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NOVEMBER 28, 2000

© Copyright 2000 Hewlett-Packard Development Company, L.P
All rights reserved. Do not use without written permission from HP.

Thank you the very kind introduction, and good evening everyone. It is a special pleasure for me to be here this evening because Hewlett-Packard has been a part of Japanese society and industry since the early 1950s when we formed our first Japanese partnership. In addition, we've just completed our most successful year in Japan, ever, and we're celebrating the 25th year of our unique partnership with a great company like Canon.

We have many great Japanese partners that have added tremendously to the global success of this firm. I am honored as well to share the evening with your two reward winners, Konishiki and Dr. Joseph Nye, although they are both exceedingly difficult acts to follow. And I want this audience to rest assured that I feel the burden of being your last speaker in what has already been a richly entertaining evening.

While at first our two award winners seemed to come from very different worlds, they share, I believe, a common trait. They are both strategists: Konishiki at the level of one-on-one physical competition and Dr. Nye at the level of global geopolitics. We in business can learn from both of them. We in business can learn from the individual focus of the sumo wrestler and from the global focus of the geopolitician. Because even as the Internet unites the globe in a whole new ocean of linkages and transactions and relationships, we are also digitally empowering the individual, the consumer, the entrepreneur to navigate that ocean. And so I'd like to use that thought as my starting point tonight.

I believe the individual is being globally connected and empowered in a true digital transformation. And in that process, personal life is being transformed, business is being transformed, and society is being transformed. Tonight, I'd like to look at the digital transformation - what I call the digital renaissance - through a prism. I'd like to break this huge, history-making shift into its components:

  • the new business and technology landscape,
  • the transformation of organizations,
  • the transformation of industries and markets,
  • the transformation of countries and economies,
  • and the transformation of leadership.
But first, I'd like to start with what I mean by digital renaissance.


To find a parallel to the historical shift that we are undergoing, I have to go all the way back to the first renaissance, not only because I was a medieval history major in college, but also because I think it teaches us great lessons as history always does.

A similar reference point in Japan's history might be the Meiji period. After all, "meiji" means enlightened ruler, and that is exactly what the Italian Renaissance leaders aspired to be. The similarity between what happened in Italy and Japan is in the shared sense of energy and possibility and the breaking down of old barriers. The difference is that nationalism was not yet a factor in Italy, while it was, of course, very important in Japan.

During the Italian Renaissance 500 years ago, Galileo and Copernicus and Leuwenhoek turned the theory of an earth-centered universe on its head. This, of course, forced people to completely rethink religion, politics, commerce, and individual responsibility. A new, disruptive technology called the printing press eventually brought access to information and education to the masses.

Centuries of dogmatic political thinking gave way to curiosity and possibility. Leaders began looking at how governments could benefit everyone, not just themselves. Artisans were given freedom to create. Scientists and engineers were given license to question and experiment. Invention flourished. There are hundreds of interesting parallels we could draw to the current period - an era when a new technology is once again liberating imagination, removing barriers, and connecting us all.

I would argue that we are in the beginning of a second renaissance, the digital renaissance. And, once again, millions of ideas and inventions are coming to market as the Internet enables anyone who has an idea to create or invent or start a business or participate in the global economy.


Let's talk for a moment about the new business and technology landscape that's fueling this digital renaissance. At HP, we believe that the new landscape is defined by three emerging forces of technology:

The first force is the rise of billions of new information appliances. Our personal interactions with technology are no longer defined or confined to the personal computer. Anything with a microchip can or will become intelligent and become connected. All of these intelligent connected things will serve as platforms for the delivery of Internet-based services, or what we call e-services.

This brings me to the second emerging force: digitally delivered services or e-services, in which any process, any asset, can be digitized and transformed and delivered over the Web.

Whole chains of transactions will be electronically negotiated behind the scenes while you do better things with your time. This is not simply about the automation of existing process - which is what e-commerce and business has been about - this is about the transformation of process to create value in new ways.

The third emerging force is the always-on Internet infrastructure to support this swarm of Internet-based transactions and interactions. Three trillion dollars will be spent worldwide over the next decade to build out an information grid that will make access to Internet-based information and services just like access to other utility-based services that we take for granted together: electricity or water, for example. But this information grid has the power, the potential, to be even more pervasive, more deeply woven into our personal and professional lives.

Now, in building out these emerging markets, we at HP are leveraging our position as the world's largest consumer technology company. We are also leading Internet infrastructure suppliers, selling more than $34 billion in servers, storage, software, and services last year. In building out these emerging markets, we're seeing that by understanding the linkages, the relationships, between these three forces and by inventing at their intersection, we have the opportunity to transform the customer experience, to transform the value-creation process, and to transform entire industries. Let me give you a couple of examples.


At HP, we spend a lot of our time thinking about how to transform customer experience. What if, for example, we could transform the role of printers, turning them into smart Internet appliances. In fact, there is no "what if" involved - we are already doing this. Your HP printer can now be your local post office, with stamps delivered over the Web and printed at home. No more standing in line to buy postage. Your HP printer can now be a ticket office for movies or sporting events or theater events. No more standing in line to buy tickets, because you can print them off the Internet, at home or at the office.

Through our partnerships with companies like AT&T and Excite@Home, you'll soon be able to print coupons while you're watching TV in your family room. Perhaps some day we'll print ballots as well. Just kidding.

We've also announced a number of alliances with companies like Palm, Nokia, and Singapore Telecom that will make it possible for you to walk up to an HP printer with your cell phone or PDA and print your email messages or your custom presentation or the day's stock trading report.

The goal of all this is to make printers more valuable and more useful to our customers as they go through their day. Of course, at the same time we create new revenue streams for HP by thinking about printers in entirely different ways.


Now let's talk about how technology is transforming the value-creation process. I'm going to use online trading communities and exchanges as an example.

Although these electronic marketplaces are relatively new, they have the potential to wring the efficiencies out of manufacturing and supply-chain management processes because they facilitate the real-time matching of supply and demand. At HP, we've participated in online auctions to sell excess inventory and buy parts in short supply. Through this process, we've been able to trim our inventory cost by 30 percent.

Think about the near future, when information will flow freely so that all participants in a market have access to the information they need. When these e-marketplaces enable true, real-time commerce where all goods and services are traded, creating spot markets for everything, we will create what economists have been dreaming about and teaching about for decades: perfect markets.


All you need is one company in an industry to catch on to the power, the potential, of inventing at the intersection of information appliances, e-services, and an always-on Internet infrastructure and they can become the tipping point for their entire industry. If one car manufacturer masters the model for turning cars into mobile portals, all of the manufacturers will follow. The first broadcast company to link printing to television content in a meaningful way will transform this medium, creating value for viewers, for advertisers, and for broadcasters.

So those are just some quick examples, a quick view of what I see as the transformation of power and opportunity of this next Internet era for businesses. What we must keep in mind is that in this new world, transforming customer experience, transforming the value-creation process, and transforming industries are all interrelated. And they are about more than simply bringing efficiencies in these processes. One transformation triggers the other, and they are all part of a larger digital transformation.


Now, of course, another part of this grand transformation is that many of us have been through, or are now undergoing, major organizational change. The bad news is, it's just beginning. The good news is, a whole universe of opportunity is being opened up by this necessary evolution of our companies.

I'd like to bring the focus a little tighter now, down to changes in my own company, to illustrate how we're going to anticipate and incorporate these larger systemic changes into the DNA of HP itself.

I share this with you because at HP we're taking on the process of evolution or revolution holistically, across a whole set of dimensions at once. Our approach to the reinvention of HP is grounded in the belief that companies are really living systems. And companies that aspire to be market leaders must align and optimize those systems simultaneously.

A system is made up of four things. The first is strategy. This is about what we choose to do and why - as well as what we choose not to do. And strategy, of course, includes making the tough portfolio choices that focus resources on the best opportunities for profitable growth.

Our strategy, as I said, is driven by the conviction that the real promise and power for businesses and consumers lies in the linkages, the connections, the intersections of information appliances and e-services and an always-on Internet infrastructure. It is by understanding the relationship between them that we have the opportunity to use technology and to truly transform the customer experience, the value-creation process, and entire industries.

Second, are structures and processes. A company's structures have to be aligned to deliver on the strategy. Processes are what knit companies together. They are how work is done. And they need to be integrated and streamlined and working at world-class efficiency to deliver quickly and cost-effectively.

Then there are performance metrics and rewards. Simply put, what gets measured and rewarded is what gets done. Over the last year, we've implemented pay plans and incentive drivers that encourage and support the behaviors that are required to win, and win big. For us, they come down to three questions: How well are we doing in the eyes of our customers? How well are we doing in the eyes of our shareowners? And how well are we doing against our competitors?

And, finally, a reinvented company needs to foster and nurture the right culture and behavior. Interestingly enough, in times of great change and in times of great challenge and opportunity, behavior is the ultimate test of a company's people. People look first at how you act and then to what you say. And if you do not walk the walk, then they will not listen to the talk.

Change is always hard, although it can also be exciting and exhilarating. In periods of great change, employees look first and foremost at how people act and behave. Do their words align with their actions? Because if there is no alignment between the walk and the talk, then there will be no transformation and no reinvention. We believe that in order to make great progress in our reinvention - for this great, historic company to fulfill its potential - we had to reinvent the whole system: strategy, structure and process, rewards and metrics, and culture and behavior. And we had to do it all at once.

So how are we doing? I'm happy to report that we are making great progress. We just completed our fiscal year for 2000, in which we had record revenue growth of 15 percent and record profitability at 16 percent earnings growth. Yet, in our last quarter, while we exceeded our revenue objective, we missed our own profit objectives - which says we still have work to do.

Our reinvention journey is just getting started, and there will be other bumps along the way. No journey of any magnitude, no transformation of any importance, comes without some pain along the way. So the lesson in the area of organizational transformation is that first, I think it requires taking on the whole system if you are really going to achieve meaningful change. Second, it's never finished. And third, you have to expect the hard times along the.


Now, I'd like to move on to the next theater for transformation - beyond individual experience, markets, and organizations - and that is the transformation of whole countries and economies.

I'd like to focus tonight on now the digital renaissance applies to Japan. I believe that Japan is a country that understands the rules of competition underlying the new digital economy, the global digital renaissance.

I said earlier in my remarks that inventiveness was the prime virtue of the first renaissance, and I believe it is true of this second, digital renaissance as well. I would argue that in Japan there is much inventiveness and energy and knowledge in your companies, in your economy, and in your nation. And if you tap that inventive spirit, you will continue to prosper in this next era. While Japan, of course, is dealing with formidable challenges like corporate accountability, financial transparency, bank liquidity, and manufacturing over capacity, you also have an industrial and financial base that for 50 years has excelled at globalization. In a digital economy, these experiences translate into a global awareness and a mindset that's a requirement to identify and realize new opportunity.

Another key asset - is that Japan is a global leader in consumer electronics and hardware technology. Let's look at Sony's PlayStation 2, which I was very fortunate to have been given. PlayStation 2 has completely caught the attention of Silicon Valley - not so much because it's a pretty cool toy developed by Sony and Toshiba, but because its graphic computing power is double what's available in commercial workstations that cost much more. And Sony, of course, views this device as an eventual gateway for all sorts of Internet-based e-services into the home.

What this means in terms of the digital renaissance, I believe, is that Japan is already a leader in understanding customer-focused information appliances, which, as I've said, are one of the three emerging forces at the core of this next digital renaissance.

Another digital renaissance asset is that Japanese researchers, schools, and R&D institutions have cutting-edge expertise in foundation disciplines for e-commerce. And your government spends massively on nonmilitary R&D.

In terms of the digital renaissance, I would equate R&D to fueling invention as a strategic national priority. How many other countries do it on your scale? How can it fail to pay off for you in the long run?

This year, of course, the Japanese government announced it was beginning a five-year plan to surpass the United States at high-speed Internet infrastructure. While we can debate whether a government-driven plan is the best way to build an Internet that serves consumers, not bureaucrats, I do hope that when it comes time to spend the money they'll call on HP Japan.

Seen through the digital-renaissance lens, this new government initiative demonstrates your national recognition that an always-on Internet infrastructure, powered by open standards and interoperability, is the underpinning of the new economy.

The final thing you're doing right may be the most important in positioning you for leadership. I'm talking about your leadership in mobile wireless technology. To put it simply, Japan is inventing the world's most advanced mobile culture, and it is becoming a laboratory for the rest of the world. The mobile arena is one of the best theaters for inventing at the intersection of e-services, information appliances, and an always-on Internet infrastructure.

I cannot place too much emphasis on the importance of the mobility revolution: the mobile Internet, mobile e-commerce, and mobile e-services. The impressive thing is that you are already blazing a trail for the rest of us. Next year, you'll be rolling out the most advanced high-speed wireless phone system on the globe. Already, your NTT DoCoMo's "i-mode" is the fastest-growing mobile Internet service, with 10 million subscribers in just 18 months and 50,000 new users a day. Industry analysts say it will take the United States and Europe a full two years to catch up.

What better example of the world of the future that HP talks about? A world where useful e-services and Internet services are accessed through simple, personal, intuitive information appliances supported by an always-on Internet infrastructure. We are proud to call NTT DoCoMo both a partner and a friend. This mobile world is a world where individuals - walking or driving or sitting, in classrooms or on the beach - can access services or information on the other side of the globe.

But I would argue that, finally, to make this world of the future become a reality on a broad scale, we need to transform more than companies, more than markets, even more than countries and economies. We need to transform how we lead companies, how we lead organizations, even how we lead countries. And I am no longer referring just to Japan, I am referring to every company, every country, every organization in our new connected world. Because without transformed leadership in business and science, these other things won't happen on the scale that is possible.


First, let me tell you what I think leadership in the digital renaissance will not be. Leadership in the digital renaissance will not be simply about controlling decision making. We leaders don't have the time and capacity to control every decision, though clearly there are some decisions that only we can make. Leadership in the digital renaissance will not be about hierarchy, title, or status. These things in the end will be as irrelevant to progress as titles of the nobility were when the Industrial Revolution began.

Leadership in the digital renaissance will not be about bragging rights or battles or even the accumulation of wealth. Wealth will be only as beneficial and relevant as the ability of purpose behind it. Leadership in the digital renaissance will be about encouragement, enablement, and empowerment. Leaders will no longer view strategy and execution as abstract concepts. They will realize that both elements are ultimately about people.

Of course, traditional aspects of leadership and business - like understanding your business, understanding the financials, and pushing the right levers to drive results - will continue to be important. But the most magical, intangible, and, ultimately, most important ingredient in the transformed business landscape is people. The greatest strategy in the world, the greatest financial planning, the greatest turnaround in the world is going to be only temporary if it is not grounded in people.

Finally, leadership of the digital renaissance will be about the realization that everyone on this earth is born with the potential to lead. This will be a deep and fundamental shift and this will be a shift worth celebrating. The realization will stem from the fact that there are large and small acts of leadership. And small acts of leadership can change the world as surely as large acts. Ultimately, they can have as much effect on people's lives and business success as big ones. This brings me full circle to my conclusion and the transformed world that I see coming.

This is a world where the individual entrepreneur, the inventor, the one-on-one sumo wrestler can aspire to have the global impact of the geopolitician. I started by talking about my conviction that the digital renaissance will be about the empowerment of the individual: his or her empowerment to participate in the global economy and in the global exchange of ideas and invention. I also spoke about how this era requires the transformation of companies, industries, markets, countries, economies, even the very nature of leadership.

But I think perhaps the most important lesson we can learn from the first renaissance was that it was fundamentally about a belief in human potential, the notion that an open society is actually what fuels progress. The first renaissance was not triggered by a single act of bravery or ingenuity. It was a collection of acts by individuals of many different talents. It was not fueled simply the bold acts of a few, it was fueled by the everyday acts of many. So, tonight, I ask all of us as business and government leaders, as patrons of this digital renaissance, what can we do to fuel the progress of this next renaissance? Thank you so much for your attention, and thank you for bringing us together this evening.

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