How do you turn around a large company?  According to Mohamad Ali, Chief Strategy Officer at Hewlett Packard, by first attacking costs and then strategically reinvesting the enhanced cash flow in profitable product initiatives.  You also divest your extraneous parts, but you do that over a long period of time.

Ali, who has spent many years in strategic planning at IBM, told a breakfast meeting of the Boston Chapter of the Association for Corporate Growth some war stories about the crises faced by IBM in the ‘90s and into the 2000s.

Ali has worked at several companies doing the same thing: guiding them through corporate transformations.  It is not surprising that all these companies are in some phase of computer technology; aside from being Ali’s substantive sweet spot, computer-related companies have faced a constant need for transformation, as technological and consumer changes occur often and are abrupt in this space.

Ali has a “transformation playbook” which has some simple sequential steps. The first always is: “take cost out of the system.”  That gives you cash and if you don’t have cash, you have no flexibility for products, sales or M&A.  You also have to take a look at governance structure to make sure that that structure matches the new configuration of your businesses.

This transformation playbook apparently is in use today at HP.  Having gone through four CEOs in four years, and having purchasing Palm and other companies without measurable affirmative effect, HP did attack cost and has been working on products in markets that it missed historically, including tablets.

We are early in the HP “transformation” and Ali is of course optimistic as to the ultimate results, speaking glowingly of product innovations.  It remains to be seen whether HP’s “transformation playbook” will produce any silver lining.