HP computer systems organization

1. Is this the time for HP-CSO to institute more changes?

Based on the customer and sales audit it was identified that considerable opportunities existed in the area of Repurchase, replacement and expansion projects as well as the Innovation projects.

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But, there exist many challenges

Customers were moving towards consolidating their supplier base increasing pricing pressure on HP

80% of the customer sales were initiated by the customer themselves

Although HP was a preferred vendor, customers doubted its ability to deliver incase of Innovation projects

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With increasing demands on price and delivery terms, HP would find it difficult to meet customer needs due to the small sales force

Sales force was spending significant amount of time doing things other than sales

Sales force was having difficulty in converting sales opportunities in replacement and expansion projects

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Sales team was spending less time in the early stages of the sales cycle for Innovation projects

Sales team lacked prioritization of opportunities

Hence, it is critical for HP-CSO to make the right changes in the sales organization to capture opportunities in the high potential segments.

How are selling instruments (HP traditional business) different from selling computer systems?

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Selling instruments can be viewed more like selling commodities. Selling instruments was engineering driven and marketing the product was on the basis of technological features.

Selling computer systems involved marketing the product as solutions that could be highly customized to the customers needs to solve their issues.

Why does HP treat its sales force as a cost center? What are the implications of such a structure?

HP was grouped into three main divisions and each had its own sales force and others support departments and divisional business units. Divisional business units were measured as profit centers. HP allocated field personnel and capital expenditures among the divisions under the promise of additional profits. This type of mechanism ensured that sales force was kept as a cost center, responsible for revenues, field marketing and customer service.

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Such a structure resulted in two distinct cultures co-existing in HP. One centered in the product divisions focused on long-term profit objectives and the other in the field, on meeting short-term sales quotas. Sales force concentrated on achieving sales target without worrying about making profits and spending time in non-core activities.

3. Critically evaluate HP-CSO’s approach to building relations with its Enterprise Customers

HP reorganized its sales approach by providing greater autonomy to its divisions. CSO could draw on HP’s resources while operating in a more entrepreneurial fashion. Freed from the constraint of a drawn-out approval process, CSO began to race to the market with new computers. By 1994, HP’s business was growing at 40% annually against an industry growth of 5%.

To capitalize on the new market position, sales force was re-organized and other dramatic changes were instituted in the manner in which CSO sold to customers. HP wanted to transform its salespeople from order takers into consultants.

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Advantages

• Sales reps were relieved of the unproductive tasks
• Centralized configuration support specialists enabled increase in the sales reps direct customer contact by 30-50%
• The domain specific approach enabled HP to focus and service large customers more effectively.
• Generate more sales through the specialized and competent sales force.
• Sales force was able to nurture the relationships developed over time with the enterprise customers. .

Disadvantages

• Sales force was averse to change and didn’t wanted to lose power over their regional fiefdoms
• Smaller customers resented being relegated to the channel partners or telephone reps.
• To transform salesperson from order takers to consultants required specifically designed training programs to de-emphasize on traditional focus on HP product capabilities and specification in favor of teaching salespeople how to evaluate customer’s circumstances and suggest ways that HP might improve them.

Do you agree with the findings of two audits?

Findings of the first audit are agreeable. However, the methodology adopted for the second audit is not convincing.

The customer that was selected for the audit was the largest with whom HP had good relationship, HP was strong in the industry selected and the study chose only one region that HP was good in.

This leads to an audit that encompasses a perfect customer, industry and region. The finding might not apply across all customers, industry and regions giving an obscure audit.

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What about the consultant’s recommendations?

• The recommendations provide deep insights into the strong and weak links in the sales strategy of HP-CSO
• The recommendations of the consultant seem very broad based and not properly structured
• The consultant hasn’t provided an action roadmap based on his recommendations.

How is this approach different from the current approach to managing enterprise customers?

• The approach of entering downstream and slowly making inroads upstream will face a lot barriers put up by competitors.
• The new approach would require re-training the sales force considerably.
• The effort and time involved in beating competition might be considerable.
• There is a high risk of failure and would require considerable time to bring in the change

Comments on conclusions of audit

The first audit conclusion is convincing, but the second audit conclusion is not detailed and devoid of an action plan.

Recommendations

• Increase conversion rate in downstream and midstream segment
• Develop competence in midstream and upstream segment of the market to capture the high potential market share, instead of building the way through downstream
• Create a value proposition for the upstream market
• Eliminate the non productive tasks of sales reps and train them effectively