Hewlett-Packard: The Flight of the Kittyhawk

Rutgers University - Camden

12/10/2015
Danny Ulch
Jeremy Orlin

Introduction and Background

In 1992, Hewlett-Packard (HP) brought the smallest hard disk drive to the public market,
named the Kittyhawk. It was named after the first attempt at flight by the Wright brothers, which
occurred in Kittyhawk, North Carolina in 1903. (Christensen, 2006, p. 1). The disk drive market
previous to this introduction was full of large, inefficient disk drives that did not meet the needs
of the ever changing and progressing computing market. Similar to the Wright brothers, HP
wanted to bring about the newest era. In HPs case, this new era ushered in a unique and
progressive product that would change the way information technology companies thought about
disk drives and computing.
Hewlett Packard was founded in 1939 by Bill Hewlett and Dave Packard with an initial
capital investment of $538. Hewlett and Packard tossed a coin to decide whether the company
they founded would be called Hewlett-Packard or Packard-Hewlett. HP develops and provides a
wide variety of hardware components as well as software and related services to consumers,
small- and medium-sized businesses and large enterprises, including customers in the
government, health and education sectors. HP is considered one of the founding fathers of the
Silicon Valley tech movement in the late 1960s/early 1970s. As of 2015, HP officially split into
two publicly traded companies (HP Inc and Hewlett Packard Enterprises) to better segment its
PC and printer business from its enterprise products business.
Disk Drive Breakdown
Prior to the disk drive breakthroughs on the early/late 2000s, rigid disk drives (or hard
drives), were the main medium for storing computing information. Invented in 1956 by IBM,

these magnetic information and storage devices were roughly the size of two refrigerators and
store a total of 5 megabytes of information (Christensen, 2006, p. 1). These drives primarily
used binary code (same as computers) to read and write information to each other. At the time,
these drives were the standard in disk memory and for a very long time went unchanged from a
design and memory size standpoint.
HP utilized a management by objective process (MBO) to achieve company goals.
Management by objective can be defined as a process of defining objectives within an
organization so that management and employees agree to the objectives and understand what
they need to do in the organization in order to achieve them. As a result, HP had four main
business organizations: Test and Measurement, Computer Systems, Measurement Systems and
Computer products (Christensen, 2006, p. 2). This is the organizational structure for HP:

As you can see, the Disk Memory Division (DMD) was embedded into the Mass Storage
Group, a computer product. Within the Disk Memory Division, HP created disk drives that
accounted for $519M in fiscal year 1992, which only accounted for 3% of HPs overall revenue
of $16B (Christensen, 2006, p. 14). Comparatively, IBM and Seagate Technology had disk drive

sales of $4B and $3B, respectively. HP saw the value in developing better disk drive technology
that would allow them to grab a larger market share.
The Kittyhawk Idea
DMD was a secondary market player and not a focus growth point for HP. Bruce
Spenner, the GM of the DMD and overall risk taker, decided that HP needed to become a major
market leader in the disk memory market. The DMD already had a 5.25 and 3.5 inch product in
the market, but had not gotten into the relatively new 2.5 inch market, which was fueled by the
increase in notebook computers of which the 2.5 inch drives were used. Using a quote from
Dick Hackborn, HPs Head of Computer Products, Spenner decided to attack an untapped market
in the disk memory segment. The quote Never take a fortified hill meant that you shouldnt try
and attack a saturated market but rather to go after a market that was underpenetrated. Thus,
Spenner decided over lunch in 1991 with Hackborn to go after the 1.3 inch disk drive market,
which became known as The Kittyhawk.
The project had an uphill battle from the start. In an attempt to isolate the work, Spenner
moved the Kittyhawk team from the DMDs main operations and into trailers on the office site.
This was an attempt to ensure that the project team would work solely on the project and not be
subject to other work interruptions. The project team consisted of three functional HP
representatives. Spenner wanted to break away from the autonomous development process
(MBO) that HP employed. The three employees were Rick Seymour (Program Manager), Jeff
White (Marketing Manager) and David Woito (R&D Manager). These three were tasked to the
day to day management of the Kittyhawk. Spenner picked them because they had a reputation at
HP to be can do employees.
Problems in the case

The root cause of the failure was setting unrealistic goals in the charter for a product that
skipped a generation and was ahead of its time. The charter outlined the following goals:
introduce the drive from start to finish in 12 months, break even on the drive in less than 36
months, attain $100 million in revenue in 24 months, be the first 1.3 inch drive on the market,
and achieve a revenue growth of 35% (Christensen, 2006, p. 5). This sent a message that that
they were pursing a goal that was numbers driven. This is something that a company does when
it is producing a product with an established market not a new technology. All the decisions
made for the rest of the project were driven by the charter. A charter for a project is a necessary,
and the team should design their execution strategy to the accomplishment of the goals in the
charter (Gilchrist, 2015). In addition, the core team was required to sign a creed I am going to
build a small, dumb, cheap disk drive! which was meant to reinforce the shift from the classic
HP development line of thinking (Christensen, 2006, p. 4). Two of the engineers on the team
would not sign the document and immediately went back to their jobs at HP. They did not
achieve any of the goals of the creed or the charter except for the size of the drive.
When launching a new product it is critical that extensive market research be
accomplished to ensure that there is a market for your product. In addition, it is critical that you
have a complete understanding of your customers needs and incorporate their needs into your
product. In this case, the Kittyhawk drive is a new technology ahead of its time as well as a first
mover type of drive. Many times a new technology is not well received by already established
clients. When this is the case you must give the market time to develop products that can use the
new technology or work closely with a client to ensure that your product meets the specifications
defined by the customer.
In this case, HP focused only on emerging markets and did not follow their creed by not
following the advice of the customer because it continued to research and design a more

expensive product that was going to take less time to develop as written by the charter. When
Seymour and White began to find a market for Kittyhawk, they started by attending the
Consumer Electronics Show in Chicago. Upon entering the show they walked past the desktop
and laptop sections, assuming that the market was flooded and instead focused on the new
emerging technologies and personal digital assistants. After they were done speaking with them,
they stopped by the Nintendo booth. During their conversation, the Nintendo representative
stated that a dream for a software writer was to be able to write more code on cheaper storage
(Christensen, 2006, p. 5). As they create more complex games, they require additional storage.
He was specific about the word cheap and about $50 concerning the price of storage. The
bottom line was HP did not focus on the customers needs by focusing on a stable market such as
gaming and concentrated on a market that met the needs of HP driven by their charter.
Questions in the case
Now that we have covered the root causes of the failure of Kittyhawk, a few questions
need to be answered concerning which directions HP should go after the Kittyhawk failure:
Should they continue to pursue rugged-based application? Should they take a step back and
create a superior 2.5 inch drive for laptops? Or should they direct their focus back on their creed
and develop a $50 drive? (Christensen, 2006, p. 11)

Additional Market Research

After Seymour and White returned from the Consumer Electronics Show, White did
additional research for the Kittyhawk. He looked at reports concerning different markets
regarding electronics and called companies to discuss any plans they had for future products. He
also spoke with internal HP resources to get more insights on where they saw electronics going

towards in the future. After the research he came up with 5 categories for potential customers:
mobile information technologies, communications technologies, consumer electronics,
automotive electronics, and some various developing computer technologies (Christensen, 2006,
p. 5). White presented these choices to the development team and together narrowed it down to
two: the mobile computing market or a drive that was inexpensive and could be used in
applications that previously was not economically sound to do so.
The $50 dollar drive seemed to be out of the question because that price had not been
achieved to this point in the industry. At that time $130 was the lowest price of a unit so far and
that was the floor cost of the drive. It cost $130 to buy the parts and put together the basic
components. Companies were able to reduce the cost per mega byte of memory by offering
larger drives, but the price as a whole did not seem to budge.
The mobile computing platform seemed to be more a more realistic goal. Every
company that was developing PDAs were interested when one of HPs marketing people would
ask them if they could use a smaller drive. Again, at this time PDAs were in the development
stage and all the big name companies such as Apple, Motorola, IBM, AT&T and HP were putting
millions of dollars towards the development of PDAs. Based on this information the team
decided to focus on the mobile market until it reached a high volume of production and then they
would reach the $50 mark through volume sales. If mobile computing was going to be the next
major shift in computing the demand for the Kittyhawk would be at the levels required to
achieve the goals set forth in their charter.
Another important performance mandate identified by the market research was that the
drive had to be able to survive a 3 foot drop. In order to meet this requirement, the team needed
to invest in a proprietary six-axis piezoelectric accelerometer technology. This was a shocksensing mechanism that could detect impending impact and cause the drive to prepare and
protect against the impact. This technology worked similar to the way an airbag is deployed at

the moment of a car accident. The main issue with this tech was that it cost $10 to produce,
which was one-fifth of the cost they were trying to sell the drive for.
White then hired a marketing research firm specialized in technology to validate his
findings to Spencer. The firm would usually talk to current clients to help with where the market
was going, but this platform was so new that the firm spoke with HP more than anyone else, so
the conclusion was the same: to go with the mobile market.
At the conclusion of the additional marketing research, HP planned on doing business
with Dayton Technologies with their pen based system, HPs own Corvallis division for laptops
that did not have space for 2.5 inch drive and then companies that were developing and
producing PDAs. The Kittyhawk team had visions of their drive being in all PDAs, laptops,
hard copy devices, printers, copiers, and fax machines.
Competitors
In HPs eyes, they had two major competitors. The first competitor was flash memory
which was an integrated circuit that could maintain information even after the power was
removed and had no moving parts which made it very rugged compared to a standard hard disk
drive with moving parts that was very sensitive to any movement or drops.
The second competitor was the 1.8 inch drive by Integral Peripherals. In the drive
hierarchy, it was the logical next step in drive sizes. The progression with drives at that time
started with the 8-inch drive, then the 3.5, and finally then to the 2.5 inch drives which would
mean the 1.8 would be the next in line. The Kittyhawk being 1.3 inches would be skipping a
generation and as such was a contributor to the failure of Kittyhawk. One of the biggest reasons
for the failure was that companies at that time did not manufacture a product that had an
application for that drive.
The Roll Out Day
The Kittyhawk was released right on schedule in June 1992 exactly 12 months from the
day HP started developing the drive. The drive received more media coverage than any other
product in HP history and won many technology and new product awards in 1992. The first drive

shipped on June 23, 1992 and had a price attached of $250 (Christensen, 2006, p. 8). According
to HPs projections it appeared that there would be two year demand for the drives from the PDA
developers numbered in the ball park of 500,00 units. That would set HP on the path of breaking
even in two years and achieving the revenue goal of 35% in less than 3 years (Christensen, 2006,
p. 8).
Unforeseen Events
HPs own Corvallis Division decided that the Kittyhawk would not meet their
requirements for the their new laptop computer. They decided to use the 1.8 inch drive from
Integral Peripherals. Then the biggest blow to HPs new drive was the discovery that the PDA
market never exploded like it like the forecasting suggested. The demand was not as expected
and the handwriting software and circuitry was disappointing. Almost every PDA manufacturer
sales were so poor that they dropped out of the market. The companies that stayed could use a
much less expensive storage medium with very small flash memory chips.
Not too long after HP rolled out the Kittyhawk II with 43 MB of storage and attracted
Chicago Controls and their pen-based system for recording and analyzing data in production
plants. Microsoft was designing the operating system with a requirement of 40 MB of space.
This deal was supposed to put HP back on track from the losses from the PDA market. Then
Microsoft notified them that the operating system would require more than 43MB of storage
destroying the entire project.
New Customers
After those failures new customers started to inquire about Kittyhawk drives. A Japanese
portable word processor that printed Chinese characters questioned whether to use the drive in
their product. Additionally, cash register producers also became interested in the HPs Kittyhawk
drives to use as a backup of the register data in such cases of central computer outages. Finally,
applications such as a film cartridge and CCD technology transforming images into a digital
format was also looking at using Kittyhawk, but the cost increased the price of the camera to

$1500 (Christensen, 2006, p. 10). Ultimately, with the small success and many failures their
customer base was comprised of Japanese word processors, a small niche market for PDAs,
standard digital cameras, cash registers, and telecomm switching systems.
Options and Choices with pros and cons
At the end of the case Seymour gathered his team together to devise a new game plan in
light of the number of failures experienced with the roll out of the new drive. The options are:
Option 1: Continue to pursue the rugged-based applications.
The pros are:
1. The technology they developed was effective, the product was proven, and HP has relevant
experience with the application.
2. HP has to do very little research to continue with the rugged technology.
3. More customers were looking to HP for the Kittyhawk.
The cons are:
1. High volume production will be slow and many not happen at all.
2. New customers will need to be educated on the improvements.
3. Additional money will be required to perfect the technology.
Option 2: Produce a quality 2.5 inch drive for lap tops.
The pros are:
1. Will be able to charge a premium price.
2. Already have the experience from Kittyhawk drives.
The cons are:
1. HP is taking a step backwards from being the innovator and first mover, to being niche market.
2. Will require additional investment.
Option 3: Manufacture the $50 drive.
The pros are:
1. The Kittyhawk project can help HP form the plan for the new drive.
2. Going back to their creed: build a small, dumb, cheap drive.
3. They had prior support from companies for the cheap drive.
The cons are:
1. Will require more effort and time.
2. High volume of sales will be required to be profitable.
3. Will require more money.
Which option do we think they should choose?
Based on the case we would go with Option 3. During their initial marketing analysis
trip to the Consumer Electronics show, White and Seymour spoke with Nintendo and the
representative stated that the dream of any programmer would be to have more storage space on
a drive that was cheap and specifically stated around $50. Additionally, that goal was the creed

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that each engineer singed off on before the project began. Then after the failure, HP spoke with
Nintendo again and their representative stated that they needed a 20MB drive for $50. A fax
machine manufacturer also expressed that they could use the drives in their machines for $48
with a follow up statement that if the price was over $52, then they could not use the drive
(Christensen, 2006, p.10). The bottom line is that HP needed to define what the customer needs
and fulfill that need. Although it will require more funding for research and development, once
successful it will lead to outcomes far better than what they experienced with Kittyhawk.
Solutions to Root Causes
First, HP needed to set realistic goals for Kittyhawk. Kittyhawk was a new product ahead
of its time, so the goals needed to be realigned with less aggressive goals being a first mover
with an innovative product. Secondly, HP needed to do better market research and enter a
market that was more stable and not just look at emerging markets and what is supposed to be
the next best thing. Even if they would targeted a mix with a stable markets and emerging
markets, the outcomes would have been as devastating. Lastly, listen to the customers needs and
fill the need. Once HP realized that there was a demand for a $50 drive, they should have taken
the time and lengthened their time frame to produce that drive.
What Really Happened?
HP did not choose any of the options. The Kittyhawk program was discontinued in
September 1994 (Christensen, 1997, p.121). During the drives time on the market about 160,000
units were sold versus the 2-year projection of 700,000 units. In the summer of 1996, HP
announced that it was closing the Disk Management Division and was no longer going to be a
player in the disk drive market. The closure of the division was largely due the failure of the
Kittyhawk.

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References
Christensen, C. M. (1997). Discovering New and Emerging Markets. In The innovator's
dilemma: When new technologies cause great firms to fail (pp. 119 -121).
Christensen, C. M. (2006). Hewlett-Packard: The Flight of the Kittyhawk. Harvard Business
School, 606-088.
Gilchrist, P. (2015, January). The importance of having a charter. Retrieved from
http://www.projecttimes.com/articles/the-importance-of-having-a-project-charter.html