Monday, November 16, 2009

Carly Fiorina On the Paradox of Cost vs. Quality--In Healthcare, and Everything Else

Carly Fiorina, the former CEO of Hewlett-Packard, now running for the US Senate seat held by Barbara Boxer, was in Washington DC today, talking about, among other topics, healthcare.

Fiorina is a Republican who played a prominent role in John McCain's presidential campaign last year, and her answers, heard at a small gathering, mostly reflected Republican healthcare orthodoxy: patient empowerment, choice, and competition, including in insurance. And interestingly, she also put in a plug for community clinics, the expansion of which was a significant, if generally unheralded, achievement of the Bush 43 presidency.

But what makes Fiorina stand out is her obvious orientation toward problem-solving, based on her three decades in corporate America, during which she rose to lead a Fortune 50 company. Asked to sort through the issue of whether government is too big or too small, she left no doubt about her own conservative inclination toward limited government, drawing a further distinction: between government that is effective and government that is ineffective.

And it was on this question, of effectiveness, that her organizational experience became apparent: “If you focus on quality," she said, "you drive costs down. But if you focus on costs, you get unintended consequences.” That might seem a bit counter-intuitive to some, but not to SMS readers; as argued here many times, powering through on technology is the key not only to improving the quality of technology--making it work better--but also to making it cheaper. Think computers, or cell phones, or just about anything else: Innovation times productivity equals lower costs. You make it cheaper by making it better.

But let Fiorina tell her own story. Asked to elaborate on her answer, she recalled that when she took over at HP, “There were 87 separate divisions, each with its own president, or CFO, each its own little empire...a very expensive cost structure...hard for customers to navigate."

It would have been simple, Fiorina said, to give each division its own “10 percent haircut"--just a rote budget paring. But the better way, she continued, was to ask a new and potent question: “How do we improve the quality of service for the customer?” That is, rather than directly confronting the budgets of those 87 divisions--each one turf-conscious, each eager to defend its own little silo--Fiorina sought a more indirect approach; she changed the equation by which the entire company operated.

Was Fiorina successful? As her website puts it:

Carly served as the Chairman and Chief Executive Officer of Hewlett-Packard Company (HP) from 1999 to 2005, leading the reinvention of the legendary company, successfully steering it through the dot-com bust and the worst technology recession in 25 years. During her tenure, HP's revenues doubled, from $44 billion to $88 billion, with improved profitability in every product category. Today, HP is the largest technology company in the world.

She proved her leadership in tough times. Her pursuit of the controversial merger with Compaq Computer is now acknowledged to be the most successful merger in high-tech history and positioned HP to become the first $100 billion information technology company, creating market leadership positions for the company in every one of its product lines.

And while not everyone is a fan of her performance at HP, she demonstrably has a lot more valuable real-world experience than Boxer, who is perhaps the leading left-wing ideologue in the Senate, and a staunch supporter of paleoliberal policies.

Listening to Fiorina's answer about costs vs. quality, we were reminded of the famous quote from Albert Einstein: "No problem can be solved on its own level." That is, when confronted with a seemingly insoluble conundrum, new intellectual inputs are needed to get out of mental stasis, even stalemate.

So how to apply such wisdom to healthcare? The answer, she said, was "integrated care," as well as the aforementioned empowerment, choice, and competition.

Here at SMS, of course, we would have wished that Fiorina had put more of an emphasis on cures--because cures are the real purpose of healthcare and medicine.

But Fiorina herself was recently treated for breast cancer, and while her doctors, she said, have given her a clean bill of health, she still has the short hair to prove that she has recently gone through chemotherapy. So she knows about Serious Medicine--and what it can do. And no doubt she has plenty more ideas on how to make medicine and healthcare work better.

Indeed, we are sure that she will have more fresh ideas to bring to the healthcare debate in the months and years to come, which is more than Barbara Boxer can say.


  1. Fiorina's tenure at HP was nothing less than a disaster, and does not qualify her in any way for higher office. That's why Portfolio rated her as #19 on their list of the worst CEOs of all time. That's why InfoWorld listed her as #6 on their list of the 25 biggest technology flops.

    Read what HP insiders really think of Fiorina at

  2. The man in the street, the shirtsleeves executive, the executive secretary and very few others in private industry positions have any perception of what it is to be Carley Fiorina and be the CEO of a gargantuan Fortune 500 conglomerate. I started in business with such leading blue chips as Smith Corona, Nestles and Honeywell in sales. I was also a Licensed Real Estate Broker and I will tell you that I could never, with 20 years of business experience do what Ms. Farina was hired to accomplish at HP for 5 minutes. That is just the point, the California voters have to view Ms. Farina as a Bill Gates or a Mitt Romney, as a veritable intellectual prodigy with super human energy and unmitigated organizational skills. Who better to address the rebuilding of California from the ground up then someone with the staid and steadfast background of the former HP head. As for Barbara Boxer, she is another left minded politician who were in vogue when Barack Obama got elected and now it appears that there is a huge fade out stage left for the group.I believe that pound for pound, this California Senate race will emerge figuratively
    like Muhammed Ali getting into the ring to face the Bayonne Bleeder, Chuck Wepner.I actually drove out to the Jersey City Armory in 1972 to see that one, needless to say it was a rout.

  3. I would love to see Boxer out of office, but I can't say that I would much prefer Fiorina much more. He tenure at HP was a disaster both practically and in terms of superficial appearances. Sure, Carly got a pile of money and a nice plane but meanwhile the company was turned from a great engineering company to a seller of little plastic boxes. She reminds me a great deal of our governor. Both are far more interested in their own personal glorification than doing anything that would actually make them enemies among the bureaucrats and thus nether is much better than Boxer or Davis.

    When will someone worth voting for run for a major office in California?

  4. At least Ms. Fiorina has actually worked in the private sector.

    Too many politicians today are careerists and have never much had to meet a payroll or run a real business. To them the business is government, and quite naturally they expand and manipulate it to empower and enrich themselves, and their chosen friends.

    As for Boxer, a 2 year old would do better than her.

  5. Those who say that Carly was a disaster at HP are usually part of the old HP guard who were the problem she inherited. If you really want to learn what she was up against at HP, read the books Backfire and Perfect Enough. She did a great job in the face of tremendous adversity.

  6. It's a shame that Ms. Fiorina has such weird baggage. Her stats were amazing. She did the impossible - taking an "old-world" tech firm infrastructure, shuffled it into a much more logical structure. The problem with many of the earlier HP services and products was that they were either built to answer dying needs, or the products they were selling were aging, and the chiefs of those areas were basically on dying horses. Carly shook up the company and yes, created a merged company with Compaq that now is one of the few remaining successful box and laptop manufacturers, but is also a serious competitor in the fields in which it has chosen to be a contender, if not a leader. I welcome Brian to mention any budding or progressive technologies that were inthe market or getting close to marketability that HP abandoned. I was a tech analyst and portfolio manager during that time, and thought Carly did that masterfully. Of course, the little princes of those fiefdoms have crammed the web with horrible diatribe against her, but from the investment community's perspective, and from mine, as a self-professed geek, she did a masterful job. But this isn't the point here. Carly is right. We do have to thik outside the box(er). I believe that Carly is absolutely right, that every public hospital, and any hospital that takes Medicare and Medicaid patients, should have a community clinic. From a business sense, and from a personnel sense, it's exactly what we should be supporting. This is much cheaper care than ER care, and would keep the ERs open for real eergencies, it can be manned by a mix of nurses, residents, interns and volunteers,and can be a friendlier first step when someone gets sick enough to require care, but doesn't have a doctor.

  7. This is not a prop up I assure you but I think I made the salient point of the day. Could Barbara Boxer at any juncture in her career be hired at HP?