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