Monday, November 5, 2012

Hands-On Management, Capital, and Complementary Products

When David Packard started his company, he and his partner Bill Hewlett had to do much of the work themselves.

In his book "The HP Way - How Bill Hewlett and I Built Our Company," Packard talks about the management style that made HP successful. Basically, they hired the best people, kept them motivated, and worked together as a team. And in the beginning, the two partners weren't afraid to roll up their sleeves and do whatever work needed to be done.

When they began Hewlett-Packard, the two partners were responsible for designing each of their products, manufacturing them, and shipping them to their customers. They managed all of the company's promotion and advertising, and they were responsible for sweeping the factory floor every afternoon.

To me, the HP startup experience sounds very much like the life that many of us in the software development industry have created for ourselves.

Packard explains that getting capital was a problem in the early days. microISVs today have different problems to wrestle with. Today, you can buy a Windows 7 PC with 4 GB of memory and a huge hard drive for about $400(US). Back when HP started, the cost of manufacturing equipment and supplies was a big barrier to entry into the computer hardware and peripheral manufacturing business.

Hewlett and Packard figured it out. By the mid-1940s, their enterprise had gross sales of more than a million dollars annually, and they had built their workforce up to the 200 person level.

Packard believes that one of their outstanding decisions was building a family of complementary products. They decided early that they didn't want to create and manufacture a group of unrelated products.

This strategy applies to today's microISVs, too. To be successful, software developers have to offer more than one product. And when you create a website that offers a software development library, a consumer app for the iPad/iPhone, and a Windows arcade game, you're only going to confuse your website visitors.

By building a family of related applications, you have cross-selling and upselling opportunities that simply aren't available to a developer who offers an eclectic collection of programs.

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