Nolan-Norton Presentation July 19, 1990© by Arthur M. Schneiderman Presentation date: July 19, 1990 Venue: Nolan-Norton Study Group Meeting Notes None Participants in the study, entitled "Measuring Performance in the Organization of the Future," were Advanced Micro-Devices, American Standard, Apple Computer, Bell South, GIGNA, Conner Peripherals, Cray Research, Dupont, EDS, GE, HP, and Shell Canada. Bob and I teamed in a pair of presentations; his, in part, on the HBS Analog Case and mine on the Analog story. The Executive Summary of the study was published some time in 1991 and included materials from Bob's and my presentations. One display in the Executive Summary was used to demonstrate the linkage between performance measurement and the organization's strategy and vision. It used materials taken from slide 20 in this presentation as an example. The interest generated by Analog's corporate scorecard prompted a second Nolan-Norton study in which the participants implemented scorecards within their respective organizations. This study provided the basis for the first KaplanNorton HBR article, which appeared in the January-February, 1992 issue. Although that article did make brief mention of Analog's use of the half-life method, and described the experiences of an anonymous "NYSE electronics company" (that was us!), it did not describe Analog's pioneering work on the first balanced scorecard. Nor did an article by Larry Maisel, then of KPMG, who was also part of the Nolan-Norton study. He published the study results in the Summer 1992 issue of the Journal of Cost Management in an article entitled "Performance Measurement: The Balanced Scorecard Approach." This is the slide package I left for the meeting participants. I can’t be sure that I used all of these slides in my presentation since I’ve been unable to locate a copy of the videotape that was made. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved Page 1 Since nearly all of the slides that I used are described in other presentations on this website, I’ve omitted explanatory notes. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved Page 2 Nolan-Norton Presentation, July 19, 1990 Slide 1 TO TAL Q UALITY M ANAGEM ENT Art Schneiderman Analog Devices ANALO G DEVICES "at a glance" Q UALITY IM PRO VEM ENT PRO CESS GO ALS culture scorecard IS PRO BLEM SO LVING projects M ETRICS Nolan-Norton, July 19, 1990 ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 6/11/90-06110-5 Page 3 Nolan-Norton Presentation, July 19, 1990 Slide 2 Analog Devices at a Glance • Headquartered in Norwood M assachusetts • Publicly Held (NYSE Symbol ADI) • $453 M illion in Sales (FY1989) • 48% of Sales O utside United States • 5200 Employees Worldwide ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 2/13/90-PREZ_1 Page 4 Nolan-Norton Presentation, July 19, 1990 Slide 3 ANALO G DEVICES AT A GLANCE (cont) Products: ICs, assembled products, subsystems Applications: precision measurement & control M arkets: data acquisition 40% industrial/instrumentation 30% military/avionics 13% computer 17% other Integrated supplier design manufacturing (8 locations) direct sales (100 locations) ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 1990-PREZ-1a Page 5 Nolan-Norton Presentation, July 19, 1990 Slide 4 ADI CO RPO RATE Q IP CO UNCIL M EM BERS: CHARTER: Jerry Fishman Executive VP Kozo Imai VP, Japanese O perations Larry LaFranchi O perations Controller Bill M anning Division GM Doug Newman VP, Sales and M arketing Art Schneiderman, Chairman VP, Q uality/Productivity Improvement Ray Stata Chairman of the Board and President Goodloe Suttler Division GM Suzanne Thomson Director, Training & Development Tom Urwin VP, European O perations Q IP O rganization Q IP Goals Deployment Training M onitoring priorities Juran metrics Incenting/Rewarding ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 4/8/90-Q IP-15a Page 6 Nolan-Norton Presentation, July 19, 1990 Slide 5 1989 Top Customers Worldwide Customer IBM (US, Japan & France) GE/RCA Fuji (Japan) HP (US, UK & Germany) Honeywell (US, Germany) General Dynamics (US) Raytheon (US) Siemens (US, Germany) TI (US) M itsubishi (Japan) Fujitsu (Japan) Toshiba (Japan) M arconi (US, UK) Hughes (US) Rockwell (US) Hitachi (Japan) Westinghouse (US) Philips (US, Europe) M otorola (US) DCASR (US) Bookings $M Cumulative % 26.8 10.5 10.3 9.1 7.4 5.4 5.1 5.1 4.1 4.0 4.0 3.7 3.6 3.4 3.3 3.3 3.1 3.1 3.0 2.7 6.0 8.3 10.6 12.6 14.2 15.5 16.6 17.7 18.6 19.5 20.4 21.1 22.0 22.8 23.5 24.3 25.0 25.6 26.3 26.9 ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 1990-PREZ-11 Page 7 Nolan-Norton Presentation, July 19, 1990 Slide 6 CUSTO M ER PREFERENCE RATINGS D/A and A/D CO NVERTERS Analog Devices Burr-Brown National Motorola PMI Linear Technology Maxim Intersil TI Signetics Harris TRW Analogic Crystal Teledune Philbrick 1 2 3 4 least 5 most Preference Source: EDN, 1/90 ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 6/11/90-06110-4 Page 8 Nolan-Norton Presentation, July 19, 1990 Slide 7 TO P 10 M IXED SIGNAL IC SUPPLIERS Sales $M 300 RM S=1.4 250 200 150 100 50 0 ADI National NEC Philips TI Toshiba Hitachi Sanyo M atsushita M otorola Source: VLSI Research ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 2/16/90-02140-1 Page 9 Nolan-Norton Presentation, July 19, 1990 Slide 8 PRO JECTED WO RLDWIDE GRO WTH RATES 1987-1992 average annual growth rate, %/year 25 20% 20 15 13% 11% 10 5 0 Electronic Equipment Semiconductor Sales ADI's Growth Goal ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 2/13/90-PREZ-10 Page 10 Nolan-Norton Presentation, July 19, 1990 Slide 9 Q UALITY IM PRO VEM ENT PRO CESS GO ALS culture scorecard IS PRO BLEM SO LVING projects M ETRICS ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 3/11/90-03110-1 rev 4/8/90 Page 11 Nolan-Norton Presentation, July 19, 1990 Slide 10 GO ALS cult ure scorecard IS PRO BLEM SO LVING projects ADI's CO NSTITUENCIES M ETRICS CUSTO M ERS partnership ADI's growth BUSINESS O BJECTIVES EM PLO YEES capital return STO CKHO LDERS ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 1/17/89-?/3/12/90-03120-2 rev 4/8/90 Page 12 Nolan-Norton Presentation, July 19, 1990 Slide 11 GOALS cult ure scorecard IS PROBLEM SOLVING projects M ETRICS BUSINESS O BJECTIVES: ADI Q IP GO ALS M ARKET LEADERSHIP (RM S) REVENUE GRO WTH PRO FITABILITY DRIVERS: BE RATED #1 BY O UR CUSTO M ERS IN TO TAL VALUE DELIVERED EXTERNAL LEVERS: PRO DUCTS DEFECT LEVELS O N-TIM E DELIVERY LEADTIM E PRICE RESPO NSIVENESS INTERNAL LEVERS: TIM E TO M ARKET PRO CESS PPM M ANUFACTURING CYCLE TIM E YIELD ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 1/17/89-AM S-5 rev. 4/8/90-04080-2 Page 13 Nolan-Norton Presentation, July 19, 1990 Slide 12 Process Quality Improvement Counter Action I % (Dip Soldering Process) 0.4% 0.4 0.3 Failure Rate Counter Action II 0.2 ppm 40ppm Omit Hand Rework Process Basic Working Guide Manual 30 PC Board Design Instructions 20 3ppm 10 Masking Method Improvement 0 Revision of Manufacturing Engineering Standards Dip Solder was made to one worker job 40 0.1 Counter Action III 0 11 1 4 78 7 10 1 4 7 10 10 1 4 80 79 7 10 1 4 7 10 81 1 4 82 7 10 month FY Source: Kenzo Sasaoka, President Yokagowa-Hewlett-Packard 7/84 ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved Page 14 Nolan-Norton Presentation, July 19, 1990 Slide 13 YOKOGOWA HEWLETT PACKARD Dip Soldering Defects 10,000 1 .01 100 .001 10 .0001 0 PPM Failure Rate % 1,000 50 % improvement each: 3.6 months .1 1 12 24 36 48 60 months ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 12/12/85-ZD4 Page 15 Nolan-Norton Presentation, July 19, 1990 Slide 14 PRO PO SED HALF-LIFE M O DEL VALUES M O NTHS PRO JECT TYPE uni-functional EXAMPLES MO DEL HALF-LIFE operator errors EXPECTED RANGE 3 0 to 6 9 6 to 12 18 12 to 24 WIP cross-functional new product cycle time outgoing PPM multi-entity vendor quality warranty costs ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 3/19/87-imp-9 rev. c. 1989-hflf-2 Page 16 Nolan-Norton Presentation, July 19, 1990 Slide 15 TARGET HALF-LIVES O rganizational Complexity months hi 14 18 22 med 7 9 11 low 1 3 5 low med hi Technical Complexity ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 6/11/90-06110-1 rev. 5/28/91 Page 17 Nolan-Norton Presentation, July 19, 1990 Slide 16 GOALS cult ure scorecard THE DEM ING CYCLE IS PROBLEM SOLVING projects M ETRICS R S S E PLAN S 36 E HALFLIFE U 27 9 C ACT DO O L M PI 18 T R S CHECK P ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 3/12/90-03120-3 rev 5/27/91 Page 18 Nolan-Norton Presentation, July 19, 1990 Slide 17 ADI RESPO NSE TO HALF-LIFE CO NCEPT Critics Supporters Embodies the concept of KAIZEN Doesn't reflect where we need to be Easy to understand Hard to understand M akes sense Hard to use Data not negotiation based manual vs. computerized realistic Accepted by line organization assumes instant startup Works assumes constant rate of learning focuses on results not process focuses on results not process "...the rate at which individuals and organizations learn may become the only sustainable competitive advantage..." Ray Stata ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 2/18/90-02180-2 Page 19 Nolan-Norton Presentation, July 19, 1990 Slide 18 SAM PLE IM PRO VEM ENT CURVE linear scale defect level 3 2.5 2 1.5 1 0.5 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 months ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 2/19/90-02190-1a rev 5/28/91 Page 20 Nolan-Norton Presentation, July 19, 1990 Slide 19 SAM PLE IM PRO VEM ENT CURVE logarithmic scale defect level 3 2 1 0.5 0.3 0.2 0.1 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 months ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 2/19/90-02190-1 rev 5/28/91 Page 21 Nolan-Norton Presentation, July 19, 1990 Slide 20 ADI QIP GOALS IC OPERATIONS, ESTABLISHED PRODUCTS METRIC 1987 HALF-LIFE 1992 EXTERNAL On time delivery 85% 9 >99.8% Outgoing defect levels 500 PPM 9 <10 PPM Lead time 10 wks 9 <3 wks Manufacturing Cycle Time 15 wks 9 4-5wks Process Defect Levels 5000 PPM 6 <10 PPM Yield 20% 9 >50% Time to Market 36 mths 24 6 mths INTERNAL WHILE AGGRESSIVELY PURSUING CORPORATE-WIDE COST MANAGEMENT ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 7/12/87-Q IP-16/Q S-16B rev. 7/25/87 Page 22 Nolan-Norton Presentation, July 19, 1990 Slide 21 FY1990 CORPORATE SCORECARD FINANCIAL End FY89 ACTUAL BHMK Q1 90 ACTUAL BHMK Q2 90 ACTUAL BHMK Q3 90 ACTUAL BHMK Q4 90 ACTUAL BHMK FY 90 ACTUAL SALES SALES GROWTH YTY CONTRIBUTION MARGIN ROA (CM) QIP ON TIME DELIVERY (To FCD) % CRDs NOT MATCHED EXCESS LEADTIME LABOR TURNOVER MANUFACTURING METRICS: IC PRODUCTS OUTGOING PPM PROCESS PPM CYCLE TIME YIELD MANUFACTURING METRICS: ASSEMBLED PRODUCTS OUTGOING PPM PLUG-IN YIELD CYCLE TIME % COST OF SCRAP/REWORK NEW PRODUCTS ACTUAL FY87 PLAN ACTUAL FY87 PLAN ACTUAL FY87 PLAN ACTUAL FY87 PLAN ACTUAL FY87 PLAN ACTUAL BOOKINGS POST-85 PROD FY89 1Q90 2Q90 3Q90 4Q90 FY90 FORECAST 3rd YR BOOKINGS of new product releases ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 1989-Scorecard Page 23 Nolan-Norton Presentation, July 19, 1990 Slide 22 1 2 1990 Scorecard ADI Qtr 2 1990 ? Line Item Actual Budget Variance % % WKS % 96.10 52.10 2.80 8.40 97 41 3 19 -1.00 10.70 -.10 -10.70 -1 # 26 # -3 -56 IC Outgoing PPM IC Process PPM IC Cycle Time IC Yield DYS % 1210.00 1624.00 50.10 40.40 908 1516 62 38 302.00 108.00 -12.30 2.80 33 # 7# -20 7 AP Outgoing PPM Plug In Yield AP Cycle Time Scrap/Rework Cost % DYS % 1483 91.40 21.90 7.70 1977 91 29 14 -494.00 .50 -6.70 -6.40 QIP: On Time Delivery % (To FCD) CRDs Not Matched Excess Leadtime Employee Turnover Retrace Utilities 1989 Scorecard Commentary ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved % Var. -25 1 -23 -45 Return 1Q 90-Scorecard-1 Page 24 Nolan-Norton Presentation, July 19, 1990 Slide 23 1 2 1990 Scorecard ADI Qtr 2 1990 ? Line Item Actual Budget Variance NEW PRODUCTS: Post 1985 Products Forecasted 3rd Year Bookings $M $M 40.30 9.90 42 -1.60 FINANCIALS: Sales Sales Growth (YTY) Contribution Margin ROA (Contribution Margin) $M % % % 116.40 1.20 6.30 7.50 117 2 8 10 -.30 -.30 -2.00 -2.00 Retrace Utilities 1989 Scorecard Commentary ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved % Var. -4 # -0 -20 -24 -21 # # # # Return 1Q 90-Scorecard-2 Page 25 Nolan-Norton Presentation, July 19, 1990 Slide 24 GOALS cult ure scorecard PERFO RM ANCE M EASUREM ENT IS PROBLEM SOLVING projects M ETRICS If you don't measure it, it will not improve. does not mean measurement improvement ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 5/22/90-05220-4 Page 26 Nolan-Norton Presentation, July 19, 1990 Slide 25 GOALS cult ure scorecard IS PROBLEM SOLVING projects M ETRICS GO AL: IM PRO VE CUSTO M ER SERVICE CUSTO M ER SERVICE M ETRICS O N TIME % late % early RESPO NSIBILITY factory warehouse % on time credit customer LATENESS/EARLINESS shipped late, how late? shipped early, how early? still late, how late? months to ship late backlog LEAD TIME customer requested lead time % CRD's matched excess lead time RESPO NSIVENESS time to schedule an order ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 4/8/90-04080-3 rev 5/13/90 Page 27 Nolan-Norton Presentation, July 19, 1990 Slide 26 On Time Customer Service Improvement Quarterly Data (1Q87 – 4Q89) 100 ADS ADBV MED CLD IPD DSP MDL ADI 10.8 16.5 8.4 18.0 13.8 6.9 54.9 13.2 10 1 0.1 Half Life In Months ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 4Q 89-% Late Page 28 Nolan-Norton Presentation, July 19, 1990 Slide 27 Percent Of Lines Shipped Late (Jun 89 through May 90) 100 ADBV ADS CLD DSP IPD 10 MDL MED ADI NS NS +++ + + + 1 0.1 Half NS NS Life (In months) NS NS N/A 7 ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved % Late M ay 90 Page 29 Nolan-Norton Presentation, July 19, 1990 Slide 28 RELATIO NSHIP BETWEEN LEADTIM E AND O N-TIM E DELIVERY AD XXX 0.1 1 0.95 0.08 0.8 0.06 0.6 0.04 0.4 0.02 0.2 0 0 50 100 113 0 150 lead time M arket requirements: O TD > 95% leadtime < 100 O ur requirements: O TD < 50% or leadtime > 113 LO SS O F M ARKET SHARE ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 5/16/90-05160-1a Page 30 Nolan-Norton Presentation, July 19, 1990 Slide 29 IM PRO VING O N THE O TD/LEADTIM E TRADEO FF 1. increase inventory 2. build to good forecasts 3. reduce manufacturing cycle time ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 5/16/90-05160-2 Page 31 Nolan-Norton Presentation, July 19, 1990 Slide 30 RELATIO NSHIP BETWEEN LEADTIM E AND O N-TIM E DELIVERY AD XXX 0.1 1 0.95 0.08 0.8 0.06 0.6 0.04 0.4 0.02 0.2 0 0 50 100 113 0 150 lead time M arket requirements: O TD > 95% leadtime < 100 O ur requirements: O TD < 50% or leadtime > 113 LO SS O F M ARKET SHARE ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 5/16/90-05160-1a+b Page 32 Nolan-Norton Presentation, July 19, 1990 Slide 31 ADI Half-Lives by month 5/89 to 4/90 60 50 40 30 20 10 0 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 89 90 Hlf Life 5/89 9 6/89 7 7/89 7 8/89 7 9/89 8 10/89 10 11/89 11 12/89 15 1/90 47 2/90 60 3/90 60 4/90 N/A ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 1990 Page 33 Nolan-Norton Presentation, July 19, 1990 Slide 32 Percent Of CRDs Not Matched (Jun 89 through May 90) 100 ADBV ADS 10 Half NS 48 Life (In months) W/I CRD % CLD DSP NS NS IPD N/A MDL MED ADI NS NS 60+ ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved Apr 90-CRDs not matched Page 34 Nolan-Norton Presentation, July 19, 1990 Slide 33 Weeks Of Excess LT - NonExcess Orders Excluded (Jun 89 - May 90) 100 ADBV ADS CLD DSP IPD MDL 10 MED ADI + ++ + + + + 1 NS 15 Half Life (In months) 61 57 W/I CRD % NS NS N/A 35 NS NS 15 25 38 20 29 49 ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved Dec 89-Excess LT Page 35 Nolan-Norton Presentation, July 19, 1990 Slide 34 48 CUSTOMERS IN VENDOR RATING DATABASE ABB AGFA Allen Bradley Allied Signal Ametek Apollo AT&T Brown Engineering Compugraphic Currie-Peak-Frazi Eaton Finnegan Ford General Electric GEC Gould Hewlett-Packard Honeywell Hughes Instron JET Electronics Kodak Loral Lucas M/A-COM Martin Marietta Marquette Electric Masscomp Microcircuits Semiconductor McDonald Douglas Parker Air & Space Penastar Perkin Elmer Raytheon Reliance Electric Rockwell Sanders Siemens Sikorsky Tektronix Teleco Teledyne Teradyne Texas Instruments Trillium United Technologies Waters Associates Westinghouse ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved c. 7/90-VRS Database Page 36 Nolan-Norton Presentation, July 19, 1990 Slide 35 ON TIME DELIVERY, CUSTOMER MEASURED 100.00 QIP STARTED % L A T E 10.00 HALF-LIFE = 10 MONTHS 1.00 Fe Ap 1987 Ju Au Oc Dec Fe Ap 1988 Ju Au Oc Dec Fe Ap 1989 Actual Data Ju Au Oc Dec Fe 1990 Trend (Ave: 21 C9ompanies per point) ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved Feb 90-CM D Page 37 Nolan-Norton Presentation, July 19, 1990 Slide 36 HEWLETT-PACKARD VENDO R RATINGS year ADI rank total suppliers 1986 8 16 linear IC suppliers 1987 5 8 linear IC suppliers 1988 5 15 all IC suppliers 1989 1 12 all IC suppliers * * category tied with one other supplier ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 5/22/90-05220-1 Page 38 Nolan-Norton Presentation, July 19, 1990 Slide 37 ADS Q IP TEAM STRUCTURE ADS SAFETY COMMITTEE ON TIME DELIVERY DIRTY HARRYS PLANNING QIP TRANSIT WIP QIP PPM STEERING ALCATRAZ BENT LEADS DIPS ELIM INATORS COG PPM FINAL TEST ESD HERM EDICS SLASHERS TEST EQUIPM ENT YIELD STEERING TEST TRIM VISUAL FAB STEERING BM W'S DIRT DEVILS ELIM INATORS ERRORBUSTERS ETCH JIT ON TIM E DELIVERY PROM IS ECN WAFER SAVERS TTM STEERING DESIGN & LAYOUT DESIGNER TASK FORCE LAYOUT TASK FORCE FABCATS PROCESS DEVELOPM ENT HANDO VER SPC GROUP 1 707 SPC GROUP 11 OP07/27 SPC GROUP 12 574 SPC GROUP 14 521/534 SPC GROUP 3 711/712 SPC GROUP 4 569 SPC GROUP 8 570/1/3 SPC SOLDER DIP WIRE BOND SPC SETUP TIM E REDUCTION ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 6/11/90-06110-2 Page 39 Nolan-Norton Presentation, July 19, 1990 Slide 38 TYPICAL Q IP PRO JECTS NAM E M EM BERS PRO JECT M ETRIC BMW'S 8 FAB LINE O PERATO RS 2 FAB TECHNICIANS 2 FAB ENGINEERS 3 FAB SUPERVISO RS REDUCE THE Q UANTITY O F BRO KEN/M ISSING WAFERS PER M ILLIO N M O VES YIELD ERRO RBUSTERS 6 FAB LINE O PERATO RS 3 FAB TECHNICIANS 1 FAB ENGINEER 1 FAB M ANAGER REDUCE M ISPRO CESSING IN PHO TO YIELD DIRT DEVILS 2 FAB LINE O PERATO RS 2 YIELD ENHANCEM ENT 1 FAB SUPERVISO R 1 Q .C. INSPECTO R 1 FAB TECHNICIAN 1 EQ UIPM ENT REPAIR REDUCE PARTICLE CO UNT IN FAB YIELD PLANNING Q IP 2 BUSINESS PLANNING 2 M ANUF. SUPERVISO RS 5 P.C. PLANNING 1 FINANCE 1 PURCHASING 1 CUSTO M ER SERVICE INCREASE CUSTO M ER SERVICE WHILE REDUCING CYCLE TIM E AND M INIM IZING INVENTO RIES O N TIM E DELIVERY ALCATRAZ 5 TEST O PERATO RS 2 BRAND O PERATO RS 1 Q .A. ENGINEER 1 BRAND SUPERVISIO R ELIM INATE FACTO RY ESCAPES PPM FABCATS 1 C.A.S. O PERATO R 1 M ASK FAB M ANAGER 1 Q .C. M ANAGER 1 FAB M ANAGER 1 P.C. PLANNING 2 P/L CO O RDINATO RS 1 FAB CO O RDINATO R M INIM IZE TAT O N NEW PRO DUCT DEVELO PM ENT LO TS TIM E TO M ARKET ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 6/11/90-06110-3 Page 40 Nolan-Norton Presentation, July 19, 1990 Slide 39 ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved Page 41 Nolan-Norton Presentation, July 19, 1990 Slide 40 GOALS cult ure scorecard IS PROBLEM SOLVING projects PRO BLEM SO LVING M ETRICS The Deming Cycle (PDCA) 1 PERCEPTION OF PROBLEM 2 EVALUATION OF CURRENT SITUATION 3 ANALYSIS OF CAUSES 4 PLANNING OF COUNTER-M EASURES DO 5 IM PLEM ENTATION OF COUNTER-M EASURES CHECK 6 EVALUATION OF RESULTS 7 STANDARDIZATION 8 SUM M ARY & FUTURE PLANS PLAN WHAT WHY WHO WHEN WHERE HO W ACTIO N ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 5/22/90-05220-3 Page 42 Nolan-Norton Presentation, July 19, 1990 Slide 41 CENTRAL PRINCIPLES O BSERVED IN TQ M IM PLEM ENTATIO N Primacy of the Customer customer first customer satisfaction market-in Use of the PDCA cycle for continuous improvement Strong CEO and top management leadership policy deployment Education and training for all Respect for all people teamwork participative management ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 4/24/90-04240-2 Page 43 Nolan-Norton Presentation, July 19, 1990 Slide 42 GOALS culture scorecard THE Q IP CULTURE IS PROBLEM SOLVING projects M ETRICS We each have a dual function daily job SDCA cycle process improvement PDCA cycle We are committed to improving customer satisfaction We are dedicated to (kaizen) continuous improvement We are part of a parallel organization: functional and cross-functional We are a continuously learning organization ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved 4/8/90-04080-4 rev 7/9/90 Page 44 Nolan-Norton Presentation, July 19, 1990 Slide 43 REQUIREMENTS FOR QUALITY IMPROVEMENT Top Management Commitment leadership profit opportunity changed objectives competition hands-on management Systematic Sense of Urgency Method proven results kaizen data driven fuel for change cross-functional visibility support Pilot Projects Company Wide Involvement overcome skepticism weakest link build credibility internal customers get ball rolling develop champions policy deployment vendors/customers Organization/ ©1987-2000 Arthur M . Schneiderman All Rights Reserved. ©1986-2000, Arthur M. Schneiderman. Revised 3/7/2016 11:30:00 AM All Rights Reserved Systems training guiding : monitoring rewarding : 12/16/85-ADI-2 Page 45