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Volume 4, Number 3______________________________________________________ April/May 1985
Digital Gains Entry To Brazilian Minicomputer Market
Digital Forms Board Of Directors For Europe
Update On Customer Satisfaction
Digital Begins Transition To Picture Badges
Treasurer And Controller Named
Electronic Business Cover Article
Digital's Opportunities by Win Hindle, vice president. Corporate Operations
Over the last several months, the competitive environment and the U.S. economy have combined to put significant pressure on the computer industry, and thus on Digital. We plan to respond by increasing the effectiveness of our operations as we work toward greater profitability.
Digital is currently in the best product position in the industry with our integrated set of products. Our new VAX/VMS systems — VAX 8600 and MicroVAX II — plus Ethernet, DECnet and our unique clustering capability give us a real edge for the foreseeable future. We shipped 140 VAX 8600s in Q3, which is due to the superb work of our VAX 8600 Manufacturing and Engineering teams, and customers are excited about the high-end applications possible with clustered 8600s. In addition, we shipped about 100 Micro-VAX Ils to test sites in Q3, and have received very positive reports back on these systems. These two products give us enormous opportunities to lead the industry and make major gains in market share during the next year.
At the same time, our cost structure is geared for a much higher volume. We are not achieving the return on investment we need to achieve to be regarded as a leader in the industry. Thus, the game plan is clear -- we must continue to work toward achieving the goal of having the most satisfied customers in the industry while reducing our costs.
We are in a great position to achieve these goals. But it will take a lot of hard work. Other computer companies have the same challenge and many have chosen drastic measures to cut costs.
Our approach has been to involve all of our managers in the task of increasing our effectiveness, for we need total involvement to make it happen.
All managers are now reviewing their proposed FY86 programs, plans and budgets in order to streamline expenses. This re-evaluation of our FY86 plans is a healthy and necessary exercise to achieve the goal. Some programs which we might like to start will not be affordable. It will be
difficult, but these programs will have to be removed from our plans. The competitive environment dictates that we move ahead only on programs that are essential.
Obviously, we do not want to detract in any way from our ability to become number one in the eyes of our customers. We will continue to offer the best products and services. Customer satisfaction must be our primary goal, and all budgets and plans must support this effort.
Every employee has the ability to directly and indirectly affect Digital's ability to be more effective. Each person can do this without sacrificing quality, service, or customer satisfaction. It is up to all of us as managers and supervisors to understand how our groups' tasks can be simplified or in some way done better.
We need to be particularly sensitive to our top performers right now. It is up to each of us to let them know we recognize their contributions and value to Digital. They are our greatest asset, and they need to know it.
We are embarked on a new period of competitiveness in the computer industry. Today we have the products, the assets, and the people to achieve our ambitious goals for the company. We are counting on the leadership of every manager to make it happen. It will be a challenge, but it will be immensely satisfying when we meet it.
A recently signed agreement with a Brazilian firm opens the previously closed Brazilian market to Digital minicomputer products. Brazil, one of the 10 largest computer markets in the world (about $1.5 billion per year in hardware and software purchases) closed its minicomputer and microcomputer markets to foreign competition in 1978 in an effort to foster its indigenous computer industry. Digital, through its 11-year-old Brazilian subsidiary, was only permitted to sell its largest VAX-11/780 configurations.
Mow, under a long-term licensing agreement, Elebra Computadores, a private Brazilian company, will be able to manufacture VAX-11/750 computers and sell and service them in Brazil. At first, Elebra will assemble and test VAX- 11/750S from subassemblies imported from Digital's Burlington, Vt., plant. Eventually, Elebra plans to produce modules for the VAX-11/750S it manufactures and develop applications software. In addition to helping Elebra's manufacturing start-up operations, Digital will train Elebra's sales and service staff, license software, and provide a wide range of peripherals, parts and components.
Computer users in Brazil will now be able to purchase medium-sized VAX systems from Elebra Computadores and large VAX systems, such as the VAX- 11/780, VAX-11/785 and VAX 8600 from Digital's Brazilian subsidiary. The two-year effort that culminated in this agreement — the first of its kind for Digital — involved the cooperation of many organizations, including Engineering, Manufacturing, Field Service, Educational Services, Software Services, Finance and Legal. Ron Spinek, manager, GIA New Ventures, led the development of this project.
In keeping with the goal of one company with one strategy and one message, a Board of Directors has been formed for Digital Europe. This group of senior managers will play a major advisory role for Europe and the corporation, helping to promote better integration between them.
This Board will hold its meetings in Europe. "It will help make sure that we have a mutual understanding of value and cultural differences, enabling the company as a whole to become more aware of and sensitive to the issues and concerns of Europe," explains Ken Olsen, president. "The Board will provide feedback, advice and perspective to the European organization from a Corporate, non-functional perspective, reviewing the overall strategic direction of Europe and of individual European countries.
"The success and rapid growth of Europe make this dialogue particularly important. We want to achieve better understanding of strategic issues that are unique to individual countries so we can provide support at the corporate level. The Board will also give formal visibility to the successes, issues, and problems of European country organizations and functions. In general, it should help give the Company a more international focus, developing the international understanding and perspective of senior corporate managers."
Jean-Claude Peterschmitt will assume the responsibility of chairman of the Board for Europe. He will continue to focus his attention on Digital's European presence, on issues related to new opportunities with other companies, customers, and governments, and on our relationships with the European community. Pier-Carlo Falotti will assume the responsibility of President of Digital Europe. All reporting relationships to European and corporate management shall remain unchanged.
The members of the Board, who will each serve a two-year term, represent a broad spectrum of the company's operations:
o Don Busiek, vice president, Software Services and CSS;
o Pier-Carlo Falotti, vice president; and president, Europe;
o Bill Hanson, vice president, Manufacturing Operations;
o Win Hindle, vice president, Corporate Operations;
o Jeff Kalb, vice president, Low-End Systems and Technology;
o Jim Osterhoff, vice president, Finance;
o Jean-Claude Peterschmitt, vice president; and chairman of the Board, Europe; and
o Peter Smith, vice president, Computer-Aided Engineering and Manufacturing.
Beat Stiefel has been asked to serve as secretary to the Board.
This April, Engineering held a four-day conference -- "International Opportunities and Differences" -- to stress the importance of designing products for worldwide markets and of using worldwide resources. The meeting opened with an assessment of the company's progress on quality issues since last year's Forum 84. Here we summarize those opening remarks. (A report on international marekets and opportunities will appear in the June issue of DECWORLD.)
"The primary goal for Digital is to become number one in customer satisfaction in our industry within three years," explained Frank McCabe, manager, Corporate Quality. "Achieving this goal is the fastest way to improve profitability for our customers and for Digital. Customers will get products with high reliability, from a Digital that focuses on systems -- a Digital that is predictable and easy to buy from. Digital can save $500 to $800 millino yaerly by implementing a quality improvement rpocess in every function of the company
"Motivation and commitment, while necessary, aren't sufficient to accomplish these goals. Quantum improvements in customer satisfaction come from quantum improvements in our processes, skills, methods and customer focus. For example, cross-functional breakthrough teams using new tools and methods are now in place to achieve 100-percent problem-free installations. Kembo Zunzanyika chairs the 11/750 system team, Jack Worthington the 8600 team and Tony Mongillo the MicroVAX team. Each of these teams has members from Engineering, Manufacturing, Field Service, Area Management Centers, Storage Systems, Distribution and the Software Distribution Center. To spread new knowledge and skills, cross-functional training for all managers will complement existing function-specific quality workshops.
"All managers and individual contributors in Digital are important to the company achieving this number one goal," Frank emphasized. "To this aim, individuals should review their current goals to make sure that, where appropriate, they support improvements in the four major areas of customer « satisfaction:
o making it easy for customers to do business with Digital,
o problem-free installations,
o predictability, and
"This is your contribution to helping Digital become a more profitable, healthy company in the years ahead," he concluded.
"Quality means exceeding customers' expectations," emphasized Bill Hanson, vice president, Manufacturing Operations. "We've made improvements, but we still have a long way to go in meeting that goal.
"In Order Administration, a year ago it took an average of 45 days from receipt of an order to get back to the customer with a commitment on a delivery date. That's now down to 19 days, and our immediate short-term goal is under 10 days. In meeting those committed delivery dates, our 'slip performance' on systems is now under 2 percent; and on everything else it’s under 4 percent. We review problems of that kind on a weekly basis. The major problems relate to new products.
"In addition, the number of 'ship waivers' — shipping partials or substitutions — is under 1.5 percent. We now deliver complete systems, not substitutes, and we're aggressively addressing problem-free installation for systems. We've upped our reliability goals, and, in the important area of inventory, we expect to do $300 million better than budgeted by year end.
"Manufacturing must continue to work on cost visibility and systems integration and must upgrade its engineering skills and focus on problem prevention."
Bill (B.J.) Johnson, vice president, Distributed Systems, summarized the progress in Engineering since Forum 84. "We updated the corporate product strategy with 'styles of computing, and we refocused our organization to match that strategy.
"Management gets what it inspects, not what it expects. So it's important to make sure our organization and measurements match our strategies.
"Our reviews of business units now have a more financial orientation. We must recognize the financial impact of development time and the importance of meeting customer expectations regarding time.
"And while considering our own improvements in these areas, we must remember that the competition is not staying still. They also are improving. We must measure ourselves not just against where we were, but against where the competition is and where our customers expect us to be."
Digital has begun a transition to picture badges for employees in organizations and facilities which have a business need for this level of security. The decision to change Digital's longtime badge system was made after careful consideration of business and asset-retention issues facing the company and our customers.
In this highly competitive industry, the need to protect proprietary information, products and processes is felt by Digital as well as its customers. Employees in the Field have reported numerous instances where customers have refused to accept a Digital badge as positive identification for entry. Today's industry standard calls for photographic employee badges, similar to those used for state motor vehicle licenses. In particular, government contractors, the banking community, and customers who need personal computers serviced in their homes are sensitive to the need for a tighter identification system. Some U. S. states have even passed laws which prohibit a person from entering another person's home to deliver, install or service a product without photographic identification.
"The marketplace now demands a more positive means of employee identification," says Ray Humphrey, Corporate Security director. "Coincidentally, this changeover, driven by business requirements, will also assist in providing a more disciplined approach to the protection of our valued resources — our people, our information and our products. The existing badge has become an uncontrolled collector's item, with both current and former employees possessing numerous copies. Employees from across the corporation have
recognized the need for a more efficient and effective identification system and have verbalized their concerns throughout the past year."
The new gray-and-white employee identification badge will feature a color photograph of the employee. In addition to the employee's name and badge number on the front, each badge will include the individual's signature, issuing site and issuance date on the back.
The entire U.S. Field population will make the transition to picture badges during May and June. Other functions and facilities which have a business need are beginning their planning process. The program was piloted in New Hampshire last summer and fall, when more than 4,000 Merrimack-area employees received picture badges.
The process is being managed jointly by the Personnel, Security and Facilities functions. Initial implementation is being coordinated by Corporate Security.
Ilene Jacobs has been named Treasurer and Bruce J. Ryan has been appointed Corporate Controller. Both report to Jim Osterhoff, vice president and chief financial officer.
Ilene joined Digital in 1974 as manager of Cash and Investments, Corporate Treasury. Since then, she has held several management positions in Treasury, including manager of the Treasury Group. She was appointed Assistant Treasurer of Digital in 1981. As Treasurer, Ilene is responsible for managing Treasury, customer financing, tax, risk management, and customs. Before joining Digital, she served as Cash Management Officer for Shawmut Bank of Boston. Ilene received a B.A. from the University of Massachusetts, Amherst, and is a graduate of the Advanced Management Program at Harvard Business School. Ilene replaces Bill Helm, who was serving as both Treasurer and Field Finance manager.
Bruce has been serving as acting Corporate Controller since 1983. He joined Digital in 1969 as Field Finance manager. Since then, he has served in various finance management positions, including Finance and Administration manager of the Computer Products Group; Manufacturing Controller, Galway, Ireland; and Finance and Administration manager of the General International Area. As Corporate Controller, Bruce is responsible for financial planning and analysis, budgeting, internal audit, external and internal reporting, accounting policies and procedures, and corporate management reporting. Before joining Digital, Bruce held financial management positions with GTE/Sylvania Corporation. He received a B.A. from Boston College and an MBA from Suffolk University.
Gary Bahr has joined Digital as Corporate Compensation and Benefits manager, reporting to John Sims, vice president, Personnel. He will have overall
responsibility for planning, developing and delivering Compensation & Benefits programs. Gary comes to Digital from National Semiconductor Corporation, where he served as director of Compensation and Benefits since 1978. Before that, he was employed by Booz, Allen and Hamilton for 10 years. Gary began his 22-year career in Personnel as a generalist at Procter & Gamble. He has a Bachelor of Science degree from the University of Illinois and an M.B.A. from Xavier University.
Bobby Choonavala has been named head of the newly created Far East Management Center, which is based in Hong Kong. He will report to Jerry Witmore, vice president, General International Area (GIA). Bobby was named international Sales manager in 1983 after five years as European Sales manager. He joined Digital in 1966 as a Project Engineer in Maynard, and two years later became the first manager of the company's Dutch subsidiary. He then served as a district manager in Europe before becoming manager of the former South-West Region in Europe from 1973-1978. He holds a B.S. degree from the University of Bombay and an M.S. degree in electrical engineering from the Technischer Hochschule in Aachen, Germany.
Dick Fishburn has been named manager of Corporate Field Finance, reporting to Jack Shields, vice president, Sales and Service, and Jim Osterhoff, vice president and chief financial officer. Dick will be responsible for worldwide Finance and Administration within the Field organization. He joins Digital from ANR Freight System, Inc., of Golden, Colorado, where he was senior vice president of administration for the the last four years. Prior to that, he worked in a variety of international and domestic finance positions at Ford Motor Company.
Gary Gottschalk has been appointed Group manager of the Distributed Systems Central Quality Group, reporting to Bill (BJ) Johnson, vice president, Distributed Systems. In this position, Gary will play a key role in establishing Distributed Systems as a quality leader in the industry. Gary joined Digital two-and-a-half years ago, and has been managing the Customer Information, Training and Technology functions within the former Systems and Clusters Central Quality Group. Prior to joining Digital, he worked for the Westinghouse Advanced Systems Division, in design and development, manufacturing automation, operations, and program management capacities. He holds a master's degree in electrical engineering from Washington State University.
Laurence Megson has been named manager of Manufacturing Effectiveness for Europe. He will report to Henry Crouse, vice president, European Manufacturing, and John Sims, vice president of Personnel. In his new job, Laurence will lead the planning and help implement major changes needed as Europe's Manufacturing organization increases its contribution to Digital's business in Europe. In addition, Laurence will be the European Manufacturing Personnel manager. A Digital employee since 1980, Laurence most recently was the manager of Employee and Organizational Development in Corporate Personnel. In this capacity, he led the development of organization performance technologies. He came to Digital from Procter and Gamble, where he held positions in the U.S. and Europe. Laurence has a law degree from Manchester University, England.
John Rose has been appointed manager of the Personal Computing Systems Group (PCSG), reporting to Jeff Kalb, vice president Low End Systems and Technology. He will be responsible for managing personal computing development efforts in support of the company's overall product strategy. A Digital employee since 1976, John was most recently Technical Support Group manager, reporting to Don Metzger in the Process & Design Support organization. Prior to this position, he was Operations manager of the former Central Engineering organization. Before joining Digital, John worked at IBM for eight years. He holds B.S. and M.B.A. degrees and has done extensive graduate work in optics.
George Shea has recently joined Digital as director of the Telecommunications Industry Marketing Group, reporting to Bob Hughes, vice president, Business and Office Systems Marketing. Before joining Digital, George was vice president and general counsel for National Data Corporation, an Atlanta, Ga.-based firm. At National Data, George was responsible for legal, regulatory, communications planning, contracts, acquisitions, stockholder relations, risk management, engineering and lobbying for the company. Prior to joining National Data, he held several senior sales/marketing and general management positions. George is a graduate of Colby College and has a J.D. degree from George Washington University.
For those of you who may have missed it, the March 15 issue of Electronic Business carried a cover article about Digital. It is based on an interview with Ken Olsen, other senior managers, and industry analysts.