Carly Fiorina's Seven Deadly Sins

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Carly Fiorina's Seven Deadly Sins

By RICH KARLGAARD
February 11, 2005; Page A10

1. Acting like a rock star. In the U.S., only entrepreneurs get to act as rock stars. Hired guns do not. Carly Fiorina failed to grasp this distinction. Here, we celebrate Gates, Buffett, Dell, Ellison, Jobs, Schultz, Fred Smith. . . even Leonardo di Caprio as Howard Hughes -- borderline crazies overcoming great odds. We love our entrepreneur rock stars so much we let their sins slide. Carly was excoriated for a boneheaded move -- giving Compaq shareholders 37% of HP's profitable printer division in a swap for Compaq's flagging PC business. Founder-CEOs are allowed to get away with far worse. Ellison nearly took Oracle down in 1990 by overlooking shoddy accounting. (Oracle is an exemplar of accounting today.) Jobs's first bold act after reassuming Apple's reins in 1996 was to buy NeXT Software at an inflated $400 million and kill the company. Because he owned NeXT, Apple's purchase made him rich. Yet Apple shareholders forgave Jobs because, well, he's a rock star. And he has made good on that faith.

2. Failing to see the cheap revolution. Carly allowed HP to drift onto the wrong side of the defining divide in the global economy. The cheap revolution has two elements: plummeting hardware costs combined with the Web-mediated ability to run world-class operations from anywhere. Dell is on the right side of the cheap revolution divide. It sells powerful servers for under $5,000 and keeps overhead low in Round Rock, Texas, where the average three-bedroom house sells for $200,000. HP sells servers for tens of thousands and keeps high overhead in Palo Alto, Calif., where the average three-bedroom sells for $1,500,000.

3. Failing to see the consumer revolution. A huge shift has occurred in the last five years. The coolest tech products now go straight into the consumer market. Until a few years ago, most got a footing in the business market first: Copiers, PCs and cellphones were expensive products that only became cheap riding the Moore's Law curve over time. Today, the most transformative products and services go straight for the consumer: Blackberry, Apple iPod, eBay, Orbitz, Google, WiFi and so on. Carly has ineffectively maneuvered HP into this consumer field.

4. Obsession with size over flexibility. Carly is blamed for ignoring a tech truism that large mergers never work. Maybe we need to go deeper and challenge the very premise of these mergers: that large scale is a requirement of success in the global economy. By merging with Compaq, Carly clearly believed this. But maybe the opposite is true -- that speed and flexibility now trump scale. The cheap revolution has armed startups and small companies with powerful, cheap technology and access to global labor pools. You don't need a large organizational unit to manage your outsourcing initiative. Just go to www.elance.com.

5. Letting talent go. The recent passing of Walter Wriston reminds me of a memorable refrain in his book, "The Twilight of Sovereignty." In an era of freely flowing information, "capital will always go where it is welcome and stay where it is well-treated." By capital, he meant money and human capital. Carly mustn't have read his book. Aside from chasing away shareholder capital, she chased away talent, from Michael Capellas on down. For high-IQ tech companies, talent loss may be the greater sin. The most dynamic -- Microsoft and Oracle during the '80s and '90s, and Google now -- have always been obsessed with recruiting and keeping talent. This week Google said it would rather slow its growth than lower the talent bar. To be fair, Carly didn't start the talent drain at HP -- it began under John Young and continued under Lewis Platt; but she didn't stop it, either.

6. Not tolerating strength in others. A few months ago, I visited Peter Drucker on his 95th birthday. We talked about his great life's work -- the study of what makes an effective executive. He said the good ones tolerate strength in others; the bad ones don't. Gates has Steve Ballmer. Michael Dell has Kevin Rollins. Larry Ellison has Jeff Henley. Carly had no one like that.

7. Lack of focus. We conclude with Drucker's other great insight: Effective CEOs pick two tasks and devote their energies there. When those tasks are done, they don't go to #3. They make a new list. One overlooked trick to maintaining focus, Drucker told me, is to cut travel. "Make your reports come to see you. Use technology, it's cheaper than traveling. I don't know anybody who can work while traveling. Do you?" Carly, globe-hopping in her Gulfstream, worked 100-hour weeks. But she was focused on too many tasks. Which is no focus at all.

Mr. Karlgaard is publisher of Forbes magazine and author of "Life 2.0" (Crown Business, 2004).

Carly Fiorina's Seven Deadly Sins
By RICH KARLGAARD
February 11, 2005; Page A10
1. Acting like a rock star. In the U.S., only entrepreneurs get to act as rock stars. Hired guns do not. Carly Fiorina failed to grasp this distinction. Here, we celebrate Gates, Buffett, Dell, Ellison, Jobs, Schultz, Fred Smith. . . even Leonardo di Caprio as Howard Hughes -- borderline crazies overcoming great odds. We love our entrepreneur rock stars so much we let their sins slide. Carly was excoriated for a boneheaded move -- giving Compaq shareholders 37% of HP's profitable printer division in a swap for Compaq's flagging PC business. Founder-CEOs are allowed to get away with far worse. Ellison nearly took Oracle down in 1990 by overlooking shoddy accounting. (Oracle is an exemplar of accounting today.) Jobs's first bold act after reassuming Apple's reins in 1996 was to buy NeXT Software at an inflated $400 million and kill the company. Because he owned NeXT, Apple's purchase made him rich. Yet Apple shareholders forgave Jobs because, well, he's a rock star. And he has made good on that faith.
2. Failing to see the cheap revolution. Carly allowed HP to drift onto the wrong side of the defining divide