Volume 10, #4_____________________________________________________________________
May, 1991
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
This issue of MGMT MEMO focuses on the
New Management System and related changes that are occurring
throughout the company. It includes an overview of the New
Management System by Alex Munn, a viewpoint on the changing
role of functions by John Sims, new directions in
Manufacturing by Bob Palmer and a vision of the "integrated
enterprise" by Bill Hanson.
The Role Of Functions - Centers Of Expertise by
John Sims, vice president, Strategic Resources
New Directions In Digital Manufacturing by Bob
Palmer, vice president, Manufacturing
The Integrated
Enterprise by Bill Hanson,
vice president, Logistics
Massively Parallel
Systems Business Unit Formed
Leasing And
Remarketing Group Formed
Update On Digital’s Drug Testing Program
Frank Wroe Named Chairman Of Digital Australia;
Ron Larkin Becomes Managing Director
Digital’s
New Management System by Alex Munn, manager, Management
Reporting Architecture, Corporate Finance Group
Digital’s "New
Management System," based on business units, has been taking
shape since last August. This system is designed to add
value to our customers and profit growth to Digital.
The Executive Committee has published
the "Overarching Principles" on which this system is based:
o Every cost adds value.
o We make profit on
each value added.
o The business unit is responsible for
the plan to make profit on its value.
These principles
are consistent with those outlined in November by Ken Olsen,
president: o Everyone works for the business units, o No one
without responsibility tells anyone else what to do.
o Budgets are
stable. Only the Executive Committee can change them once
approved, o Everyone has more responsibility than authority.
o Results of an investment are always
measured against an approved budget.
Business unit
managers are now making presentations to the Business Unit
Committee describing how they will manage their units to
add value, following those principles. This committee is
chaired by Win Hindle and includes Ken Olsen and other
members of the Executive and Operations Committees. Its
focus is on performance to plan, overhead, and sharing what
has been learned.
Mick Prokopis
has been named vice president, responsible for the
integration of the business unit plans that form the
company’s budget. He will also provide a planning context
for the Executive Committee to effectively implement the New
Management System.
FY92 planning
and budgeting is being done in the New Management System
format. A timetable of events, submissions and requirements
has been issued to business unit managers.
The "Corporate
Captains Group" has been formed as a steering group for the
New Management System at the corporate level. Chaired by Jim
Osterhoff, vice president, Finance, this group deals with
issues relating to the implementation of the New Management
System that can't be resolved within individual
organizations. This group serves as the final court of
appeal and also provides guidance in philosophy and
direction. Members include: Mick Prokopis, Lyn Benton for
Finance, Dick Farrahar for Personnel, Susan George for
Training, Frank McCabe for pricing, Dan Infante for
Information Management and Technology (IM&T), and Jim
Cudmore representing Jack Smith. Other task forces are
following up on specific issues identified by the Corporate
Captains Group, such as systems requirements,
implementation by Finance, and pricing.
Much work
still needs to be done to deliver the New Management System
reports with the detail, speed and accuracy desired.
Automated implementation of management reporting at the
transactional level could be as much as 18 months away, but
rapid progress is being made and useful reports of "actuals"
already are being generated by manual conversion from the
old system.
Of particular
note, for Q2 reporting, U.S. Area Finance was able to
produce 230 account P&Ls in the new system format just
four weeks after the close of business, which was just three
months after the decision had been made to convert to the
New System. Those accounts represent about 50% of U.S.
business. And for Q3, they produced 3400 account P&Ls,
year-to-date.
Meanwhile the
terminology that we use in talking about business units has
been changing as our vision of their role has become
clearer.
The main role
of a Product or Service Creation Unit is to develop and
produce competitive products that satisfy customer needs.
"Products" could be hardware, software and/or services.
These "products" are sold to the Customer Account Units
using a business unit price, which is based on a
competitive-level price for a comparable product in the
marketplace.
Product and Service Creation Units are
responsible for:
o best-in-class product and service
development, manufacturing and service delivery;
o engineering, manufacturing and service
competitiveness; and
o profitability on their direct added
value.
Marketing Business Units (MBUs) are
involved in three areas of activity, each of which
contributes to the company’s profit. First, they may develop
unique product or service offerings, tailored for their
market segments. These offerings are then "sold" to the
Customer Account Units at a competitive business unit price,
benchmarked against what would be charged by an outside
vendor for comparable value added.
They also
enhance base products and services in ways that increase
their value by recruiting and managing Complementary
Solution Organizations (CSOs) to provide a suite of
applications software targeted at their market segment.
Third, they
increase the profits of the company by applying their market
expertise to reduce the selling costs of the Account Units.
For example, they provide sales support to Account Units
through Digital Customer Centers (DCCs). In the latter two
cases, Customer Account Units will be charged for these
services through a value price.
They prepare a
profit and loss statement (P&L) that reflects their
marketing activity and expense and clearly shows their value
added as business units.
The company
also has established Integration Business Units. They use
their influence to plan and coordinate related activities
across the company. All Marketing Business Units also have
an "integration" role. In addition, there are some business
units which are just Integration Business Units.
There are 17
"vertical" Integration Business Units (which are also MBUs)
that look at specific vertical markets, such as insurance or
banking. They put together integrated P&Ls which are
summations of activity in particular groups of accounts. The
total of these 17 integrated P&Ls equals the total of
the company. In the past, this consolidating of all the
numbers across the company was done by Finance for
Corporate, without specific managers being held responsible
for specific areas of performance. Now the vertical IBUs are
each responsible for the overall integration of business
plans related to their piece of the business across the
corporation.
In addition,
there are "cross-industry" Integration Business Units, which
focus on classes of applications, such as Office and
Personal Computers, which are used in a number of different
markets. And there are also other Integration Business Units
that focus on classes of products, such as Workstations.
In other
words, each of these business units has an individual
entrepreneurial marketing role, and at the same time has an
integrating role, making sure that the various parts of the
company work together as a cohesive whole to satisfy
customers and optimize business.
Customer Account Units use their
expertise and Digital's tools and solutions to solve
customers’ business problems. As business partners to their
customers and as employees of Digital, Customer Account
Units have a dual role: (a) to create the best possible
future for their customer, and do this (b) within the
boundary of returning a profit to Digital.
Account teams
focus on the customer, managing all Digital revenue
transactions, investments and business practices with and
for the customer. In this context, they:
o are the
focal point of responsibility and authority for committing
Digital to the customer in a timely manner;
o provide
consistent treatment (pricing, terms and conditions,
support) for their customers across geographies and
functions; and
o are the
infrastructure that provides continuity with their customers
over time, through all business transactions.
The attached
list of business units does not include the Customer
Accounts Units, which are too numerous to mention by name.
But Accounts are business units in every sense of the word
and must be run as businesses, consistent with the New
Management System principles.
In many cases
today, the same organization acts as both a Marketing
Business Unit and an Integration Business Unit. They are
listed both ways to emphasize that these are separate roles.
Keep in mind
that this list is a "living document." To remain flexible to
changing business conditions, business units will be added,
deleted and changed as necessary.
The Role Of
Functions - Centers Of Expertise by John Sims, vice president, Strategic
Resources
In Digital, the functional organizations
have joint responsibility with line managers for functional
activities in the line organizations. As the line
organizations respond to the New Management System, the
functional people have to apply the same discipline to their
work, to make sure that any cost they add adds value for the
corporation.
The functions must serve as the "glue"
for the corporation and make everyone else better at what
they do. Many are at the intersections of various
businesses, and therefore have a broad perspective. They can
bring a level of integration that helps each of the
businesses be profitable. They also can look after the
interests of the company as a whole, and recognize and bring
to light opportunities to maximize the profits of the
company, as opposed to those of one small or local part of
it.
The functions also serve as "centers of
expertise." For instance, people in Finance and Personnel
should know how to deliver their functional services
cost-effectively and with high quality. It is the
responsibility of all the functions to benchmark and strive
to be "best in class" at what they do. Then they can offer
all of the businesses of Digital the best possible and
lowest-cost support.
In today’s competitive environment,
benchmarking and striving for excellence are a business
necessity. If they do not provide excellent service, or if
they are inefficient and the businesses cannot afford the
services that they are offering, then their survival as an
internal service provider is at risk.
In many cases, internal functional
groups which serve as centers of expertise for the
corporation and are "best in class" are becoming revenue
generators. External customers want their expertise and are
willing to pay for it. This is already happening in such
areas as Finance, Personnel, Environmental Health and
Safety, Waste Management and New Ventures. And customers are
willing to pay as much as $3000 and $4000 a day for this
consulting work.
In other words, "function" is taking on
a new definition. Not only do you have to be very
cost-efficient and professional to serve as a center of
expertise for the corporation, but also you have to be ready
to respond to customer requests for consulting.
In many cases, "functions" are
broadening their business models to include responsibility
for generating revenue. They are coming forward with plans
and proposals for new business, just as business units do.
For example, Digital Management
Information and Technology, managed by Dan Infante, is
certainly among the very best organizations in the world at
running information centers and support structures. If
anybody in Digital needs help with a management information
system, they can come to Dan’s group for expertise. And
customers come for the same reason for the same kind of
help. Already today, many of Dan’s people spend 60% of their
time with customers. The people in his center of expertise
have to be able to demonstrate critical systems, such as our
finance system, and to help customers solve information
management problems.
Similarly, Personnel is a center of
expertise, with the very best people, who know how to do
compensation and benefits, workmen’s compensation, employee
relations, affirmative action, etc. Just as they can give
our employees the best advice on those topics, they can sell
that advice to customers.
We need entrepreneurship not just in the
business units, but in the functions as well. And the ideas
are flowing. We have dozens of excellent proposals from the
functions for investments that will save the company money
and business ventures that will generate revenue.
Yes, this is a time when cost control is
important. Everybody should be a cost captain, not just a
designated few. If you can save money, you owe it to the
corporation to do so. We are funding new programs. We are
trying to reinvigorate and revitalize the company. And the
money that you save can be used for these important
investments.
The basics of Digital have not changed.
We have just shifted the emphasis. We still have to develop
products that the customer wants. We’re a technology company
and do best when our products are near the state of the art
and are timely and are what the customer needs.
We also want to be a place where our
employees are entrepreneurial and our values are stable — a
good place to work. We have rewards and recognitions that
support those behaviors. We are a customer company, and we
build the whole pyramid of our business to take care of the
customer.
But over the last few years, we have
made some changes. Whereas in the past, we might have 20
separate people taking care of the same customer, now one
person is in charge — the account manager. The account
manager orchestrates all resources necessary to take care of
the customer. While we are shifting our measurements and
rewards to encourage entrepreneurship and profit, the
customer is still the main concern.
None of this is totally new. We’ve
shifted our emphasis in important ways to help us achieve
our goals.
For some years, the emphasis in this
company was on the development of functions, rather than on
profit. We focused on functional, stovepipe activities. Now
we say that Digital is integrated. Your function is Digital.
You may be in Engineering, but you have to do what is best
for Digital as a whole.
This change is going on right now in
varying degrees throughout the company. Some have already
shifted, and others are just beginning.
In other words, everything is the same
and yet everything is different.
New
Directions In Digital Manufacturing by Bob Palmer, vice president,
Manufacturing
This article discusses some of the
issues, challenges and opportunities facing us today and
describes some objectives and strategies we are pursuing to
deal with them.
The most important issue in Digital
Manufacturing today is that we simply are not competitive
with respect to costs. We have benchmarked ourselves with
respect to the best competitors in our industry and have
determined that we must significantly reduce the costs
associated with manufacturing and delivery of our products
and services if we are to achieve the leadership position
that we owe to our customers, shareholders, employees and
suppliers. The Manufacturing Management Team has estimated
that we need to reduce our total spending in Manufacturing
by approximately $1 billion (!) to be truly world-class in
delivering our current level of products and services.
Therefore, as a Management Team, we have
established three primary objectives for the Manufacturing
organization: 1) to get competitive, 2) to stay competitive
and 3) to preserve our most important core values in doing
so.
Before we discuss our strategies for
accomplishing these objectives, it might be worthwhile to
consider some of the factors that led to our current lack of
competitiveness. Part of the problem is the fact that our
installed capacity significantly exceeds the requirements of
our business. This is partly the result of the outstanding
success that Digital enjoyed until about 1988. For the
previous ten years, the company had an average revenue
growth of more than 20% per year. Management anticipated
that this growth rate would continue and put in place
facilities and resources to support the forecasted growth.
Unfortunately, the computer industry has suffered from a
general slowdown and we have not grown at the expected rate.
In addition, rapid advances in semiconductor technology have
had an enormous impact on how computers are manufactured,
displacing many of the traditional manufacturing operations
and much of the capacity. Additionally, the establishment of
standards in many areas of computing, i.e., the emergence of
"Open Systems Computing," has placed significant pressure on
profit margins and made any unnecessary costs unaffordable.
The large number of facilities that we have results in too
many interfaces, too much complexity, and too many overhead
people to manage it. This unnecessary complexity represents
a significant part of our cost problem and must be addressed
if we are to become truly competitive in costs, time to
market, quality and customer satisfaction.
How will we achieve our objectives? We
will utilize the New Management System framework to help us
identify the activities we currently have that do not
provide adequate value- added for our customers. The New
Management System will help us to understand our costs more
accurately as well as our contributions.
We have established five basic
strategies to date to accomplish our objectives:
o Simplify our business management
processes and organizations.
o Reduce or eliminate redundancies and
duplications.
o Design for manufacturing and quality.
o Purchase our materials more
effectively.
o Utilize our assets more effectively.
Organizations with a clear sense of
purpose and involved empowered employees are key enablers of
these strategies. We will work hard to create an
environment, within Manufacturing, that encourages
participation by empowered employees, because employees know
best how to rationalize the processes and eliminate the
redundancies of the work they are involved in on a daily
basis. The rapid rate of change in our industry today
requires timely decision making. It is important that
management hears all points of view, but ultimately it is
management’s responsibility to make decisions and the
Manufacturing Management Committee has committed to make
necessary decisions even when these are difficult at times
and unanimity cannot be achieved.
Our short-term goal is to be able to
produce the same volume of high-quality products while
reducing annual Manufacturing spending by $500 million (as
measured from our December forecast when we began these
initiatives). We hope to achieve this goal in FY92, but it
will require fundamental changes in all phases of our
Manufacturing operations to do it. And, as noted earlier,
this is only an intermediate milestone on our journey to
Manufacturing excellence.
As I previously noted, a major obstacle
to achieving our objectives is the overwhelming and
unnecessary complexity of our operations throughout our
Manufacturing pipeline, from planning our demand/supply to
delivery of final products to customers. To deal with this
problem, we are thoroughly analyzing and completely
redesigning the demand/supply process within Manufacturing
to make it more responsive to changing market needs. We will
use Digital’s software and networking tools more extensively
and eliminate unnecessary organizational interfaces which
add complexity, increase response time and require
additional resources. Our new demand/supply system will
enable all plants to have access to the information they
need to perform their function at essentially the same time
for execution at the plant level.
Working closely with Engineering, we
will identify the critical technologies we need to maintain
a leadership position in order for the company to have
leadership products. These are the technologies in which we
will invest and we will then reduce investments in those
technology areas that are not as critical and are readily
available elsewhere. We are also striving to work much more
closely with Engineering, to make available, early in the
design process, the best possible information regarding
manufacturing costs and alternatives. This is part of the
job of Larry Walker, our Manufacturing and Design Technology
manager. This is a particularly important role for
Manufacturing in the New Management System, which gives
Business Unit managers a large degree of entrepreneurial
independence to achieve their business goals. For example,
if each Product Creation Unit selects a different memory
module design for its systems, we would have far too many
individual unique memory modules, moving at too low a volume
to be cost competitive. We need to work more closely with
Engineering, up front, so that any variations in component
design from product to product add sufficient value, from
the customer’s perspective. I believe that Digital’s
Engineering managers are eager to work with Manufacturing in
a mutually successful partnership to achieve greater
productivity and increased profitability for Digital; but
we need to provide them with good input regarding the
manufacturing cost implications of their design decisions.
While the business units strive to meet unique customer
product needs, we in Manufacturing need to strive for a
degree of standardization around the variety of
subassemblies and components that are used. We can help the
Engineering groups coordinate their product designs to
achieve significant cost advantages for the corporation.
One major opportunity for Digital
Manufacturing to lower its costs is to bring in from the
external vendor base many of the components and
subassemblies that we currently allow others to manufacture
for us. In many cases, we could just as easily and
competitively build those parts inside, and thereby more
fully utilize our existing assets and people. In the past,
local Engineering managers have frequently decided to buy
outside rather than build internally because they believed
they could achieve lower cost that way; that appeared to be
the right decision for them at that time, and at the local
level. In current competitive conditions, however,
Engineering managers need access to information that will
enable them to more fully assess the true cost to Digital of
their decisions, including the additional cost of
underutilized people and physical assets that the company
owns.
Basically, Digital Manufacturing can be
competitive with external vendors in almost any area we
choose, provided that we have an adequate volume of business
and support and partnership with the Engineering community.
We have a very capable, well-trained Manufacturing
organization. We have substantial physical assets and we
have most of the technologies needed. We are globally
distributed. There is no fundamental reason why we cannot be
competitive with almost any external vendor once we simplify
our overhead structure and become more efficient in the way
we manage the business. Our challenge under the New
Management System will be to ensure that Engineering
managers in the Product Creation Business groups want to
come to Digital Manufacturing first; because we have the
best quality, are the most responsive and have competitive
costs.
IBM and the large Japanese computer
companies rely very heavily on their internal manufacturing
- far more heavily that Digital does. It is not an accident
that these companies, which are extremely competitive, have
chosen to focus on their manufacturing core competencies. I
believe Digital Manufacturing can provide the Corporation
with a competitive advantage. Our suppliers clearly make
significant profits on the products we buy from them, and
I’m far more interested in keeping Digital employees working
than keeping the employees of our various suppliers working.
We also are studying our strategies for
purchasing materials. It seems there is an opportunity for
substantial savings from revamping the processes and
techniques we use to purchase our $2 billion worth of
materials annually. For instance, we see the opportunity to
use our total purchasing power for maximum leverage; and to
reduce the number of redundancies that currently exists in
our Purchasing organization. This opportunity is being
analyzed today and a new Material Acquisition Architecture
for Manufacturing will be proposed shortly.
In addition to working with Digital
Engineering groups to more fully utilize our Manufacturing
capabilities, we are also considering other ideas to utilize
our assets. Entire facilities may need to be taken out of
the Manufacturing function. Some of those facilities might
be rechartered to support Manufacturing consulting work in
direct Sales and E.I.S. organizations. As Digital moves
toward more enterprise integration business, we expect to
see increasing demand on Manufacturing for helping customers
implement solutions using the technologies we use in
Manufacturing.
If we look at the activities for
Manufacturing today and in the future, we see two broad
categories:
those that are directly related to product cost and
those Manufacturing
Consulting Services that add value that
customers are willing to pay for. We have a number of
Manufacturing Consulting Services that we provide to
customers in such areas of expertise as factory automation.
To the extent that we provide high-quality services that
customers are willing to pay for, the Field will fully fund
our costs, because they will make a profit for Digital. In
select cases, we may do manufacturing work for other
companies because our volumes are not adequate to provide
competitive costs in many of the technologies in which we
have invested. For instance, the minimum cost for being in
the storage or semiconductor or high-performance
interconnect business is so great that to be cost
competitive we have to spread that cost over larger volumes
than Digital can internally generate. That means we may
need to sell some of these manufacturing services
selectively to external companies. For example, the Storage
Group sells thin film heads and media to a limited external
customer base. This will help us lower our overall costs in
Storage and provide us with valuable feedback from the
marketplace as to our real competitiveness. This is the best
way to obtain benchmark data, because customers who pay for
these products and services will be quite expressive about
our cost competitiveness, quality and reliability. In other
words, we need to think innovatively to find ways to load
our assets fully, and to provide meaningful work and
opportunities for employees throughout Manufacturing.
These are definitely challenging times
for the computer industry and change is occurring more
rapidly than ever before. The increasing competitiveness in
our industry will prove devastating, in my opinion, to those
companies that are too inflexible to change themselves. The
future is bright, however, for those companies, such as
Digital, that are willing to embrace the changes as
opportunities for designing, manufacturing and delivering
superior products and services at competitive costs. We have
the talent and resources that we need to be successful.
Digital Manufacturing has the opportunity to become the best
in the world at what we do, and we are determined to seize
this opportunity.
The Integrated Enterprise by Bill Hanson, vice president,
Logistics
The competitive and technological
challenges that face us as manufacturers demand that we
operate in a broader context, as a "manufacturing
enterprise."
The factors that contribute to our
manufacturing effort go far beyond the traditional
production cycle. These factors encompass the entire range
of activities from market demand to customer satisfaction.
All the internal organizations — including sales, marketing,
engineering and manufacturing - must be focused,
interdependent and committed to delivering customer
satisfaction. In addition, outside organizations such as
suppliers, consultants, research centers, competitors and
the customers themselves must be integrated into a cohesive
enterprise working toward the same common end. Such an
"integrated enterprise" allows both the manufacturer and
the customer to be successful.
The task of addressing all the internal
and external elements of the enterprise as a cohesive whole,
rather than as a set of discrete functions and
organizations, raises some interesting issues. For example,
the interrelationships of organizations have to change to
create this truly cohesive whole. This requires new thinking
about how we work together, organize, behave, relate and
measure; and also about what we value and how we are
motivated.
Timely solution of customer problems
requires the enterprise to have some collective unity and
focus before a specific customer need is identified. This
unity comes by focusing on a set of visions that represent
the excellence all customers require. These visions include:
o products and processes that "never
fail,"
o shortest cycle time in the industry,
o competitiveness independent of volume,
o leadership in defining industry-wide
manufacturing excellence, and
o leadership in the development of the
best people.
We must create an environment that
encourages a "learning process" that draws knowledge from
the disciplines critical for success. We also need to view
ourselves from the perspective of the tasks that must be
accomplished, not the organization in which we are members.
For example, a key manufacturing metric
is cycle time. In traditional manufacturing, cycle time
refers to the time it takes to produce the product on the
factory floor — the duration of the production cycle in
creating a finished good. In the context of the Integrated
Enterprise "cycle time" is redefined as beginning when the
customer expresses a need and ending when that need is
fulfilled. It includes problem-identification time, sales
time, processing the order, supplier delivery, design,
assembly, shipment, invoice, installation and service. Each
element in this process and the relationships between
elements must be considered if we are to reduce cycle time.
The "task" of reducing cycle times must be viewed in this
broader context of "all" these variables, extending beyond
our traditional organizational structures.
At the same time, we need to develop the
trust required to encourage successful team orientation. To
act in unison, individuals need to have equal access to the
information and knowledge that describes and justifies the
task. An outside supplier unfamiliar with marketing plans
and product strategies cannot fully provide the resources
and intelligence to help in achieving reduced time to
market. Exclusion not only makes the flow of the suppliers’
material less efficient than possible, but also denies us
full access to their knowledge and expertise. In many cases,
this knowledge of how to improve time-to-market may be more
valuable than the raw material they provide.
Although computer technology provides
the means to disseminate information freely, independent of
geography or organization, there is still a reluctance to
allow information to flow across organizational barriers.
Restriction of information flow is a function of
organizational behavior, not technology. These barriers must
be eliminated.
Cultural and organizational barriers to
the flow of information are artificially created when each
element of the enterprise views itself as an end and not as
a means to fulfilling the ends of the larger enterprise.
Each discipline, seeking to optimize its own operation,
creates its own culture, somewhat independent of other
organizations in the company. In this regard, the
organizational structure itself can become the barrier. What
must change therefore, is how we view the activity within
the organization and accommodate that view in as efficient
an organizational structure as possible.
The challenge is to adopt a structure
that is organized around a stream of activities that
transforms knowledge and material into customer solutions.
This implies a radical change from the traditional
functional organization. The successful manufacturer of the
1990s will not have a manufacturing organization or an
engineering organization or a marketing organization, etc.
Rather, it will be structured and viewed in terms that
relate to the customer.
The word "function" connotes an
organizational structure. If we could instead view these
skills as "disciplines," as resources to accomplish tasks,
we could then free ourselves from the traditional barriers
that surround organizational structures.
Customers do not buy manufacturing, or
engineering or sales. They buy solutions. The successful
manufacturer links its organizational focus to the customer
needs, not to a functional structure. It is optimized around
solving the customers’ needs, utilizing the skills of each
discipline, focusing on the real task and ultimately solving
the real problems.
Focusing on the customer does not reduce
the need for excellence in the disciplines. We must continue
to require excellence in each discipline, developing the
strengths, the skills and the knowledge of each individual.
And we must begin to treat each set of skills as an embedded
discipline of excellence rather than as an organizational
structure.
Successful implementation of the
"integrated enterprise" depends on five principles that call
for leadership in both the management of people and
technology. People leadership refers to cultures and values.
Technology leadership addresses the integrated information
systems that allow the electronic interchange of data and
the sharing of information, knowledge, experience and
values.
These principles are:
o When people understand the vision or
larger task and are given the right information, resources
and responsibility, they "will do the right thing." "Doing
the right thing" is based on the appropriate frame of
reference, a clear understanding of the task and its scope.
The Integrated Enterprise makes certain that people are
doing the right thing against the proper frame of reference.
In this context it is critical that the members of the
entire enterprise freely share a common understanding of the
task. For example, to reduce cycle times, we must share
information with our suppliers. Product specifications,
volumes and scheduling within the context of broader product
strategies that include inventory strategies, quality
control, customer lead times and distribution plans, are
some examples of the information that should be freely
shared. Now suppliers can make proper decisions that should
contribute to reducing cycle times. Suppliers become part of
the team that successfully completes the task.
o Empowered people and groups will not
only have the ability, but will want to participate
proactively in the decision process. This level of
involvement will enable and encourage the individual to make
decisions, rather than adopt a passive or reactive attitude,
waiting to be told what to do.
o A comprehensive and effective
communications network is essential to distribute knowledge
and information widely. Openness and trust allow the
individual to truly feel empowered to impact the "real"
problems.
o But the network alone is not enough.
The democratization and dissemination of information
throughout the network in all directions, irrespective of
organizational position, becomes a critical principle that
assures that the Integrated Enterprise is truly integrated.
o The results of the first four
principles implies the fifth - distributed decisionmaking.
Information freely shared with empowered people who are
motivated to make decisions proactively will, by its very
nature, distribute the decision-making process throughout
the entire organization.
These principles will compel companies
to reconsider their organizational strategy. Decisions will
be made where the work occurs and much of the work will be
outside the traditional boundaries of the manufacturer. In
this context relationships become peer- to-peer, not
hierarchical. People share information to accomplish tasks.
The organizational structure and the behavior that result
from that structure become the key element in the
effectiveness of the total enterprise.
Interestingly, the most radical change
must begin inside the four walls of the manufacturer
itself. Company structures must dramatically change to fully
capitalize on the opportunities provided by the integrated
enterprise. Much of our segmented and restrictive thinking
begins at home.
Since our most valuable knowledge base
is our people and the majority of people are in operations,
we would logically want the operating groups to be
self-managed and empowered to act. Unfortunately, we have
historically layered people (overhead) on top of operations
to tell operations what to do and mediate behavior between
operations.
Actually, each of the operating units
should service the needs of the larger enterprise and not
the overhead layers and the functional segmentations they
represent. This change in perspective can lead to a dramatic
change in the dynamics of relationships. The peer- to-peer
relationship is a customer/supplier type of relationship.
The dependencies are management by dialogue and negotiation.
Knowledge and understanding are both intrinsically and
institutionally far more important than rank. Ownership for
resolution of problems related to delivery of products or
services is peer-to-peer and knowledge-based.
This does not mean that the role of
management is eliminated. On the contrary, managers must
develop a new set of skills. Traditionally, the emphasis was
primarily on authority and decision making at a functional
level. Now, leadership, task definition and resource
development become the critical strengths of the new
manager.
Leadership should not be confused with
decision-making. Leadership plays the critical role in
ensuring that the enterprise understands the right tasks.
Good leadership must clearly define the tasks, develop the
resources and create the positive environment that allows
those resources to fulfill the mission successfully.
Leadership also requires that
non-company resources such as suppliers and customers are
properly integrated as part of the solution. These external
resources are more easily integrated because of their place
in the traditional value chain. But as we expand our
value-added concept to include knowledge and learning, we
will quickly see the need to embrace a wider resource base,
which includes government, academia, industry resources and
even competitors.
The world-class manufacturer will be
recognized by the leadership it provides in attacking and
resolving complex customer problems. The effort needed to
understand, define and resolve customer problems in an
increasingly complex world intensifies the demands for new
skills for managers. Complex problems will not be solved by
simple solutions. Most often these problems appear as
irreconcilable positions. For example, customers have always
wanted high quality and low cost. But the historic
conventional wisdom resolved the "dilemma" with an
"Acceptable Quality Level (AQL)". One simply determined a
desired quality level and invested the appropriate cost.
Another example is the tradeoff between short lead times and
high inventories. The dilemma, how to get both high quality
and low cost, how to have short lead times and low
inventories, was ignored.
Today, these dilemmas are being
addressed and are being solved. High quality and low cost,
short lead times and low inventories are essential
components of success in modem industrial life. Total
Quality Management (TQM) and Just In Time (JIT) inventory
are the recognized standards of excellence.
The successful manager of the 1990s will
have the skills to define complex dilemmas and resolve them,
not ignore them. This management skill, which we define as
"dilemma management," is a critical component of the
Integrated Enterprise. The characteristics of the "dilemma
manager" include the ability to tolerate ambiguity, to
manage and even thrive on conflicting demands. They view
apparent conflict as a stimulator for change which
encourages new levels of creativity. And the resolution of
one dilemma creates new dilemmas to solve. Once you get to
one level of performance, it is time to move to the next
level. Patience and courage are of premium importance.
The successful manager values dilemmas
and has the vision to stimulate them, not eliminate them by
trying to make a tradeoff between opposing views. The
emphasis is on continuous improvement. Those manufacturers
whose managers can solve industry dilemmas first will have a
competitive advantage.
To be a
world-class manufacturer in the 1990s, Digital must be an
integrated enterprise, capitalizing on a wider range of
skills, beyond the department, beyond the walls of the
company. This means engaging in strategic collaborations
that extend beyond the organization and take advantage of
increased transfers of technology and knowledge. It means
encouraging the free flow of information throughout the
enterprise and empowering large numbers of people to work
cooperatively in a peer-to-peer relationship that encourages
and motivates dynamic distributed decision-making. We must
identify dilemmas and, through resolution, rise to higher
and higher levels of performance. We must value and demand
change that will yield continuous improvement - setting ever
higher standards of performance for ourselves. Following
this path, we will be recognized as defining the stand- aids
of excellence to which others aspire.
Massively Parallel Systems Business Unit
Formed
The Massively
Parallel Systems Group (MPSG) has been formed as a business
unit within Corporate Research to direct Digital’s early
entry into the market for massively parallel processor
systems. Charlie Wilson will manage this business unit, and
will report to Sam Fuller, vice president, Corporate
Research and Architecture.
"Massively
parallel computers" employ more than a thousand individual
processors. Some of these machines have upward of 64,000 or
more processors. They are gaining market acceptance because
of their ability to process large numerical arrays at very
high speed and with relatively low cost. Today, they are
most attractive for such computationally intensive
applications as simulating molecular dynamics, computational
fluid dynamics, structural and thermal analysis, and
seismic data reduction - a small but growing sector of the
computer market. There is also the potential that such
systems will find use in information retrieval and other
commercial applications.
The work of
the MPSG business unit is to create development tools and
application software and to market complete affordable
systems around hardware platforms currently available from
other vendors. "Our goal is to position Digital early to
become a major player in this sector as the market expands
in the future," noted Sam.
By helping
accelerate application development, Digital can help
massively parallel technologies and systems better achieve
their market potential and can also help integrate these
technologies into high-performance, multivendor, networked
environments of larger corporate and institutional users.
This approach
can leverage Digital’s traditional strengths in software
development, communications and systems integration to help
build a base of applications and customers,
and to
integrate massive parallelism into increasingly "mainstream"
technical and commercial applications with minimal user
disruption.
For years,
universities, computer companies and independent researchers
have investigated parallel-processor design as a means of
achieving dramatic speed improvements over the sequentially
oriented designs of traditional general-purpose computers.
One such research program, the Data Parallel Research
Initiative (DPRI), was established two years ago by Digital
to stimulate development of applications and operating
system software for massively parallel computer
architectures. Charlie Wilson initiated and led this program
which funds university and research-lab projects and also
includes Digital’s co-development programs with two leading
builders, Thinking Machines Corp, and MasPar Computer Corp.
Another
Digital-sponsored effort is the Topaz Program, a research
project involving multiprocessor workstations and custom
multiprocessing operating system software. Topaz, which
involves multi-university collaboration in the US, the UK,
the Netherlands and Canada, is one of many Digital-sponsored
university research projects now under way.
Earlier,
Digital’s research into parallel processing with older style
Digital PDP-11 and 11/780 minicomputers yielded subsequent
advances in commercial computing technologies such as
clustering, where Digital today is the acknowledged
technology leader, and in symmetrical multiprocessing. Both
clustering and SMP computing styles are now used in
commercial, business-critical applications for customers in
a wide range of industries.
In recent
years, Digital has had an advanced development project
working on massively parallel processing hardware and
software. This advanced development project has resulted in
working, prototype systems and resulted in the development
of numerous advances in massively parallel processing
architectures. In particular, Bob Grandalski was recently
awarded a patent covering massively parallel processor
routing technology, and who has led development efforts
resulting in other numerous patent applications.
Massively parallel processing is an
outgrowth of the quest to speed computer processing.
The
traditional computer architecture (known as the "von Neumann
architecture") operates in serial fashion. With every cycle
of a central computer clock, the central processor (CPU)
processes a fixed-size instruction, or word. The larger the
word length - from 16 to 32 bits, for instance - and the
faster the processor, the greater the volume of information
that can be processed in a set time. However, the faster the
CPU, the more memory and larger input/output band width
required to maintain balanced, high-speed operations.
Multiple-processor
implementations
— with four- six, or even a hundred or more processors — can
bring significant increases in speed, but they must be
coordinated by additional logic in order to maintain
synchronicity, and this interprocessor overhead can add
considerably to internal resource utilization.
On the other
hand, massively parallel architectures employ thousands of
relatively inexpensive processor/memory units, distributed
throughout the memory of the system. Data to be processed
(and in some cases the actual instructions, as well) are
"parallelized" by special software, then are fed into the
array of processor elements.
Today’s
massively parallel computer builders are devoting
significant resources to software design — optimizing
compilers and other tools to help programmers parallelize
their applications. Digital is also working on numerous
software development projects for these systems, and is
focusing on areas, such as distributed computing, networking
and systems integration, where Digital products and
expertise can be beneficial to third-party application
developers.
For instance,
Digital is currently building a development environment for
massively parallel computers systems that will be based on
popular development tools and will be compatible with
Digital’s open-systems NAS (Network Application Services)
framework. Digital is also driving toward standardized
software architectures for massively parallel systems that
will allow application portability across different vendors’
hardware platforms. Finally, Digital will offer developers
and resellers services that range from training to
application porting in the near future.
Ultimately,
Digital plans to incorporate massively parallel computers
into its product line in a way that expands the family of
high-end Digital systems, and that complements the company’s
high-performance VAX 6000 and 9000 system families with
newer, software- compatible products.
Over the next
several weeks, Charlie will be building a core team for
software development, product marketing, and sales support.
This group will work closely and coordinate its efforts with
Bob Glorioso’s Information Systems Business (ISB); Harvey
Weiss’ Public Sector Cluster, where many of the application
opportunities exist; and David Stone’s The New Software
Group.
Leasing
And Remarketing Group Formed
In recognition
of its expanded role in the U.S. Area, Digital has formed a
new business unit, the Digital Leasing and Remarketing
Group. Headed by Thain Allan, this group provides leasing
services and financial solutions for customers. These
services are delivered through a network of district
leasing managers located throughout the U.S. This group
comes from a combination of U.S. Customer Finance and the
Refurbished Equipment Group
"This
announcement signifies the strategic importance of our
leasing services, and the role they will play in our account
marketing activities," notes Don Zereski, vice president,
U.S. Area. "Customers are increasingly looking to their
computer vendor to make it easier and more economical for
them to acquire products and services and leasing allows us
to do that."
Update
On Digital’s Drug Testing Program
In response to
requirements and obligations from government agencies and
customers, Digital instituted a drug testing program in
January 1990. To date, the program has only affected a small
number of employees in the U.S.: those where testing is
required by federal law or regulation (such as truck drivers
under U.S. Department of Transportation regulations); and
those who provide service to a few customers who, because of
the risks in conducting their operations, have determined
that testing is required. In addition, some employees in the
Government Systems Group in jobs requiring security
clearances have been notified that they may become subject
to testing.
The people
affected are notified in advance. They are given detailed
information and opportunities to ask whatever questions they
may have in order to help them understand their
responsibilities under the program, if they should become
subject to it. Tests are conducted by an independent
laboratory under contract to Digital and following strictly
defined procedures, to ensure accuracy and confidentiality.
The greatest
pressure to expand the number of employees to be tested is
coming not from government but rather from commercial
customers. For instance, some customers, who test their own
employees for drugs, have requested that all Digital
employees who come to their sites also be tested. Each
customer request for drug testing is evaluated on an
individual basis to determine if the need is legitimate
based on the risks of their operation. If that is the case,
that account may become part of Digital’s Drug Testing
Program. If not, Digital negotiates with the customer to
determine the most reasonable way to proceed, given the
actual work to be performed. On a case-by-case basis, these
negotiations have led to mutually acceptable alternatives,
including the use of volunteers.
While such
decisions affect a very small number of people, this is
another indication of the current climate of public opinion
regarding drugs and drug testing, and the likelihood that
the drug testing program may have to expand In response to
further customer requirements, government regulations and
business needs.
Frank
Wroe Named Chairman Of Digital Australia; Ron Larkin Becomes
Managing Director
Frank Wroe has
been named Chairman of Digital Australia. "In this
externally focused role, Frank will help Digital Australia
shape its future direction," said Dick Poulsen, vice
president, GIA.
Effective July 1, Ron Larkin will become
managing director for
Australia and
Regional manager for the South Pacific Region. Ron has more
than 20 years experience in the Information Systems
business. He joined Digital in 1987 as the Canadian
Marketing manager, and for the past two years has managed
the Canadian Regional Sales and Marketing organization.
Appointments
John
Alexanderson has been
named vice president, U.S. Sales and Sales Support Training,
reporting to Bob Hughes, vice president, U.S. Sales. John as
11 years of sales and sales managment experience, during
which he served as Northeast Regional Sales manager. Most
recently, he managed the creation, development and evolution
of Digital’s Direct Marketing Operation.
Maureen
Harvey has been
appointed to the newly-created position of Program manager
for Upward Mobility, reporting to Liz Aberdale, Corporate
Employee Relations/Valuing Diversity manager. "This program
office will focus on the development of strategies and
programs to significantly increase the numbers of women,
people of color, and people of diverse cultures in senior
management positions within the company," said Liz. Maureen
is currently leading the first phase of Personnel
Benchmarking. Prior to this effort, Maureen was the
Organization Development manager for Digital’s Software
Engineering organization.
Jack
McCredie has been
appointed manager of the Education and Science Business
Unit, reporting to Harvey Weiss, vice president. His
responsibilities include management of the school district,
college, university, and science markets worldwide. Jack has
been director of Digital’s External Research Program, where
he advanced the company’s research capabilities by forming
partnerships with universities and research laboratories
throughout the world. He will continue to serve as chairman
of Digital’s Education Investment Review Board, responsible
for coordinating the company’s diverse relationships with
the education community.
Mick Prokopis has been promoted to vice president,
reporting to Ken Olsen, president. He is responsible for the
integration of the Business Unit plans, which will form the
corporation’s budget and will also provide a planning
context for the Executive Committee to effectively implement
the New Management System. Mick has been with Digital for
three years as Manufacturing Group Controller and more
recently as a key focus for cost structure reduction. Prior
to joining Digital, Mick was senior vice president and Chief
Financial Officer for Lotus Development Corporation. From
1974-85, Mick held a series of senior finance positions at
United Technologies Corp., the last of which was vice
president of Finance and CFO at Mostek Corporation.