Hewlett-Packard, Tigers at Heart

Going to work for Hewlett-Packard was not a matter of chance. I persisted for four months until Noel Eldred, the marketing director, got Packard’s permission to hire me. I was the 300th employee.

Packard and Hewlett didn’t happen to be successful by accident. Both were very smart and industrious. Early on Packard had two essential experiences that set him up for his business career. First, as fullback on the Stanford varsity football team, he learned how to compete and he learned the importance of winning. Second, he worked after graduation for General Electric, the best managed American company at the time, and specialized in the technical management of engineers.

These two experiences provided the essentials of Hewlett-Packard Company. Then Hewlett came in as the quarterback, the creative thinker. Hewlett, the thinker, and Packard, the fullback, made the perfect team.
A lot of attention has been given to Hewlett’s first product, the RC oscillator with the cathode coupled feedback. For sure it was an important innovation in its time, but if it hadn’t sold, Hewlett and Packard would have promoted one of their many other product ideas.

To get an idea of their diversity of product ideas, one of Packard’s original ideas was a mechanical lettuce thinner. Using an electronic eye, this agricultural machine would selectively thin a new lettuce crop so it would produce the optimum size head.

Along with other projects, Packard spent years on the product, which was commonly, referred to as the “Electronic Mexican,” and actually got it working to some extent. But, ironically, he never could perfect the windshield wiper that removed the crop dust from the electric sensor. After 15 years he gave up.

Early on, Packard had his greatest successes by picking, one at a time, various instruments from General Radio’s product line and improving them to the extent that he won market share. He did the same thing taking a high frequency voltmeter from Fred Horman’s product line; Horman’s main product was thus wiped out. Horman saw the writing on the wall and became Packard’s sales representative. Fred Horman provided the valuable entry into the U.S. Military market, which was to become the linchpin of Hewlett-Packard’s success during World War II up through the Vietnam War and even afterwards.

Charlie Means, a long-time banker and later a friend of mine made them their first start-up loan of $400. He told me later that he understood very little about their products but was betting on them personally. Charlie Means further confided to me that $400 seemed like a large amount at the time (in the middle of the Depression) so to make it look better on the books he made separate loans of $200 to Hewlett and $200 to Packard. These loans not only launched Hewlett-Packard but also led to Means’ very successful banking career—the continuing loyalty between him and Hewlett-Packard was a financial asset.

At HP I worked first in production, next in marketing and finally in the lab. In marketing I got to know Dave Packard pretty well, and in the lab I spent some time with Bill Hewlett, both outstanding men. I fully expected their company to move up in the ranks of the Fortune 500, as they have since done. These two men are well known for their liberal personnel policies, for their public spirit, and their philanthropies, so I needn’t elaborate on that.

While in marketing at HP I made a study (after hours on my own time) of the profitability and competitive position of their major products. I put together a list of about ten major instruments whose prices could easily be raised about 10% without affecting their competitive position, and I made a second list of a half dozen instruments where the profit was excessive, 30 or 40%. I felt these products should be reduced in price before they attracted competition. I passed on this information through my boss, Noel Eldred, to Dave Packard. After a couple of months of thinking about it he finally came back saying he approved all the recommended price increases, but for now, not to lower the prices as recommended on the second list. That old fox was right; we never did attract any competition on those overpriced military instruments.

One thing, by the way, that I have been very good at is finding geniuses in the ash bin and turning them into great contributors. Often I have been able to do this and, in the process, it really helped my own career. One thing is true, you can’t do it all yourself. What success I have had comes from the thousands of employees who have worked for me over the years. And some of the very best ones were those I rescued.

I had been studying new product possibilities for Hewlett Packard on my own and informally along with Ph.D. Pete Lacy, lab engineer in the Development Lab. Pete Lacy was an eccentric genius; he also was a serious drinker, to the extent that he was pretty much shunted aside at Hewlett Packard. They just couldn’t depend on him. I developed an informal rapport with Pete—he was smart; and I was a beginner. During long coffee breaks I talked to Pete about advanced technologies that could relate to new products, and I pulled a lot of fundamental information from him. Talking informally, we identified a new sampling type instrument that multiplied frequency coverage a thousand fold. That was significant! In a rather comprehensive memo I outlined the product idea to Norm Schrock, my lab boss, and to Hewlett and Packard as well. Nobody reacted. Everybody was probably expecting Schrock to take the ball, but he was a conservative guy. An indication of how conservative he was is one day when he and a group from HP were driving down a country road behind Stanford. Hewlett looked out and said, “Look at those sheep, they are newly shorn.” Schrock glanced up and replied, “Uh-huh, at least on this side.” Schrock was a real prove-it-to-me type engineer; so nothing happened on my great “sampling” idea.

Finally Pete Lacy and I read a technical paper from an English engineer, a fellow at Harwell (the English atomic energy establishment) who had built a primitive sampling instrument that worked. As luck would have it, Hewlett was travelling in Europe at that time. I called him and told him to stop by Harwell to see the instrument. He did, and seeing is believing; he bought the product idea and from then on I had top priority for my new product.

I got a team assigned and once we got a first prototype instrument put together, I showed it to Hewlett and let him know that for certain applications it would give us 1,000 times higher frequency coverage than Tektronix. He was beside himself. Tektronix was our big competitor at that time and Hewlett never shrank from competition. Hewlett’s eyes lit up as he chuckled. “Tektronix will be like a she bitch in heat. If she runs she will get chased and if she stands still she will get screwed.”

Happy as he was about this new technology, even Hewlett didn’t realize the full potential of this sampling technology in leading to other instruments. It turned out that the sampling technology which Pete Lacy and I were introducing to Hewlett-Packard’s product line would lead to the most profitable line of high frequency counters and Vector Network Analyzer (VNA) instruments the company had ever had.

Hewlett-Packard’s feeling about competitors further came to the fore when I left the company to start up my own firm. I did everything properly, including a generous notice. But after I was out the door with all good wishes from everyone, Packard casually passed the word. Either he’s for us or he’s again’ us, and its obvious he’s not for us. I expected a little more neutrality on Packard’s part since I had made a small fortune for him in the marketing area and had laid the groundwork for the most successful product line he ever had. Over the years, as both our companies progressed, Packard never forgot that I was no longer for him and he played the role of a most aggressive competitor, no holds barred.