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mgmt memo

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


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.


Digital’s New Management System by Alex Munn, manager, Management Reporting Architecture, Corporate Finance Group


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.




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.  privacy statement