billion as appliance makers built all sorts of Net-enabled gadgets. Within days, Fiorina created a separate division that operates alongside the two back-end groups and has grown to 250 people. Besides Rau's software, it will sell other HP technologies such as new disk drives to manufacturers. ''It was like we'd been smothered for four years and someone was finally kind enough to lift the pillow off our face,'' says Rau. ROUGH EDGES. With Phase One of her transformation behind her, Fiorina launched a formal reinvention process last spring. First up: cutting expenses. Over nine days, a 12-person team came up with ways to slash $1 billion by fiscal 2002. HP could save $100 million by outsourcing procurement. It could trim $10 million by letting employees log their hours online rather than on cardboard time cards. And the company could revamp its stodgy marketing by consolidating advertising from 43 agencies into two. That would save money and, better yet, focus HP's campaigns on Fiorina's big Web plans rather than on its various stand-alone products. But when the big changes really started to kick in, Fiorina's plan started to bog down. In the past, HP's product chieftains ran their own operations, from design to sales and support. Today, they're folded into the two back-end units, leaving
product chiefs with a far more limited role. They're still responsible for keeping HP competitive with rivals, hitting cost goals, and getting products to market on time. But they hand those products to the front-end organizations responsible for marketing and selling them. The arrangement solves a number of long-standing HP problems. For one, it makes HP far easier to do business with. Rather than getting mobbed by salespeople from various divisions, now customers deal with one person. It lets HP's expert product designers focus on what they do best and gives the front-end marketers authority to make the deals that are most profitable for HP as a whole--say, to sell a server at a lower margin to customers who commit to long-term consulting services. ''You couldn't miss how silly it was the old way if you were part of the wide-awake club,'' says Scott Stallard, a vice-president in HP's computing group. ''A parade of HP salesmen in Tauruses would pull up and meet for the first time outside of the customer's building.'' These advantages, though, aren't enough to convince management experts or many HP veterans that a front-back approach will work at such a complex company. How do back-end product designers stay close enough to customers to know when a new feature becomes a must-have? Will executives, now saddled with thousands of HP products under their supervision, give sufficient attention to each of them to stay competitive? And with shared profit-and-loss
responsibility between front and back ends, who has the final say when an engineer wants to take a flier on expensive research? ''You just diffuse responsibility and authority,'' says Sara L. Beckman, a former HP manager who teaches at the Haas Business School at the University of California at Berkeley. ''It makes it easier to say, 'Hey, that wasn't my
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