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Hewlett Packard Kittyhawk Case Analysis

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In 1992, Hewlett-Packard introduced the Kittyhawk, which was the smallest hard disk drive in the world at the time at 1.3” in diameter. The initial product held 20 megabytes of storage and could withstand a three-foot drop without losing any data. For HP, the possibilities of such a product seemed endless. As a result, the company launched the project with a rather ambitious goal; that is; for the project to succeed, it would have to meet the following requirements, as specified by Bruce Spenner, HP’s Disk Memory Division (DMD) General Manager: it would have to be ready for market in 12-months, generate $100-million in revenue within 18-months after launch, and make the break-even point within 36-months. However, by June 1994, after only two years of effort, the project’s sales failed to meet the projected forecast and Rick Seymour, the project leader, was left having to make some big decisions. Why did Kittyhawk fail? By applying course concepts, some of the reasons become clear.
The Disk Memory Division was essentially an OEM supplier in high-performance markets and had technical competencies in sustaining technology improvements in disk drives. Under Spenner’s leadership, the Division was to become a major player in the growing disk drive market. Spenner’s “big-business fast” strategy is ultimately what caused the project to fail. Since HP was a company that specialized in sustaining technological enhancements, it managed the Kittyhawk project as though it was a sustaining technology, utilizing the RVP Framework (Resources, Values, Processes) as discussed by Christensen. Under such a strategy, HP’s values and processes forced the Kittyhawk Team to accurately forecast potential growth of an emerging PDA (personal digital assistant) market. Committing too early in a single product such as the PDA proved to be fatal to the project, especially since it was being managed as though it was a sustaining technology. The fact is, this case satisfied almost all the standard definitions of what Christensen labeled a Disruptive Technology; it underperformed in the mainstream markets (desktop and laptop computers) in dimensions such as storage capacity and cost, two factors that were important to customers; it also, found a stronghold in downstream, underserved markets such as those devices requiring smaller storage size; beyond that, its rapidly improving performance allowed it to enter the low-end segment of the mainstream market and cause disruption. As such, the Kittyhawk should have been managed as a Disruptive Technology rather than a Sustaining Technology. Because the project was mismanaged, the RPV Framework for which it was structured created barriers to innovation rather than the desired effect.
Hewlett-Packard and the DMD had the resources available to complete the project in the required 12-month period. It also properly identified potential markets quickly. However, the values adopted by the DMD created a huge barrier to innovation. For example, the $130 price point, which was agreed upon by everyone, didn’t provide a wide enough margin for the project to succeed in meeting its anticipated revenue. HP simply didn’t have the business savvy (resources, development, and strategy) to make it work. Spenner’s strategy of building the business fast made it nearly impossible for the Division to meet the revenue and market share goals. The company’s core competencies in innovation and technological leadership, in fact, caused it to enhance the original product by adding an accelerometer, which only added to the cost and complexities of the design. HP processes were also a barrier to innovation because the Kittyhawk Team was required to satisfy HP processes rather than that of the DMD. Rapid time-to-market, time-to-volume, and time-to-profit demands along with the forecasted revenue and break-even point made it difficult to properly manage the project. According to the coursework, there are other methods that may have proven more successful.
The Kittyhawk Team was forced by the HP RPV Framework to accurately forecast the rapidly emerging PDA market. This was identified as the only market that would be willing to pay high prices for the Kittyhawk, was sustainable, and allowed for the project plan to achieve stated goals. Because the PDA market was such an unknown at the time, as was the $130 price floor, it would have been a better idea to use a Discovery-Driven Plan rather than the RPV Framework, which was created for sustaining innovation. This process would have uncovered several issues that may have allowed the project to switch gears early on and discover other potential markets.
Discovery-Driven Planning is a disciplined process to systematically uncover, test, and revise, if necessary, the assumptions underlying any venture. It effectively exposes uncertainties and enables them to be addressed at the lowest possible cost. Had HP utilized the five step process for successful venture planning with respect to Kittyhawk, the project may have done much better. By calculating the allowable costs, the project leader might have had better insight into whether or not the project would have been worth pursuing. Most importantly in this planning process is to identify and test assumptions. In the case of Kittyhawk, these assumptions would have shed light on the true nature of the costs involved as well as the importance of being more flexible in the product’s design. In his strong desire to be more like HP in the printing industry, Spenner lacked enough foresight to properly identify the risk involved in the project’s assumptions. The price floor of $130 simply wasn’t going to work for Kittyhawk. Had the managers used Discovery-Driven Planning they would have seen that the market would have supported the $50 price point and the resulting product would have satisfied the customer’s conditions for purchase. Success would have been inevitable. Hindsight, of course, is always 20/20.
There are other lessons to be learned in this case as well. Kittyhawk relied heavily on using the skills of an internal team of experts to create the strategy to move the project forward. Open Innovation concepts may have allowed the project to pull in experts from outside HP to help the company see things from a different perspective. Open Innovation is beneficial because it reduces the risk factor, increases the level of collaboration between experts, and can improve such things as time-to-market, which was seen as very important in this case. Of course, there are a lot of other benefits as well. For example, breakthrough technologies often come from the least likely source. By enabling outsiders to offer creative ideas for innovation, it is entirely possible that the Kittyhawk Project could have been rejuvenated and looked at from a different angle. As it stands, the project failed on many levels, all stemming from poor management decisions, which were derived from strategies using the wrong framework. Hewlett-Packard didn’t use the right strategy for managing Kittyhawk. Rather, they named their requirements up front. Had they asked the right questions from the beginning and opened their mind to outside influences they may have realized that there were greater opportunities than that of the PDA market. In fact, it may have been beneficial for the company to Beta-test the product in several selected markets to see where the strongest foothold could be had. This project failed for reasons that are pretty clear, given the facts. It was being managed by a leader that didn’t see the trees for the forest. He was unbending. He was rigid in thought. He was most interested in getting the product out as quickly as possible, playing heavily to a market that was still emerging, and not considering the voice of the customer. If he had done differently, he could have produced a cheaper product that met the needs of the customer with fewer bells and whistles. He may have discovered previously unnoticed markets. He would probably have been far less aggressive in forecasting revenue and more cautious considering pricing and costs. In a perfect world this project would have been seen as a disruptive technology from the beginning. That would have changed everything in my opinion.
Sources:
Christensen, Clayton. (1997, June 11). Managing Disruptive Technological Change: A Case Study. Harvard Business Review.
Christensen, Clayton. (2006, October 23). Hewlett-Packard: The Flight of the Kittyhawk. Harvard Business Review.
Gunther McGrath, Rita, & MacMillan, Ian. (1995, July 1). Discovery-Driven Planning. Harvard Business Review.
Jouret, Guido. (2009, September 1). Inside Cisco's Search for the Next Big Idea. Harvard Business Review.

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