HP Fine Tuning a Well Oiled Machine - Or Throwing A Cog in the Works?

Implications: HP (NYSE HPQ) has dominated the printing landscape for over 20 years.  With a dominant share of over 50% in most categories, the firm is the leader in the industry. At the same time, the highly profitable annuity stream from supplies drivers more than 50% of HP's profitability annually.  It literally is the core profit pool for the company. In the third week of June, HP quietly shuffled the management and organization of the Imaging and Printing Group (IPG), the group which owns the printing business.  The number of functional units was compressed from five to three, with four executives below the key executive (Vyomesh Joshi) driving the entire business.  Interestingly enough, three of these executives are relatively new to HP. The core question is, will this serve to fine tune HP's already admirable success, or will it prove to be a business disruption ont he scale of Xerox's (NYSE XRX) missteps in the late 90's?

Analysis: Jim Lyon's article does an admirable job of queuing up the issues.  The key question in my mind is will this disrupt the organization, or refocus the organization?  Typically HP's reorganizations have been very well thoughout and have been communicated rather succinctly to both investors and the press.  This reorganization had a bit of a 'hurried' feel to it.  And what was the impetus for the change?

My belief is that HP's CEO (Mark Hurd) has listened to Vyomesh Joshi (affectionately called VJ) statements about the industry going through a basic shift, and the challenges to the traditional revenue model, and that he has taken these changes to heart.  And as such, he is proactive adjusting the business to anticipate market changes, not just react to market changes.

And what exactly is VJ predicting for the business.  The biggest theme is essentially that content is moving digital, and in order to drive growth, HP (or any printing equipment vendor) must be offering the software and online applications which will leverage this content to ultimately either capture the resulting pages, or, generate revenue from the online application / content itself.

My view is simple.  The greatest risk to the market leader is complacency.  I think Mark Hurd is making changes which will, if nothing else, shake up the organization and ensure the firms most profitable division does not fall into complacency.  And, I think it will work!