Ni Uyen Huynh

This is what I have done so far. Ni Uyen Huynh


Analog Devices’ strategy in the second half of the 1980s: (1985-1990)
In 1983, Ray Stata recognized that ADI was having problems with the quality of its production, so he implemented the concept of total quality management into the company management control system. He hired Schneiderman, an expert in practicing TQM and implemented the “half-life” concept and corporate scorecard into the control system.
The “half-life” concept
Evaluation of the “half-life” concept in light of Analog Devices’ strategy


Before
After
On-time delivery
70%
96%
Cycle time
15 weeks
8 weeks
Average yield
26%
51%
Defects in products
500 PPM
50 PPM

Potential benefits
- Improvements quality of production
- Reducing waste
- Reducing cost per unit
Limitations
It is a cost reduction tool not a wealth creation tool. It has little say about business strategy. It deals with defects, not cost.
How would a company develop the half-life for difference processes?
The half-life is not the same for all processes. It depends on the complexity of the process. The complexity of the process can either be technical or organizational. The basis for the half-life dynamic is the interactive learning loop at the heart of TQM. Half-life starts identifying the root causes of defects, rank them in order of importance, then propose, design, test and implement solutions using the Plan-Do-Check-Act or ‘PDCA’ cycle. For less complex processes, the root cause is often larger and the improvement cycle time shorter, accounting for the shorter half-lives. For more complex processes, there tend to be many more causes so that the root cause is smaller while the improvement cycle time is longer. Organizations should attack less complex processes at the beginning when developing half-live.
Differences between half-life concept and the experience curve concept

Half-life Concept
Experience curve concept
A performance measures tools
As a result of increasing experience or proficiency in doing something
Theoretical basis
No underlying theory
The rate of decline of defects level is constant over time
Real unit cost drops by a constant percent and the rate of decline of cost drops over time
Longer cycle of improvement
Shorter cycle of improvement

The QIP measures and the financial measures
The goals of QIP and the company’s financial goals were in conflict. QIP is more focused on long-term plans while financial measures are more focused on short-term results. Financial measures can be manipulated by manager.
Corporate scorecard:
The usefulness of corporate scorecard:
The corporate scorecard is used as communication tools on how well ADI’s strategies are implemented in the management control system and how ADI is moving toward its goals. The scorecard measured critical success factors as well as financial performance. It provides a link between short-term results with ADI’s long-term plans.
Role of each set of measures playing in strategy execution:
What should be the relative importance of financial versus non-financial measures?
Additional information to be included in the scorecard:
The scorecard should have 4 components. ADI’s scorecard has 3 categories, which are financial, innovation and learning, internal business process. It should include the customer perspective in its scorecard as it is the most important key success factor.
5. Evaluate the evolution of the corporate scorecard and related management planning and control systems at ADI during 1990-1995
6. Compensation philosophy of ADI
ADI did not link incentive compensation to performance on the scorecard measures and compensation was based on stock price for senior management and growth in revenue and operating profits before tax for all other employees. There was no correlation between the non-financial measures and financial results. This can disrupt goal congruence as managers are more concerned about financial measures than any other measures which are not benefits for the company as a whole.
It should link incentive compensation to performance on the scorecard.
7. ADI’s strategy’s in 1996