Re-engineering HP Labs

March 7, 2008: 9:06 AM ET
Shane Robison
HP Chief Strategy and Technology Officer Shane Robison says the reorganization of HP Labs should speed innovation and eventually boost profit margins. Image: HP

Now that it's an undisputed turnaround story, Hewlett-Packard (HPQ) is looking for ways to fuel long-term growth. An important piece of its plan is HP Labs, a group of 600 top-flight researchers who work to develop breakthrough technologies. To better position HP Labs as a growth engine, the company announced Thursday that it will refocus its efforts on five areas: Information explosion, dynamic cloud services, content transformation, intelligent infrastructure and sustainability. (Earlier: Turning an idea farm into a hit factory)

I sat down with HP strategy and technology chief Shane Robison to talk about the research shift, and what it means for the company. Below is an edited transcript of our chat.

What should investors take away from HP's announcement about the reorganization of HP Labs?

If you don't know where you're going, any road will get you there. We actually really know where we're going now. And that helps us narrow the choices, which helps us increase the probability that the choices are going to influence the business, and that we're going to be inventing the future that we need.

We've got a process here that will support speculative research. It will support a certain amount of investment in areas that are completely outside of the strategy. But the bulk of the research will be consistent with where we're taking the company. And there's plenty of really hard problems to solve within that context.

How is this approach different from the way HP's peer companies have tackled the R&D challenge?

HP Labs Director Prith Banerjee and Rich Rashid up at Microsoft (MSFT) are actually very good friends, and we do a lot of joint things together, so we kind of compare philosophies. Their philosophy is a little different from ours; their researchers tend to be more of a traditional environment where it's bottoms up and not at all constrained by certain themes. Intel (INTC), their research is more like ours; it's more directed based on where they're trying to take their company. IBM (IBM), most of their research has been going on for a long, long time, and a huge piece of it goes into the microelectronics business, which is all about fabs and all of that. Based on my recent interactions with them, they're not too far off what we're doing in terms of looking at different ways to do research. Then you look at the newer groups like stuff that's going on at Yahoo (YHOO) and Google (GOOG), and the difference there is, the context is so narrowly defined. They're going to work in search-based web services particularly. We're going to have a much broader set of issues we've got to attack.

It seems like all the big players in technology are going after the high-margin, high-growth stuff, which is software and services.

That's why I talk about cloud services. One of the big transformations that we've put the labs through, to your point, is three or four years ago, or when I first got here eight years ago, most of our research was in hardware platforms and stuff that would be part of our physical products. Now most of our research is in software of one sort or another, or web services, the stuff you were talking about before – for exactly those reasons.

Is there a danger that you'll miss some opportunity in hardware? A lot of people associate HP with physical stuff that they like to use.

So there's always a danger. But don't misread it; we're not getting completely away from hardware. We're shifting what we do. We're not doing microprocessor research anymore; we leverage Intel and AMD (AMD) for that. But we are doing some really interesting research in reflective displays that don't have problems in the sunlight. We're doing really interesting research in 3D capture stuff for scanners that will allow you to do stuff like put 3D images of things you want to sell on eBay. We're doing a lot of interesting research in optical interconnect technology at the semiconductor level. It's not that we're not doing hardware. We're just being very selective about where we do it.

The five focus areas struck me as pretty broad. Is there anything that doesn't fit into those five areas? Have you decided to stop doing anything in particular?

You're good. You're the first one that's figured this out. They're fairly broad by design. It's back to your point of, how do you know you're not missing something? (Of course, we probably are going to miss something; hopefully we'll hit more than we miss.) And the idea there was to narrow it enough so that the research is directionally consistent with the strategy of the company but not over-constrain it so that we don't have a lot of room for creativity.

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