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Volume 4, Number 5 August 1985
Three Engineering Managers Named Vice President
Philip Caldwell Talks About His Ford Motor Company Experiences
Digital's Mid-Range Vax Product Strategy By Bill Demmer, vice president, Mid-Range Systems
Mike Riggle Named Senior Corporate Consultant
Jack Mackeen Appointed Group Vice President
LEST Organizational Changes Announced
Corporate And U.S. Field Aa/Eeo Organizations Merge
Digital Receives Award For Corporate Contributions Programs
Competition In Today's Global Computer Market by Sam Fuller, vice president, Corporate Research and Architecture
In recognition of their leadership in developing and implementing Digital’s successful product strategy, three Engineering managers have been promoted to vice president. They are:
Bob Glorioso, vice president, High Performance Systems and Clusters
Bill Heffner, vice president, Software Systems
Bill Strecker, vice president, Engineering Product Strategy and Architecture
Each continues to report to Jack Smith, vice president, Engineering and Manufacturing.
In announcing the appointments, Ken Olsen noted, "It is in large part the result of their efforts that Digital is now delivering the most integrated and compatible networked products in the industry. The fundamental strength of our current business and our confidence in the future comes from the success of this integrated product strategy."
Bob Glorioso led the development of the VAX 8600, which was introduced last fall and is now being shipped to major customers worldwide. He also participated in the development of VAXclusters, Digital's unique multiprocessing technology. A Digital employee since 1976, Bob holds a B.S. in electrical engineering from Northeastern University and M.S. and Ph.D. degrees from the University of Connecticut.
Bill Heffner manages the VAX systems software group and has led the development and enhancement of VAX/VMS, the operating system which ties all VAX computers together with Ethernet and makes clustering possible. Bill has been with Digital since 1975. He holds a B.S. from Albright College in Pennsylvania and a master’s degree in mathematics from Lehigh University in Pennsylvania.
Bill Strecker is one of the chief architects of the company's overall product strategy, including the VAX family. In addition, he helped define the corporate strategy for interconnecting products, including the implementation of Ethernet, which allows products from different manufacturers to exchange information. Bill also played a major role in the development of VAXclusters. He has been with Digital since 1972, and holds bachelor's, master's and doctorate degrees from Carnegie Mellon University in Pittsburgh, Pa.
"Make the product people need and want. Make it at the lowest cost. Sell it at a fair price and make sure the income is greater than the expenses. That's all it takes to succeed in business," said Philip Caldwell, former Chairman of the Ford Motor Company and current member of Digital's Board of Directors.
"It's easy to talk abogt the strategy in retrospect, but when it's being implemented, it's not always that clear. I'd say one of the key jobs of every manager is to support the company strategy and not to give in to personal preferences. The whole organization has to feel secure, particularly when the going gets tough," he advised the assembled Digital managers and Board members.
He emphasized the need to be sensitive to the signs of decline in an organization. The major sign at Ford was a loss of market share in 1979-1980. "The product line had been allowed to atrophy. New products were brought to market that were neither properly conceived nor properly executed. The quality wasn't on target and costs had been allowed to increase. And perhaps most important of all, many of the basic planning systems of the company had broken down," explained Caldwell.
There were some external factors over which Ford had little or no control — for instance, government actions with respect to safety and emissions and fuel economy. Also, the U.S. demand for cars dropped from about 10.6 million units in 1979 to barely 8 million units in 1982. In addition, some 30% of the existing U.S. automobile market went to imports.
In 1979, Ford experienced a financial loss in the U.S., but made a profit because of its strong overseas position. "Fortunately, 1980 was the worst year and 1981 was a little less bad and so on. There's nothing more frustrating than to not know where bottom is; to not be able to start to build because we hadn't found the base yet. Nonetheless, there are some advantages to all of this; when you're under attack and everybody knows you're at war, it's a little easier for the organization to get the idea that something needs to be done.
"It was obvious that there was no way to stop the erosion in market share unless we got our quality under control. So, we took the time to write down simple little words, like 'Quality is the No. 1 objective of the Ford Motor Company.' The objective was quality because we wouldn't have -deserved any customers if we couldn't provide what they wanted and deserved.
"The second thing we had to do was retool all of the products; that was the whole development effort. And, thirdly, we had to restore our product planning process, which had been allowed to come down to hardly more than three years.
"When you're leading a large organization, you can't issue a different set of instructions every day, every week or every month. There has to be a central theme and there really can only be one basic plan in an organization or it's going to fall apart. We now plan at least 10 years ahead.
"The fourth change we made was just meat and potatoes—getting costs in line. From 1980 to 1984, the annual operating costs of Ford Motor Company were reduced by $4.5 billion and that was in thousands of small items. If you ever believe that all of the costs have been cut out of an organization, you're in trouble. It's a never-ending process.
"In 1979, we had just slightly under 500,000 people worldwide in the Ford family. Today, there's something like 375,000. There's a lot of blood, sweat and tears in going from 500,000 to 375,000. There were husbands, wives, children, communities, schools, and hopes and aspirations in each of those affected families. And yet, it absolutely had to be done or there would eventually have been zero employees.
"The fifth part of Ford's strategy dealt with the people side of things. There are lots of ways to deal with people and lots of kinds of programs. It doesn't matter what you call it, or how you do it. We call it Employee Involvement at Ford. It recognizes that there's not a single human being who doesn't have something worthwhile to contribute. It's vital to listen to all of those ideas out there.
"You see, if we don't care enough to create the climate and we don't care enough to ask somebody, and if we don't care enough to listen to what people tell us, then we won't engender the attitude that results in suggestions and participation.
"I don't think that American industry has yet faced up to what I'll call the indirect element of the work force, the indirect labor — that's us. We're not as efficient as we should be, and I suspect we're having the great problems we're having in competing with the Japanese almost as much because of the inefficiencies in that part of the work force as all the unionized inefficiencies that have been given so much publicity.
"I think the kinds of products — the systems — Digital makes will make the difference in business efficiency. I think your products are in the forefront of improving the competitiveness of American industry, and I surely hope that you're thinking about it that way because it's not just computers, it's systems, and the efficiencies that you can get with the use of computers when properly installed into a system.
"You know, I wouldn't be standing here unless it had worked out. So, after losing $3.3 billion, in 1983 we made $1.9 billion and, in 1984 we made $2.9 billion. Both were records and, of course, that’s more than the $3.3 billion we lost. But, let's be frank about it; we lost at least three years while we were getting out of the ditch.
"Respectability and pride returned to the work place. People recognized that integrity was wanted in the product and quality needed in everything we did — quality in the way we represented our company to the public, in the attitudes in dealing with each other, in our systems, in our research and development, everything.
"Quality is a work ethic. It isn't something for the quality control manager. After all, we should not need any quality control managers anywhere. Just do the job right the first time. Take away all of the parachutes, don't backstop anybody, give everyone the opportunity to be personally responsible.
"You have the good fortune to be associated with a company that's never lost its reputation. Never let it happen. It's not worth it. The reputation is based upon what everybody in the organization thinks and does.
"We cannot control the forces that shape our world, but we can control Digital Equipment Corporation. Excellence is mandatory in everything we do; second best is no good at all; and unpleasant situations only get worse if they're not tackled. In other words, don't run away from the problems you have. Management is not management without the courage and the willingness to make and execute difficult decisions."
We must effectively market current systems, introduce new systems on time, and become more cost-effective in all of our efforts. These actions will help make Digital more profitable and make the company the industry leader with its compatible range of products.
The work in developing mid-range VAXs must be accomplished within the parameters of Digital's financial position. Over the last five years, while our operating profit actually declined, our revenues increased by $3.5 billion. About half of that drop in operating profit comes from the cost of manufacturing and warrantying the product. The other half is an increase in Field spending as a percentage of the revenue, and an increase in Central Engineering and associated Manufacturing projects as a percent of revenues. Of course, much of this expenditure consists of reinvestments to help Digital remain at the technological forefront. But, nevertheless, it becomes one of the major items we must learn to control.
We are fortunate our revenues have continued to grow over the past five years; not as fast as we had planned but, nevertheless, at a respectable level. Unfortunately, our spending has exceeded our growth in revenues and has put a major squeeze on our profits. To deal with this problem, we must set very specific and measurable targets for our revenues and our spending. In FY86, the major corporate functions will have spending plans that do not exceed 3% over what we spent in FY85. You will find this will affect you directly in your day-to-day work.
If we're going to have a financial problem, it is probably far better to have one that is within our control and not one related to an inability to perform in the market. To help improve Digital's financial metrics, we must penetrate all markets we deem to be desirable. We also need a strategy and a set of products that will assure a continued growth in our revenues.
The VAX product strategy
The VAX product strategy is Digital's unique ability to offer a broad range of compatible systems. In this strategy, we achieve leadership via the uniqueness we can provide in things like software—our operating systems software, our layered products, Digital-generated application software and software generated and written by third parties. Our systems structures are also unique. Today it's clusters. Tomorrow we hope it'll be multiprocessing. Today, Digital is recognized as a leader, if not the leader, in networking. Of course, all of these unique attributes of our systems depend on having an underlying base set of state-of-the-art system components.
We started the early 1980s with a relatively narrow price range across our VAX family. Last October we announced the VAX 8600, which extended our price and performance range upward, and this spring we announced the MicroVAXII, which extended our price range downward.
At the high end, IBM and some other competitors deal with the traditional mainframe market, where the price range is in excess of $1 million. At the other end of the spectrum is the personal computer and low-end systems world. We have historically targeted VAX in the mid-range, and deliver compatible processors to cover that range. If you look at IBM in that range, you find they have four or five incompatible systems; each with a family unto itself and none of which covers the range.
The fact that we can offer inter-system functionality — whether in the form of clusters, connections on the Ethernet or pure networking — puts us on a level that is unmatched in the industry. If we consider the niche market competitors, again we find our major attribute is this compatible range of systems.
Our future VAX systems will lead to greater efficiencies in Engineering, Manufacturing and Sales. With the use of the MOS and ECL technologies, we're reducing the number of basic circuit technologies required that cause extra investments in manufacturing. By cutting this down, we can make significant inroads toward helping Digital with its asset management and its use of other resources. Likewise, the corresponding reduction in the number of VAX systems to cover an ever-broadening price and application range will serve to improve Digital's use of its resources.
We often take for granted that when we come out with a major advance in computing, like clusters, we make it out of existing products rather than having to develop something totally new from the technology up. Likewise, our VAXstation II is built around the same MicroVAX chip that our MicroVAX II product is. In other words, we are leveraging our basic system development and our basic processor developments into a range of products and functionalities. And covering this entire range with one set of software has a major impact on the efficiencies of our activities in supporting and generating that software.
The single most important thing Mid-Range Systems can do is introduce our new systems on time. We must bring them to market on schedule and to the point where the numbers we can produce meet or exceed our revenue projections. We also must be sure that all of our new systems and new options are also done in a way that allows both Manufacturing and Sales to produce and sell the new products efficiently.
We must provide all the support we can in marketing our current products — our VAX-11/750 and VAX-11/785 family products — because they will continue to be a significant portion of the mid-range VAX family revenues this year. Therefore, while they are older in an engineering sense to most of us, they are our bread and butter for the immediate future.
The workload we have contracted to undertake in FY86 means we're going to have to increase our productivity and do more for the allocated dollar. In part, we must improve our output by taking advantage of the design processes and methodologies we have developed over the past couple of years.
All of us are directly or indirectly involved in the productivity of our groups. It is up to you to accept the responsibility; to see that that dollar you spend gets spent in a place and in a way that will have the most leverage. If we don't implement the strategy in a cost-effective manner, we will not return to the financial metrics and measures that are important to us as employees and to the investment community that we count on to help fund our growth. We must execute our strategy in a timely and cost efficient manner.
Mike Riggle has been named Senior Corporate consultant, reporting to Grant Saviers, vice president, Storage Systems. Says Grant, "Mike has been the technical cornerstone of Digital's successful effort to become a world leader in disk technology. This appointment recognizes his outstanding technical, architectural and strategic contributions to the company."
A Digital employee since 1976, Mike is Group Engineering manager for Storage Advanced Development and Architecture, where he has concentrated on magnetic memories and storage subsystems, including data base systems. His group has been responsible for leading the development of the advanced technology and architecture base for Digital's magnetic disk, tape, floppy products and DSA (Digital Storage Architecture) subsystem products. They have also done advanced product development for the RA80 series of disk drives, RC25 disk drive, UDA50 disk controller, HSC50 disk/tape cluster controller, and RRD50 optical disk drive.
Before joining Digital, Mike was director of engineering for Storage Technology Corporation (STC). He holds a B.S. in electrical engineering from the University of Minnesota.
Besides Mike, Dave Cutler and Bill Strecker are the only Senior Corporate consultants at Digital.
Jack MacKeen has been named Group vice president for the Business Computer Group (BCG) and Original Equipment Manufacturers (OEM) Group, replacing Ward Mackenzie, who left Digital in June after 18 years with the company. In his new position, Jack reports to Ken Olsen. He had been managing the OEM Group since December, and was named a vice president in March.
As part of this change, Jim Willis assumes management of the BCG organization, reporting to Jack MacKeen. Jim had been BCG Channels Marketing manager.
Several separate organizational announcements made this spring have resulted in new titles for European managers of Software & Application Services, International Sales, International Engineering and the Danish subsidiary.
Reflecting an increased level of activity and the strategic importance of engineering in Europe and in the international arena, David Stone has assumed the responsibilities of vice president of International Engineering and Strategic Resources. He will manage all the International Engineering activities in Europe and the resources assigned to the international group at corporate level. In addition, he will drive strategic plans related to collaboration with other companies in Europe. He reports to Pier Carlo Falotti and Bill Johnson and serves as part of the Corporate Engineering staff.
David Barlow has replaced David Stone as European Software & Application Services manager. He served Digital in Sales, then as European Technical Product Group manager, and most recently, as country manager of Denmark. In his new position, he reports to Pier Carlo and to Don Busiek.
Upon his return from INSEAD management training, Niels Birkemose Moeller will replace David Barlow as country manager for Denmark. Niels joined Digital in 1981 as SWS manager in Denmark and has since developed that organization from four people to more than 40, while bringing its level of customer satisfaction to one of the highest in Europe.
Replacing Bobby Choonavala, who is moving to Hong Kong as managing director of Digital’s Far East operations, Dave Buckingham has been named International Sales manager for Europe. This group has been realigned to include responsibility for: International Accounts (all large European accounts with international and strategic importance to Digital), European DECUS activiites (to ensure effective dialogue and cooperation with DECUS), and a new Sales Communication and Development group (which will set standards in all aspects of sales communication). Management of the "channels" group, formerly part of International Sales, has transferred to Marketing. Dave will continue to manage European Educational Services until a replacement is announced.
To streamline Digital's efforts in the systems and workstations engineering area, Jeff Kalb, vice president, Low-End Systems and Technology (LEST), announced the following organizational changes:
o The PRO 300 workstation efforts will report to Dorn LaCava, manager, Micro Systems Development. This includes all aspects of the PRO business.
o Other activities which support VAX "Worksystems" — systems linked by networks which offer customers complete solutions — now report to Steve Teicher, Group Engineering manager, Worksystems Program Office.
o An Applications Planning Group has been established and will be managed by Ron Ham, Applications and Base Product Marketing manager for workstations.
Bonnie Bedell has been named Personnel Programs manager for the Sales organization. She will report functionally to Dick Walsh, Field Group Personnel manager, and will also be responsible to the U.S. Area managers (Dave Grainger, WACS; Chick Shue, NEAS; and Harvey Weiss, MASS) and to Jerry Paxton, manager of Corporate Sales. Bonnie was most recently Group Business manager, Personnel, for Computer Systems Manufacturing (CSM). She joined Digital in 1971.
Pat Cataldo has been named Corporate manager of Educational Services, reporting to Jack Shields, vice president, Sales and Service. Pat replaces Del Lippert, who has taken a leave of absence from Digital to serve as president of NovAtel Communications in Calgary, Canada. In his new position, Pat will be responsible for Digital's worldwide Educational Services organization. During his 11 years at Digital, Pat has managed GIA and U.S. Ed Services and, most recently, the Sales Training organization. He holds an undergraduate degree in economics from St. Francis College in Pennsylvania and an M.B.A. from Boston College.
Judy Gustafson is now Personnel manager, Peripherals & Supplies Group, reporting to Dick Walsh, Field Group Personnel manager, and John Alexander- son, vice president, Peripherals & Supplies. She was previously project manager for the U.S. Field Personnel Business Planning Group. Judy came to Digital in 1980, and holds a B.A. in psychology from Marymount Manhattan College in New York.
Mike Marshall has been appointed Northeast Regional Sales manager, reporting to Chick Shue, vice president, Northeast Area States (NEAS). Since joining Digital in 1967 as a sales representative, Mike has held various positions, including Philadelphia District Sales manager, Marketing manager of Industrial Products, New England District Sales manager, and his most recent post as NEAS Operations manager. Mike will continue to manage the NEAS Operations group until a successor is named. Mike holds a B.S. in electrical engineering from Drexel University in Pennsylvania.
Bob Murray has joined Digital as Marketing manager for the Networks and Communications group, reporting to John Adams, Strategic Planning and Marketing manager for Distributed Systems. Bob had been vice president and director of marketing for Commterm, Inc., of Billerica, Mass. In his new position, Bob is responsible for planning and implementing Digital's networking and communications marketing strategy, programs and promotional activities worldwide for DECnet and interconnect products with other vendors' equipment. He holds B.A. degrees in literature, psychology and journalism from The College of St. Thomas.
Ed Reiss has been appointed Real Estate and Construction (RECO) manager, reporting to Doug Hammond, Corporate Administration manager. Since joining Digital seven years ago, Ed has held management positions in the Acquisition, Planning, and Design groups within RECO. He holds a B.S. degree in civil engineering from Cornell University and an M.B.A. from Harvard Business School.
Susan Stanley has been named Human Resource & Development manager for Finance, reporting to Libby Fusco, F&A Personnel manager. In her most recent position, Susan was the custom business partner supporting the Law Department. She joined Digital in 1980, and holds a B.A. in political science from the University of Maine' at Orono and a Master's in organization development from American University in Washington, D.C.
Effective Aug. 5, the Corporate Affirmative Action/Equal Employment Opportunity (AA/EEO) office is merging with its U.S. Field counterpart. The new organization, managed by Barbara Walker and located in West Concord, Mass., will focus on both AA and EEO.
The EEO component will deal with areas of compliance, including U.S. state and federal laws and regulations affecting business practices. Newly- designed resources and technologies will support EEO and ensure that it becomes part of each manager's ongoing business practices.
In keeping with Digital's "Valuing Differences" philosophy, the AA component will continue developing and enhancing an environment that reflects Digital's values relating to managing and working in a diverse workforce. The AA effort will help managers understand the business connection between the Valuing Differences philosophy and Digital's productivity and profitability.
Digital has received a "Business in the Arts" award for supporting various cultural activities and organizations through its Corporate Contributions program.
The award, one of 20 presented annually by the Business Committee for the Arts and Forbes Magazine, cited Digital's cash and equipment grants,
employee matching gifts and employee involvement. Particular .emphasis was placed on contributions to cultural institutions such as the Kennedy Center in Washington, D.C.; underwriting of the Boston Pops Summer Series on public television; and partnerships with the Children’s Museum in Boston and the Children's Discovery Museum in Acton, Mass.
The Business Committee for the Arts is a national non-profit organization of business leaders committed to encouraging new and increased support for the arts from the business community. Digital was chosen by a panel of business, foundation, government and artistic leaders.
The more international a U.S. company becomes in its manufacturing, engineering and marketing activities, the more successful it is; yet, the more vulnerable it becomes to domestic protection and to foreign government targeting, which can lead to government trade restrictions. We must strive for the difficult path of discouraging foreign government targeting and encouraging foreign market access without instituting U.S. government policies that will provoke retaliation. As a result, we should avoid using formal U.S. industrial policy to respond to foreign government restrictions, since a U.S. "industrial policy" inevitably would consist of policies to subsidize and protect government-selected "winners."
Instead of targeted subsidies and protection, we look to performance-based incentives that can enhance the competitiveness of any entity that chooses to take advantage of them. The R&D tax credit is an outstanding example. Enacted as a part of the 1981 tax-cut, this incentive provides for a 25% tax credit for incremental R&D spending. It is available to any corporation, whether high or low tech, high or low profit, so long as it increases its R&D effort. Legislation to make the R&D tax credit permanent includes features that stimulate greater corporate research contracts with universities and increase corporate donations of equipment to universities for scientific training and research.
In a similar vein, Congress last year enacted two important measures designed to target the process of innovation rather than any one sector or product. The first was the "National Cooperative Research Act", which modified the antitrust laws as they apply to joint R&D among corporations. This act removes any lingering concerns about the legitimacy of cooperative efforts. The second measure is the "Semiconductor Chip Protection Act", which will give a hybrid form of copyright protection to semiconductor chip designs once they have been realized in silicon. This act will provide a necessary form of intellectual property protection for products such as MICROVAX II and Digital's other semiconductor components. We are encouraging Japan and other countries to enact similar national laws, that,in turn, would provide the basis for international treaty protection of semiconductor designs.
The above is excerpted from "Government Issues Update" and summarizes remarks deliverd by Sam Fuller to the U.S. Congress and Congressional staff members earlier this summer.