Analog Devices, Inc.
Presented by:
Joyce K. Fred and Darnell Price
ADI Overview
Who is ADI?
1996 Operations
Company Goal
1996 Company Strategy
ADI’s Successes
 1965 to early 1980’s
 Growth at 27% per year
 1984 to 1986
 Revenues grew by 46% ($313 M)
 Profits grew by 105%
 1988 Goal
 Revenue Growth of $1 Billion
Warning Signs
 1984 – 1986
 Sales grew only 6.7%
 Profits fell by 38%
 Operational Problems
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

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Process yields less than 15%
Defect Level > 20,000 PPM (Motorola @ 1,000 PPM)
On-time delivery was missed 40% of time
Customers complaining about quality
 1986 Revenues Stagnant & Profits Declining
 Sales declined by 5% - Industry sales up by 25%
 Income Statement
Looking for Solutions
Half Life (QIP)
Scorecard
TQM
Hoshin Kanri
Hoshin Kanri Planning Principles
 Identify important areas of opportunity for the organization
to change or improve
 Determine the most cost effective actions throughout the
organization to achieve these changes
 Create a detailed implementation plan; and
 Provide a review mechanism to identify corrective actions
and learning.
Vision 2000
 Build leadership positions in seven critical areas
for signal processing
 Grow sales & profits more than 20%
 Develop employee’s skills and competencies
ADI’s Plan
Four Business Drivers
Customer Satisfaction
New Product Development
Organizational Capabilities
Financial Expectations
See Exhibit 8 (in case)
Group Discussion Questions
 Given the solutions in the case, what strategy should
ADI employ to accomplish its Vision 2000?
 What organizational changes need to occur to
implement the strategy and how will it be done?
 Why?
Groups for Discussion
Group Members
Lisa, Ken, George
Group Members
David, Yasu, Bea, Van
Group Members
Amy, Elvira, Jeff
Michael Beer
Graduate School of Business Administration
Harvard University
 “I view TQM as the continuous improvement of
work processes to enhance the organization’s
ability to deliver high-quality products or services
in a cost-effective manner.”
Why TQM Failed at ADI !
 Lack of commitment by senior teams to TQM,
in adopting TQM, and agreement on
implementing TQM
 Lack of commitment to organizational and
cultural changes for TQM
 Lack of company wide two way (vertically and
horizontally) communication for TQM
 Lack of managerial capabilities in all sub-units
with commitment to TQM
How to Implement TQM
Insist that:
 Leadership teams discuss the appropriateness of TQM to their sub-unit’s
business model and problems.
 The senior team conduct a diagnosis of organizational and management
barriers to TQM and develop a comprehensive action plan for change.
 The data collection and discussion process allow important, often
threatening, issues to get raised and “publicly” discussed without negative
repercussions.
 New plans be stress-tested by those who implement them to determine their
validity and the organization’s willingness and capacity to implement them.
Critical Success Factors for Employee Involvement (EI)
Customer and Market Focused Strategy and Action Plans
Marketing Research/R&D
Leadership
Steering Committee
Strategic Planning
Management
Support
Rewards
Employee
Involvement
Training
Teamwork
 Quality Results
 Innovation
Wrap Up-ADI:
Dying Giant or Smart Student
ADI:2000 and Beyond
 TQM Infrastructure: 7 Elements for Success
 2003 (3rd Q) Total Outgoing Electrical PPM = 25
 2000 Revenues @ $2.5 Billion, EPS Rose 170%
 Struggling some since 2000 (dip to $1.7 Billion)
 2003 Revenues @ $2 Billion
 WINS INTEL’S PREFERRED QUALITY SUPPLIER
AWARD for the fourth consecutive year-2004
 www.analog.com
 www.forbes.com/finance/mktguideapps/compinfo/Compan
yTearsheet.jhtml?tkr=ADI