Malone's Bill & Dave: How Hewlett and Packard Built the World's Greatest Company. There's little question that the author believes HP is worthy of the less-than-subtle superlative of his book's subtitle. With the cooperation of the founders' descendants, who provided access to family archives, Malone has produced a biography, management guidebook, and business history, all in one. A veteran journalist and former staffer in HP's public-relations department, Malone has also drawn from interviews with former employees and family members, news reports, and HP files. Despite its enthusiastic tone, though, even jaded business book readers will find much of interest here.

Anecdotes from the founders' childhoods highlight the book's opening pages. We learn that Packard was a top student in high school and lettered in three varsity sports, while Hewlett was an "indifferent" student who once detonated a homemade grenade fashioned from a doorknob. There's also a plethora of endearing trivia about the company's early days, including the tale of how the duo decided whose surname would come first in the company name. (They flipped a coin.) The author rehashes a bit of HP lore, telling how, for instance, during a visit to a machine shop, Packard absentmindedly fondled a plastic mold die. Not recognizing him, a technician snapped: "Get your finger off my die!" Packard quickly apologized. Malone acknowledges that the story is "so perfect that it seems to be fake."

The author does not neglect the founders' strategic and technical mistakes. In the mid-1950s the company desperately wanted to enter the business of oscilloscopes, which are used to measure and analyze voltage. In 1956, HP unveiled the model 150A, which Malone says "suffered from terrible reliability problems." But no matter how HP battled rival Tektronix, it could never take more than 15% of the market. Consequently, "never again, they concluded, would the company attack an established market or competitor unless HP could offer a decisive contribution... no matter how lucrative the potential payoff," Malone writes.

Most thought-provoking are the sections on what's still known as "the HP Way"—the company culture noted for its emphasis on trust, empowerment, and employee appreciation. As you'd expect, there are stories of company picnics and gifts to employees who married or had babies. More intriguing are passages on the culture's limitations. For example, soon after HP's initial public offering in 1957, Hewlett and Packard were chagrined to discover that some senior executives were flipping their HP shares. Thereupon the founders "decided to violate the HP tradition of trust" and impose a vesting period.

Later, as they opened offices in other communities, Hewlett and Packard faced the harsh reality that HP wasn't always loved outside of Silicon Valley. In the ranching town of Loveland, Colo., the freethinking HP workers began "stealing girlfriends and wives, driving up real estate prices, and increasingly dominating local politics," alienating longtime residents. In response, Hewlett and Packard decided that putting future offices in areas populated by affluent, educated folks would sidestep those kinds of culture clashes. Malone, however, doesn't make it clear whether the strategy worked.

An appendix offers a list of "leadership lessons from Bill and Dave." These are generic and at times painfully obvious. Cases in point: "Take care of your smallest clients—they may one day be your biggest." And: "The biggest competitive advantage is to do the right thing at the worst times."

A final chapter tackles recent history through 2006. While Malone is clearly unsympathetic to Carly Fiorina, the controversial CEO from 1999 to early 2005, he believes HP employees "heard Dave Packard's voice" in some of current CEO Mark Hurd's recent remarks. Maybe. But even if they didn't have that flashback, Malone probably did, hoping Hurd can duplicate the passion Bill and Dave brought to the company that today has more sales than any other in techdom.

By Louise Lee

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