Somewhat lost in the discussion of HP splitting into two is whether breaking into smaller companies is an unstoppable trend in the tech sector. HP plans to break itself apart, creating two approximately $60 billion, publicly owned, global companies. No one would consider these small. Companies at a certain size just can't execute at the speed of digital customers today. Heres our take on why.
Marc Adreessen made the point well at Dreamforce last week. He basically said that tech companies are different from others in that their product is really innovation. The products driving revenue today will be different in three years or less. By contrast, the Campbell Soup Company made soup 50 years ago, and while they may acquire other retail food companies, they will still be selling soup 50 years from now.
Scale and size for tech companies has become the enemy of of innovation. At some point, larger tech companies seem to give up and just try to grow by acquisition, investing more in sales and marketing to push increasingly outdated products, which tends to drive up price and weaken market position. Continual innovation requires heightened awareness and execution across ten agility dimensions which exists in smaller and flatter organizations. Our review of hundreds of companies, for example, found that high performing companies had higher scores in Knowledge Dissemination which measures the flatness of the organization and the ability to share information across functions and departments. We expect smaller to be better, focus to beat scope and large tech companies increasingly pried apart to deal with accelerating innovation from disrupters. You don't have to look far to see this happening. IBM is selling off it's semi conductor business. EMC is being pressured to spin off the the higher value pieces. HP now two companies. Will Oracle be in the conversation next?