Volume 9, #5___________________________________________________________________
June, 1990
"MGMT MEMO"
was written by Richard Seltzer in Corporate Employee
Communication for the Office of the President. It was
written for Digital’s managers and supervisors to help
them understand and communicate business information to
their employees. You can reach Richard at seltzer@seltzerbooks.com
DQR - Senior
Managers Answer Employee Questions In Live Video
Broadcast
The
Transition
Program in the
U.S.
The
Expanding
Role Of Educational Services by Pat Cataldo, vice
president, Educational Services
The Digital Quarterly Report (DQR) is
a live video program intended to keep employees updated on
major developments and decisions that affect the company.
Designed by Corporate Employee Communication, it is
broadcast over the Digital Video Network (DVN). In the April
24 broadcast, Ken Olsen, president; John Sims, vice
president, Strategic Resources; and Jack Smith, senior vice
president of Operations, discussed third quarter financial
results, the transition program in the U.S., and recent
organizational changes. They and Ted Sares, director of
Transition, also answered employee questions on a variety of
topics. The following article summarizes their remarks.
"In Q3, we did better than many people
thought we would do, but still not as well as we did in the
past," explained Ken. "The market is hard, and the
competition is tough. Customers in the U.S. aren’t buying
like they used to. That’s why we need to put a lot of work
into improving efficiency and doing a better job.
"At the same time, we took a large
reserve — $150 million — for expenses related to our
transition program in the U.S. As a result of changes in our
business, there are a number of jobs that we cannot justify
anymore, and we are incurring that expense to deal gently
with the people involved. We earned $1.40 per share before
the reserve and $.20 per share after it. Analysts who
evaluate the company tend to look at the $1.40, because that
number represents what we really earned from operations.
"Because of the nature of the business
we’re in today, we are both proud and challenged. We’re
proud that we did this well, and challenged that we should
do a lot better," he noted.
"When explaining our situation to the
outside world, I emphasize the sluggishness of the economy
and the nature of the business," Ken went on. "When speaking
inside, I say it’s all our fault. Both ways of looking at it
are true.
"We have the best products, and the
best people. In spite of the economy, we should do very
well, and we’re not doing as well as we should. That’s the
challenge in front of us."
Jack Smith added, "We are among the
soundest companies in the industry, with $2.2 billion in
cash and a AAA credit rating, which only 13 industrial
companies have. But to maintain that position, we’re going
to have to be more profitable. Digital has never paid
dividends. That means that when investors put money into
the company, the return they get is the growth in the value
of the company - which includes all the physical assets,
such as buildings, equipment, etc.; the accounts receivable,
the inventory and the cash we have on hand. They expect a
return on all those assets. Profit is how they measure how
well we run this business. We are the stewards of those
assets, and if we do not get a suitable return, those
investors may choose to disinvest.
"Over the last few years, our business
has changed significantly. We take care of our customers and
are helpful to them. We encourage them when they are ready
to buy, help them design their systems, prepare bids,
install the systems and guarantee those systems. We are very
proud of our accomplishments in the service part of our
corporation. All these services are expensive. Many of our
competitors can offer competent products at very low cost
because they don’t offer these services; and we have to be
able to match their prices. To compete with those companies,
we will have to charge separately for the services and for
the equipment. That’s one of the changes we have to go
through. At the same time, we have to be very efficient so
we can match their prices for equipment. We cannot afford to
maintain activities that are no longer necessary."
"Digital is a people-driven
organization," explained John Sims. "For us to be
successful, all 125,000 of our people have to feel empowered
and operate from a common base. Our transition program is a
tool that we use when we find ourselves in an unfortunate
situation — after a lot of worry and anger and frustration
— that jobs and people don’t match. ‘Transition’ gives us a
way to work with an employee, primarily to find another job
within the company. And, if there is no other job in which
that employee can fit, to help that employee get
repositioned elsewhere. We do all this with care, in the
Digital way.
"As we move into the 1990s,
competition is intense. Our entire 125,000-person
organization has to be highly efficient. Each one of our
business managers has to plan, to reinvest in skills
development and organizational design, to build an
integrated structure so we can take care of the customer and
operate profitably.
"The business we’re in frequently
requires major changes," John observed. "There are skills
and jobs that we need in one period of time and don’t need
later on. This has meant that at all times, there have been
some people whom we have had to encourage to move. Often
this has been because the skills they had, the kinds of work
that they could do well, were no longer needed.
"When Digital was growing fast, we
were often able to move people to new kinds of jobs. For
instance, about four or five years ago, we transitioned
about 4,000 people out of Manufacturing, because of changes
in technology. We were able to do it slowly, and to work
with people one at a time to help them find new jobs in
Digital or to help them make the transition outside the
company, doing this very gently, without signaling the fact
to everyone.
"Now, when the numbers of people and
the amount of money involved are significant, it is
appropriate that we announce what we are doing publicly so
our stockholders can see. But still we’re proceeding as
slowly and gently as we can.
"Today, we are facing a major change
brought on by several factors all hitting at once," he
pointed out. "Technology has changed, and due to the economy
we have had slower than expected growth. At the same time,
in our overhead areas, the good work that we’ve done over
the last few years to become more productive has started to
pay off.
"We want to avoid situations where the
need to change builds to this magnitude. But, in general, we
should view transition as positive. If we’re not having
transition, that means we’re not working hard enough, not
developing the right technology or not making the changes
necessary to stay competitive.
"Employees should keep in mind that
the skills needed in this business are changing
dramatically not only at the direct labor level but also at
the management level," said John. "To keep employees in the
best possible position, we have to think about training and
repositioning people. And that need and effort will continue
to be important, regardless of financial results, for the
next ten years or more."
"Remember — transition does not mean
just out-placement," added Ted Sares, director of
Transition. "The primary energy in transition is to get
people retrained and repositioned in other jobs in the
organization. We have had large numbers of people move out
of staff positions and into revenue-generating positions in
the Field."
"We should not downplay the anxiety,"
noted Jack. "It’s a gut-wrenching ordeal for the people
involved. It’s the most difficult piece of management that
I’ve ever been involved in. But it’s very necessary."
"Some employees were angry because
they read about the details of transition in outside media,"
observed Ted. "That happened because we approached
transition from the bottom up, on a business by business
basis. That meant that, until it reached a certain
magnitude, it would have been confusing to communicate it
across the board."
Ken advised, "Everybody should realize
that nothing is guaranteed, and life is full of dangers.
People wonder why I always call myself an engineer. That’s
so I can always go back and work for a living.
"You should always live within your
means and make sure that you can be useful. Particularly if
you get into an overhead position, you should always make
sure that you have marketable skills.
"People forget very quickly that we
have, like the economy, gone through ups and downs many
times in 30 years," he continued. "It doesn’t take many
months of downturn before people start planning as if it’s
going to be that way forever; or very few years of good
times before they plan that way forever. But it’s safe to
say that things will go both up and down."
John concluded, "At a personal level,
once you recognize the fact that change will be in the job,
you can do your job planning and skills development with
that in mind and begin to watch the business and anticipate
when change is coming. We ought to be constantly in the mode
of developing ourselves to keep up with what we know is
going to happen."
"Originally, the price we charged the
customer for hardware covered services and software as
well," explained Ken. "In recent years, we’ve increased the
services and software that we provide. We now have Digital
Customer Centers (DCCs) and all kinds of special services
for different markets. These services and software make us
very popular, but we can’t cover them in the hardware price.
That gets compounded by the fact that other people are
selling hardware with zero services and doing that very
economically. So we have to learn to charge little for the
hardware, but charge for the services and software, and do
this the right way for each different market.
"You can’t take care of this kind of
need with an overall plan for all industries. We need
different kinds of services for different industries. So
we’ve broken the company down into individual pieces, where
each piece has the responsibility of operating like a
business. There will probably be 30 to 40 of these pieces by
the time we’re through. They will all know the cost of their
products, what the prices should be, and what services they
need to run that market. And they will then figure out how
they’re going to get income.
"In other words, we’ve moved from the
five basic business segments that were announced last fall
to a flatter organization that is closer to the customer,"
he observed.
"The five segments we had before were
mostly hardware, computer segments," said Ken. "Today, we’re
operating with ‘business units,’ also known as Tines of
business,’ that are laid out according to what the customer
wants. Of course, we need to be efficient to be competitive,
and these new units should be able to identify
inefficiencies and take care of them. But more importantly,
they are responsible for figuring out how to charge the
customer for the services they need.
"One of the reasons our profit is low
is that we haven’t done this kind of planning by individual
units. We tried to do it by the whole corporation. On the
one hand we’re turning out excellent products and delivering
them in good quantity, but we haven’t figured out how to
charge for all the services we do. That’s what this
organizational change should fix."
The announcement regarding lines of
business said that the managers of these units would have
marketing, sales, service and engineering responsibilities.
But in subsequent announcements, the sales and service
responsibilities were concentrated outside the line of
business. Could you clarify what is happening?
"Both are true," answered Jack. "The
Tine of business’ or ‘business unit’ will be responsible
for its marketing. But at the same time, we will have a
centralized marketing group to help them with centralized
services. Where appropriate, an individual business unit
will do engineering that is unique for its market so that it
can compete with small companies outside. At the same time,
we will have a central engineering group to do large
projects that only a large company can do."
How will inputs and requests from
different business units be consolidated to the various
engineering and manufacturing organizations so they’re not
pulled in many different directions at once?
"An important element of business
units is that they do all the business planning for a
particular marketplace," explained Jack. "Theirs is the plan
that drives the company. Those plans include what products
we are going to ship, when and in what volumes. We also know
that the day after a plan is put on paper it’s obsolete. The
reason for that is that nobody is smart enough to anticipate
the future to the level of the three or four thousand
products that we offer.
"A number of years ago, we tied
manufacturing capacity planning directly into the order
flow, which caused a significant improvement in our
inventory turns. In the past, the plan was cast in stone,
and we would build to the plan with little modification
based on actual order flow. Today, we do our business
planning, and then it’s the responsibility of Manufacturing
to react to the order flow in real time.
"The business unit approach should
also help us in Engineering. Business units are now
responsible for making sure that our engineering people
understand the marketing needs. Left to their own devices,
engineers naturally chase technology. That’s the way they
should think — wanting to drive the technology as hard as
they can. But the marketplace sometimes does not need the
most advanced technology. Business units, because they are
focused on individual marketplaces, are in a better position
to translate the needs of the marketplace for Engineering.
In other words, there will be a closer coupling between
customer needs and engineering development projects.
Is our current number of people the
right level to carry us over the next few years if revenue
growth remains slow?
"It is important to separate
restructuring from growth," noted Jack. "Our current
transition program is the result of restructuring — doing
the work in a different way than in the past, which means
that certain jobs are no longer required. For instance, when
technology changed some years ago, we eliminated hand
wiring. Today, we are eliminating some jobs in overhead
areas and would do so regardless of growth and do not expect
those jobs to return.
"That doesn’t mean we’re going to be a
125,000-person operation forever. IBM is five times bigger
than us in terms of revenue, but they do that with less than
400,000 people. If we continue to grow at a rapid rate, of
course we will add more people. But, hopefully, we will not
add them at the rate that we did in the past because in the
future our operations will not demand as much labor."
Ken added, "Speaking of growth, it is
interesting to look at our Customer Service operation. For
years, they have extrapolated that because the reliability
of our equipment is improving, we will need fewer Field
Service people. But over the vears.
they have increased the range of
services they offer. So instead of cutting down every year,
they have grown bigger. In other words, the fact we offer
more services has compensated for the reliability of our
products. In other areas too, we compensate for many of the
changes we make by creating new jobs. On the other hand, we
increase our efficiency in Manufacturing 15% a year, and if
we don’t grow 15%, we will always have surplus manufacturing
people. These factors are complicated; but, in many cases,
new jobs are created."
With our old product line
organization, we had some problems with large customers
having to interface with different people from different
product lines. How will we avoid that with the business
units?
Ken replied, "The Field is now
organized by accounts. Every customer has an account
manager. Large accounts have many sales people and one
account manager. Smaller companies have one account manager
to take care of several companies. But the account manager
coordinates everything with the customer. That account
manager will also coordinate all the activities with the
different business units."
Many Wall Street analysts have
suggested that our transition program is too sensitive, too
caring and too slow to bring about the cost cuts that they
say we need to become more profitable. You are taking a hot
of heat for offering this kind of program. Does that bother
you?
John answered, "I think anything we do
that affects our people, their livelihood, their situation
with their families, requires time and attention. That’s how
Ken and the other people who started this company want it to
be, and it would serve none of us well to change it. That’s
what makes us different as a company and what causes our
people to feel ownership. Our people are our future. If we
don’t do these things well, we have no future."
You’ve talked about the factors that
are bringing pressure on the economy and the company. What
do you see on the horizon?
"We don’t know what the future is
going to hold," answered Ken. "But whatever happens, we have
to learn and do better and be stronger. We have the best
products and the best people and we have tremendous assets.
As long as we continue to learn, we should do very well."
Last year, at DECathlon in Australia,
Ken Olsen and Jack Smith heard a number of complaints from
the U.S. sales force about bureaucratic barriers that were
making it difficult for them to do their jobs. They came
back from those sessions determined to fix this and, with
the support of Dave Grainger, established a Committee to
Eliminate Red Tape (CERT) empowered to find out what was
wrong and solve those problems.
Set up as a subcommittee of the
Operations Committee, this group, chaired by Abbott Weiss,
included representatives from Sales, Administration,
Personnel, and Customer Services, and several layers of
management and workers, with sales unit managers, account
managers and sales representatives. Some of the people who
had been most vocal about the problems were enlisted to
participate in finding solutions.
From the beginning, the committee was
intended to last no more than six months, rather than become
a permanent part of the bureaucracy. Its purpose was to
empower people closest to customers to eliminate those
impediments that make it unnecessarily difficult to sell and
service our accounts or make it difficult to do business
with us. We wanted to eliminate steps and unnecessary
approvals. We wanted to make sure our sales force could be
flexible enough and responsive enough in front of the
customer. No subject was off limits.
A number of task forces and committees
were already dealing with some of these issues. The
intention of CERT was not to repeat that work, but to build
on it. We wanted to find the principles involved, figure out
what needed to be done, see if it was being done, and find
out if the people involved needed help. We would give added
emphasis and authority to their work — escalating the sense
of urgency and priority so these problems would be taken
care of promptly.
At the first meeting, everyone brought
a list of problems that they could identify from their
experience and their colleagues. These problems fell into
six broad categories: administration, measurements, software
licensing, warranty, cross-functional teamwork/- support and
information overload. Some of the problems were relatively
easy to resolve and others were enormous and complex.
We identified the big problems and,
also, picked a few little ones that could be quickly solved
to show tangible progress. For example, Manufacturing had a
process for dealing with "short ships" (incomplete shipments
to customers) that was intended to hold down costs, but made
it difficult for sales people and customers. For instance, a
claim from a customer that an item of documentation was
missing could lead to a series of time-consuming and
aggravating telephone calls to verify lack of shipment. Once
the problem was brought to their attention, Manufacturing
changed the process. Now the sales person who calls in a
short ship is presumed right, and the missing item is sent
without argument. It took less than two weeks to solve this
problem.
In general, we found that people in
the U.S. Field were treating rules as if they were absolute.
Communication, too, was a real problem, in many cases,
procedures had been changed and problems solved, but some
people who needed to know had not yet heard. Also, we were
not keeping our focus on the customer.
We set out to go over this list of
problems in detail. We met once a month. Our job was to make
sure the issues were worked. Wherever possible we would find
somebody who owned the issue. We would tell them, "We’re
counting on you to fix it. When are you going to have it
done? What help do you need? " Then we would spend enough
time with them to make sure they were fixing the right
problem, and that the solution was better than what we
already had.
A lot of work was done between
sessions. Individuals from the committee signed up for
specific issues and took care of whatever needed to be done.
The committee itself became the place where we could test
solutions, because we had people who could offer suggestions
and feedback.
In the area of warranty, the solution
was already on the way. By putting it on the list, we gave
that issue enough emphasis so it got higher priority and a
date was set for implementation. The committee wasn’t
coming up with solutions; it was commenting on what was
offered.
Software licensing, one of the most
difficult issues, hasn’t been wrapped up yet. But the
solution and the plan to implement are now clear.
Individuals own all the elements to make it happen, and it
has the attention of the Operations Committee and the
Executive Committee on an on-going basis. We intend to
simplify the entire licensing process so that it’s easier
for our customers and easier for us to administer. We will
begin implementation in the fall, and it will take another
year to complete.
A major administrative issue was the
need to send a customer one invoice that includes all
hardware, software, and services. It had been a project for
a couple years. It just needed priority. People on the
committee didn’t do the work. But the existence of the
committee provided the framework to give that project the
necessary priority and support.
One of the biggest problems faced by
Sales was the product descriptions used as part of the
Automated Quotation System (AQS). Every quote for a customer
pulls product descriptions off a master file for each and
every line item. These descriptions are maintained by
product managers in Engineering. These descriptions, which
were generated for internal purposes, typically included
abbreviations and jargon that were indecipherable or useless
to sales people and customers. When we brought this to the
attention of the product managers, it turned out that many
of them had never seen a quote and didn’t know how the
descriptions were being used. Fixing that problem has been
given high priority.
Some problems just didn’t lend
themselves to simple solutions. For example, Don Zereski
came to the committee and described the challenges he was
working on to try to reduce the complexity of our pricing
for services. He asked for ideas and suggestions. It was a
far tougher problem than we had ever imagined. In that case,
the members could go back to their constituencies and
explain the issue’s complexities, tell them what is being
done, and give some indication of the limits of what can be
accomplished.
After three months, the committee sent
sent out an interim status report to district sales
managers, corporate account managers and national account
managers. The report helped bring more issues to our
attention.
Meanwhile, similar independent efforts
were under way in GIA and the U.K. In GIA, Ivan Pollack was
visiting remote sites, talking to many people, helping them
take a fresh look at their organizations and procedures,
serving as a catalyst to promote needed changes. In the U.K.
a program known as "Gulliver" set out to free the Field
"from the bonds of unnecessary bureaucracy." Gulliver aimed
for single points of ownership with clear authority and
accountablity, simple integrated processes, and the freedom
to operate within clear boundaries, with delegation of power
and maintenance of control. The "Gulliver Dream" was: a
value system which drives simplicity; clarity and focus in
the work environment; and behavioral bias towards
individual authority and responsibility (self-em-
powerment).
As the Committee to Eliminate Red Tape
drew to a close, we tried to summarize the factors that had
made it a success.
o We dealt with real problems and
tangible tasks. No problem was too big or too small, o
People on the committee had a stake in the results. They
were dedicated and committed to this work.
o The membership was diverse in terms
of functions, backgrounds, geography and organization
level. The committee was representative of the whole
organization.
o Also, in selecting members, we chose
some people who had been the system’s toughest critics. They
brought energy to solve problems. And being on the committee
helped them to understand the complexity of some of the
problems.
o Members reached out to others in
their organization and discussed the problems and the
proposed solutions.
o We tried to separate individual
management issues from more systemic problems, and treat
them appropriately.
o On every issue we had one or two
drivers — people assigned to make things happen, o The fact
that the Executive and Operations Committees had chartered
the effort raised the level of urgency and expectation.
o The committee secretary (Bill Lynch)
made sure that the right people were working the issues
between meetings on an on-going basis.
o The fact that the chairperson
(Abbott Weiss) wasn’t part of the Field or any other
particular group gave the committee a degree of neutrality
and objectivity.
We managed to put some substance
behind the word "empowerment." Members of this committee who
were sales unit managers, account managers and sales reps
learned that they could make things happen on behalf of
themselves and their own people. They also learned that if
they fixed the problem they faced in their own circumstance,
they could, in the process, help the whole U.S.
organization. They have gone off individually now and set up
some groups on their own with people from their own
geographies to solve problems.
When people stop challenging the
system, bureaucracy and complexity build up and become all
the more difficult to deal with. Empowering people to try to
solve their own problems is a way to avoid the future build
up of red tape.
Our goal is an integrated corporation,
not one that is either decentralized or centralized — a
corporation where people are willing to communicate openly.
We’d like more of the same kind of
thinking and acting to occur at the district level and
across accounts. We’d like to continue stressing that one
individual can indeed make a difference.
(The other members of this committee
included:
Dennis Albano @OFO, Donna Blaney @MRO,
John Boros @CLO, Bruce Davidson @DCO, Ed Delaney @WRO,
Debbie Dunnam @AUO, Sylvia Hankins @IVO, Randall Herald
@UPO, Art Jones @TUO, Cyndi Kilbarger @BXO, Linda Milligan
@TUO, Claire Muhm @MRO, Bob Nealon @MRO, Rob Rhode @DCA,
Ralph Schmoller @IVO, Peggy Anne Smith @IDO, Dick Vinton
@MHO and Earnest Williams @AWO.)
Basic technological
changes — such as rapid improvements in price/performance,
the shift to smaller systems and distributed computing, and
the move toward open systems — are affecting all our markets
today. And while we deal with these general challenges, we
also face others specific to individual markets.
The pace of
improvement in semiconductor technology, which is the
fundamental basis of hardware price/performance, hasn’t
slowed down. If anything, it’s accelerating. While there
must be physical limits, the limits that people anticipated
just a few years ago appear not to be limits at all.
At one time Digital
had a number of engineering groups that focused their
attention on developing different central processing units
(CPUs) — engines that execute instructions. That traditional
role has shrunk to just two design centers. Today we have
one group doing microprocessors and another group working on
mainframe processors. And every system that we introduce is
based on one of those two designs. There are still many
groups that package those technologies in different ways to
deliver different classes of systems, and we still have as
much activity going on as we ever did. But the focus has
shifted to packaging, multi-processing, memory and I/O,
which are very different across our various system products.
We are examining
whether we need as many variations of packages of these two
technologies as we have right now. I expect that we will
shift our total investment profile away from doing quite so
many variations of hardware, and put additional investment
into the software arena. In other words, we will need fewer
people in hardware engineering and more people in software
engineering. Most people know where we need to go, and we
are trying to make those changes in a way that is reasonable
and not disruptive, but gets us to where we need to be in
the future.
Basically, we need to
be a competitive company, which means we have to be very
efficient and effective at what we’re doing. We need to do
things significantly better than our competitors do them,
and that means changes in how we think about our work.
"Value added" has to be understood from the customer’s point
of view.
You may think that
what you are doing is very important, but you have to ask
yourself, "Will the customer be willing to pay for it?" When
we look at our jobs and our organizational structure, we
have to make sure that what we are doing is something that
customers actually want.
This is a big change
for us. For a long time, Digital defined the playing field.
That was very appropriate when we were a small company. We
made good technology choices back in the 1960s and 1970s,
and it turned out that customers did want to pay for the
products we built. But it is not our inalienable right to do
whatever we want and then go on to learn what customers
want. Today, we have to think of the customer first. Every
individual and every organization really has to make very
sure that what they are working on is something the customer
will buy.
There are many things
being done in the company today that customers won’t want to
pay for. We have to face that fact and make appropriate
adjustments.
Fundamentally, the
customer’s focus has shifted, and we can no longer expect to
succeed through product differentiation at the traditional
level. We’ve always wanted to say that our operating system
and our hardware are better than anything offered by the
competition. But today’s customers are focusing their
attention at a different level — looking for applications
and service - and the requirements in these areas differ
widely from one market to another. We need to be able to
respond effectively to all these various market-specific
demands.
Basically, customers
pay you to do things that are useful to them. And, today,
the differentiation or the "value adding" that we do is
moving up to higher levels of software.
Ten years ago, we
focused a lot of attention on the details of computer
instruction sets because we could translate improvements at
that level into competitive advantage. Today, customers do
not care much about instruction sets; so we devote little
effort to that area. Instead, we’re much more interested in
building better databases and graphics user interfaces,
because that’s where the differentiation is today.
In our architectural
continuum, that change is just a movement from a low level
to an intermediate level. I believe that we’re going to have
to move up to still higher levels of differentiation.
For instance, we’re
going to want to provide customers with the architecture of
an information system to run a factory. Rather than letting
that level be the customer’s problem, or some third-party’s
problem, we need to architect and understand it ourselves,
and make sure our factory information system architecture is
better than what the competition can provide.
We won’t win against
IBM or Hewlett-Packard by having a better instruction set.
We may win by having a better database. But, over time, even
that will be less of a differentiator; and we will have to
move up to higher levels of information management because
that’s where the differentiation will be. Of course, we have
to be good at the lower levels, but our competitive
advantage will come at the higher levels.
Field engineering
will always be on the leading edge in dealing with the
latest customer challenges — things that are not well enough
understood to make routine. As those problems and solutions
become routine enough to be well understood, they should be
dealt with in Central Engineering where we can apply
standardized engineering and manufacturing processes to
produce them in high volume.
In other words, we
see a wave of standardization moving up through the levels
of our architecture. Some lower levels have become so
routine that we don’t want to put very much energy into them
anymore. That is increasingly the case with some aspects of
hardware and operating systems. They have become virtual
commodities. In the middle are problems that are becoming
well enough understood that we can apply traditional
engineering discipline to deal with them much more
routinely. And at the very top are the problems that are
not well understood at all and hence require extensive
customer, Field and third-party involvement.
The role of a central
engineering organization is to focus on the right area in
that continuum. We don’t want to be too far out, because
things are not well enough understood to make real progress.
On the other hand, we don’t want to focus all of our
attention on those things that are so well understood that
everybody knows them. Our challenge is to determine the
right place to work so we can make the maximum contribution
to the corporation.
"Systems Engineering"
means engineering for systems integration. Our job is to
develop methods for solving complex problems with technology
so Digital can satisfy customers with total solutions,
seamlessly assembled from the right building blocks.
Systems Engineering
and Enterprise Integration Services (EIS) are partners in
this effort. EIS focuses on customer projects whereas
Systems Engineering focuses on engineering the overall
system from an architectural perspective. We might take
pieces that EIS has developed as customer projects and try
to generalize them into something that is reusable over a
broad market area. Our goal is to reduce the risk and
improve the efficiency and effectiveness of our enterprise
integration work.
We provide an
architecture and do some of the underlying engineering work
to reduce the amount of unique custom work that has to be
done on any particular project. This means Digital won’t
have to start every job from the ground up.
Enterprise
integration work is complex, non-standard and risky.
Typically, customers want Digital to share their risk, by
coming in at a fixed price. To operate profitably in this
arena, we have to have a very clear game plan.
The role of Systems
Engineering is not to develop base products, but rather to
plan for the use of these products and characterize them and
provide information necessary to show people how to put
those products into usable configurations that the customer
needs. We want to pick some key market areas, establish a
technical architecture for how all Digital’s various
products and capabilities go together for those markets, and
then develop tools, methodologies, and specialized
integration components needed to make them come together.
Today, Digital takes
its basic systems and puts them together with applications.
If the customer wants some complex combination of elements,
we use custom integration services.
More and more
customers want us to put together complex solutions; and as
the number of piece parts grows, that becomes harder and
harder for us to do. To fill that gap, we are focusing on
some major configurations of equipment that customers will
tend to buy. We need to understand their characteristics so
we know how to sell them, install them and grow them. Our
vision is to have a small number of major base-system
platforms, basic hardware and software products configured
in a way that a customer would use them.
At the base-system
platform level, Digital tries to create configurations that
have very broad applicability. To get to an even higher
level of integration, we have to look at specific strategic
market areas and develop "market-specific platforms." A
market-specific platform consists of an architecture that
shows all of the elements and how they fit together. Those
elements could be standard products as well as unique
components developed for that particular market.
The key in developing
a market-specific platform is to distinguish what part of
the solution must be absolutely unique to the customer and
what part could be based on common technology that is
reusable across that market space. We then take that
reusable technology, which fits into our architecture, and
provide the Field with information on how to apply it to
create solutions for that market.
This "market" might
be an industry like Financial Services, or it might be an
application area, like electronic publishing, that is used
in many industries. In any case, this market must be an area
where Digital sees a major systems integration opportunity.
For example,
Digital’s work with Bankers Trust will result in a
market-specific platform for securities traders. This was a
strategic project because it dealt with a critical piece of
the banking and financial services industry. Our success and
knowledge in this area enables us to leverage our efforts in
other parts of that industry.
The specific
applications that Bankers Trust uses to make decisions are
proprietary. However the generic capabilities that were put
together to create this overall solution are reusable across
this marketplace. These include the user interface, the
system management capabilities, the means for capturing the
data and putting it into a data structure and the
capability of transmitting this data to the various
workstations. Those capabilities are going to become the
basic feature for this market-specific platform. In other
words, we didn’t just do one large custom job. Rather, we
also established an overall architecture for how these
pieces go together, and provided the necessary information
to the Field, so they can replicate this for another
customer.
Putting it all
together
The Systems
Engineering organization is part of Peter Smith’s Industry
and Product Marketing Group. There are Systems Engineering
groups associated with the newly-formed Application Business
Units and also some common functions like systems
performance characterization which cut across the groups.
In the
characterization area, we have been working on the
application-level characterization of Digital’s major
systems, such as the VAX 6000 series. In other words, we
thoroughly test those systems to determine how well they
perform running particular applications for particular
market areas. This work allows us to provide information to
sales and sales support people which helps them to position
our various platforms and initially to size and subsequently
to grow particular customer solutions.
Educational Services
has recently gone through significant changes to make it
easier for customers to buy from Digital and easier for
Digital to sell. Today, we not only provide education for
customers and employees, but also serve as a major
communications vehicle for the company in support of its
messages and strategies in the various products, markets and
applications that we’re after. We work directly and in
partnership with content experts and to deliver necessary
information about our products to sales, sales support,
services and our customers. Education, in its broadest
sense, can be a major lead generator, encouraging customers
to choose Digital because they are current on our directions
and products.
In the past, we
operated primarily with "steady-state" instructors who teach
similar materials over and over on a regular basis. With
"Digital University," we will expand our delivery
capabilities, bringing in Digital’s best technical experts
who will add real-life experience to their instruction. They
do this on an "as-needed basis" as a regular part of their
job. In other words, we borrow people from engineering or
from the product marketing groups to supplement our
instruction team. Over a thousand people have already been
"borrowed" as instructors for employees and customers.
Basically, we now have one of the largest adjunct faculty
systems in the world.
Our Summer Session at
Brown University last year signaled to the entire company
the priority that we’re placing on customer and employee
education. This is in recognition of the fact that as our
technology changes, we can’t achieve our plans unless our
own people and our customers understand the new technology.
We expect to extend
this approach into management training as well, "borrowing"
managers to help instruct other managers.
This approach gives
these temporary instructors opportunities to share
experiences and get direct feedback from an audience. It
also forces them to formulate their messages very clearly.
The instructional
designers who work with these presenters are very important
in making this work and putting fun into the educational
process. That’s the difference between education and
information. It is an experience of interactivity and
involvement. Instructional designers help teach our experts
how to do that, how to create competitive environments, how
to present material, how to get people involved, and how to
make them feel good about the experience.
Organizational
shifts
We now report to both
Russ Gullotti, Enterprise Integration Services (EIS) vice
president, and Peter Smith, vice president, Industry and
Product Marketing. Our membership on the EIS management team
reinforces the role training plays in our customers’ total
solutions. And as a member of the Industry and Product
Marketing organization, we are able to further integrate
training into our marketing strategies.
To a greater extent,
we are now acting as part of custom-tailored solutions for
customers. As part of EIS, we are extending those
capabilities through Digital Customer Centers (DCCs) and
through direct involvement with the Computer Special Systems
(CSS), Software Services organizations and others in the
solutions integration business. The problem today is that
you can’t divorce the solution from the training anymore.
It’s all tied together. When the customer asks "How am I
going to get my people trained?", we can’t say, "Go see the
training department." Training has to be part of the total
solution.
At the same time, our
alignment with marketing is leading to greater involvement
in presales as well as post-sales activity. Today,
technology changes so fast, that the printed word is not
enough to convey our marketing messages. It takes training,
not just literature, to know what to buy to solve your
business problems. Through education we have the chance to
integrate our major marketing messages and carry them
through the complete continuum from pre-sales through
post-sales activities.
Basically, our
activities are getting more bound up with the other
activities of the company, without the necessity for
organizational walls and barriers. We extended our
relationships with other training organizations in the
company under a Training Consortium. Working with this
Consortium we’re formulating educational tools and
techniques that can benefit everyone. This is meant as a
sharing mechanism, to eliminate redundancy, reduce costs,
and improve overall training effectiveness for all groups in
the company, whether it be manufacturing training,
management training, technical training, or skills training.
Rather than change the organizational alignment of other
training people, we want to work with them as partners in a
seamless way across all of Digital.
Two major areas of
concern in Manufacturing are waste and quality. We define
these terms broadly and set out to solve root cause problems
one at a time.
Manufacturing is in
the business of transforming raw material and labor into
product. Whatever doesn’t go into the product is, by
definition, waste. The true cost of manufacturing should be
those things that help your product out the door.
Inspection, rework and stocking are waste. They don’t do
anything to add value to the corporation.
Since FY86, through a
program known as "PONC" (price of non-conformance) we’ve
been focusing on reducing these various forms of
manufacturing waste. There are the six categories of PONC.
Four are related to manufacturing processes:
o scrap — things that
we build wrong,
o rework - things
that we built wrong but are fixing,
o inspection — the
time it takes us to sort out the good from the bad, and
o retest.
The two other categories relate to
inventory:
o inventory carrying costs - the money
spent to store and keep track of inventory, to provide heat,
light, power and insurance for it, and
o obsolescence — inventory we have
little hope of shipping because it has been superseded by
newer products (like last year’s cars in the dealer’s lot).
Every group in
Manufacturing sets its goals in these six categories and
keeps track of its actual performance on a quarterly basis.
By focusing on
eliminating these forms of waste, Manufacturing has saved
the corporation more than $240 million since 1986. This is
just a beginning. There is a lot more to be saved.
So far we have only
focused on six categories of waste. There are many others at
which we are not yet looking in an organized fashion. And
there are many similar sources of waste — usable material
thrown away or wasted effort — outside the Manufacturing
organization that could benefit from a similar focus.
One important way we
measure the quality of our total system products is
"Problem-Free Installation" (PFI), or how well the systems
perform at the time of installation. Since 1985,
manufacturing people have carried on a dialogue with
installers to determine what happens immediately after our
products are delivered. We want to identify any problems and
relate them back to what we do in Manufacturing so we can
shut down the root cause failure mechanisms.
Thanks in part to
this effort, we have doubled the system PFI for mid-range
and high-end products in just five years. And we’ve learned
to arrive at a much higher quality level earlier in a
product’s life cycle. For instance, the VAX-11/785 system
didn’t reach its quality peak in terms of PFI until its last
year of production. But the VAX 6000 series of products
achieved very high PFI rates in just three quarters, and
that was a much higher level than the VAX-11/785 system ever
reached.
At the same time, we
have made drastic reductions in the frequency of problems in
Storage and Communications products. For instance, in
Storage products, from 1986 to 1990, we reduced their defect
rate by 50 % each year.
For an entire system
to work well at installation, all of the pieces have to work
well — the central processor, the storage system, the
communication, the terminals, etc., have to be designed and
manufactured well. Also, the people in Administration,
Sales, Service, Software, Distribution, etc., all have to do
their work well. This chain is only as strong as the weakest
link. We all have to perform together to make sure we have a
satisfied customer at installation.
Therefore, we have
cross-functional PFI teams for each class of system. These
teams note all the problems found and assign an individual
to drive root cause corrective action. They solve these
problems by simply solving one problem at a time. Through
dedication to details, we are making installations much
smoother.
For low-end products,
requirements are even more stringent. In that arena, we
measure not in terms of percent defective, but rather
defects per million systems.
In the past, the
hardware contribution was the biggest problem. Today
hardware problems have been significantly reduced.
Implementing a
quality process such as this is like lowering the level of a
river. You see some rocks and remove them. Then as the water
level goes down, you see some more rocks. As we’ve decreased
the number of defects and changed the level of installation
performance, we now see a new set of defects that were not
as apparent before. They were there all the time, but the
first problems were so big that we couldn’t see beyond them.
Today, because
hardware defects have been significantly reduced, the
biggest problems we see relate to sales and service issues
having to do with how we book orders and how we handle new
product introductions. This is particularly true in the
low-end space where the huge variety of products complicates
matters, making it difficult for sales people to book
orders.
So the shape of the
curve has changed, away from hardware into new areas of
opportunity where we now have to focus our attention.
George Chamberlain
has been named vice president of Finance for Industry and
Product Marketing, reporting to Peter Smith, vice president,
Industry and Product Marketing, and to Jim Osterhoff, vice
president, Finance. In his new role George will ensure that
appropriate corporate reporting systems and management
measurements are built and will help link the work of
various application lines of business to the Digital
Competency Centers, sales and engineering activities and
measurement systems. George joined Digital in 1969 as
Treasury Department manager. He was promoted to manager of
Corporate Information Services in 1970, and to assistant
treasurer in 1972. He was named treasurer of Digital in
1976, and vice president in 1981. For the past seven years,
he has been vice president of Finance for MEM.
Dick Farrahar
has been named vice president of Personnel, reporting to
both Jack Smith and John Sims. In this role, he will be
responsible for leading the company’s Personnel function.
Dick joined Digital in 1970 as a recruiter in the Sales
& Service organization. Since that time, he has held a
series of increasingly responsible Personnel roles,
including plant Personnel manager in Westminster, Group
Manufacturing Personnel manager, Mar- keting/Finance and
Administration Personnel manager and MEM Personnel manager.
He helped to establish the Personnel Management Committee in
1982 and served as its chair for the last two years. He was
named a vice president in 1988.
Alan Kotok,
corporate consulting engineer, has been appointed technical
director of the newly formed Telecommunications Business
Group (TBG). In this role, he will be responsible for
advanced development and architecture for the TBG, reporting
to Mahendra Patel, technical director for the
Telecommunications and Networks organization, and Ernst
Well- hoener, vice president, TBG. Alan joined Digital in
1962. For the past four years, he has been Storage Architect
in the Storage and Information Management Group (SIMG),
responsible for the Digital storage architecture and its
enhancement. He also served as chairman of the Storage
Strategy Task Force, a technical review group with members
from all major engineering organizations. Earlier, he was
technical manager of VAX 8600 development and principal
architect of the DECsystem-10 and DECSYSTEM-20 lines of
computers. He was the architect of the Digital Telephone
Network (DTN) in 1975, and has provided advice on most major
telecom projects in his 28 years with Digital.
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