brown, executive vice president, peripheral products … · controlled expense levels, and reduced...

SECURITY ANALYSTS PRESENTATION

June 14, 1979

R. M. Price

GOOD EVENING AND WELCOME TO THE TWIN CITIES.

BEFORE I SHARE WITH YOU SOME OF MY THOUGHTS REGARDING

CONTROL DATA'S COMPUTER BUSINESS, I'D LIKE TO INTRODUCE TWO

OPERATING EXECUTIVES THAT ARE WITH US TONIGHT. HOPEFULLY, SOME

OF YOU HAD THE OPPORTUNITY ALREADY TO VISIT WITH THEM. GORDON

BROWN, EXECUTIVE VICE PRESIDENT, PERIPHERAL PRODUCTS COMPANY;

JOE MINUTILLI, EXECUTIVE VICE PRESIDENT, COMMERCIAL CREDIT.

THESE FELLOWS" DON'T REALIZE IT BUT THE COST OF THEIR MEAL

TICKET THIS EVENING WILL BE TO ASSIST ME WITH YOUR QUESTIONS

FOLLOWING MY REMARKS.

FIRST OF ALL, I WOULD LIKE TO ADDRESS THE SUBJECT OF

PROFITABILITY. FOR MANY YEARS, EXTENDING INTO THE EARLY

1970'S, ASSEMBLING THE RESOURCES AND BUILDING THE BASIC

STRENGTHS OF OUR BUSINESS TOOK PRIORITY OVER PROFITABILITY PER

SE. THROUGHOUT THE DIFFICULT YEARS IN THE EARLY 1970's, WE

MAINTAINED THE COMMITMENT TO PROGRAMS THAT WOULD BROADEN THE

BASE OF OUR BUSINESS, UPGRADE OUR TECHNOLOGY RESOURCES, AND IN

PARTICULAR ESTABLISH THE FOUNDATION FOR OUR SERVICES STRATEGY.

BY 1973, THE NEEDED RESOURCES WERE FALLING INTO PLACE AND

EMPHASIS STARTED TO SWING MORE TOWARD PROFITABILITY.

R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>

SECURITY ANALYSTS PRESENTATION-06/14/79R. M. Price

Page - 2 -

IN THAT REGARD, BASED ON APRIL AND MAY RESULTS, SECOND

QUARTER EARNINGS IN THE COMPUTER BUSINESS ARE EXPECTED TO BE UP

WELL OVER LAST YEAR'S PERFORMANCE OF $1.48 PER SHARE.

ALL MAJOR ELEMENTS OF THE BUSINESS ARE EXCEEDING PLAN. IN

ADDITION TO VOLUME INCREASES, IMPROVEMENTS IN GROSS MARGINS,

CONTROLLED EXPENSE LEVELS, AND REDUCED TAX RATE ARE

CONTRIBUTING TO THE IMPROVEMENT IN COMPUTER BUSINESS PROFITS.

BELIEVE ME THOSE ARE NICE STATEMENTS TO BE ABLE TO MAKE —

AND I ENJOY THAT, BUT THE SIMPLE TRUTH IS THAT IN SPITE OF THE

IMPROVEMENT, OUR PROFITABILITY HAS BEEN AND IS TODAY MUCH TOO

LOW. WHILE THE PROGRESS OF THE LAST FOUR AND A HALF YEARS IS

GRATIFYING, WE ARE DETERMINED TO IMPROVE OUR PERFORMANCE EVEN

MORE IN THE YEARS AHEAD.

NOW THERE ARE SOME WHO WOULD ACCOMPLISH BY CUTBACKS IN THE

PROGRAMS WHERE INVESTMENTS ARE STILL BEING MADE FOR THE

FUTURE. THAT WOULD CERTAINLY BE THE EASY AND UNFORTUNATELY

SHORT-TERM WAY TO IMPROVE PROFIT MARGINS. BUT OUR PROFIT

STRATEGY IS IN MAINTAINING A CAREFUL BALANCE, CONTINUING TO

MAKE INVESTMENT IN STRATEGIC PROGRAMS FOR THE FUTURE AND AT THE

SAME TIME DRIVING OUR MANAGERS TO GREATER EFFICIENCY AND BETTER

PROFITABILITY IN OUR CORE PRODUCT LINES. THAT STRATEGY IS

WORKING AND THE RESULTS OF OUR INVESTMENTS MADE IN THOSE

DIFFICULT YEARS ARE NOW FUELING OUR GROWTH AND CONTRIBUTING TO

THE BOTTOM LINE.



Page - 3 -

THUS WHILE WE ARE PROUD OF THE GOOD IMPROVEMENT THAT HAS

BEEN MADE INDEED THE COMPUTER BUSINESS HAS NEVER BEEN IN AS

STRONG A POSITION AS IT IS NOW I DON'T WANT YOU TO BE

MISTAKEN ABOUT OUR RECOGNITION OF THE NEED TO FURTHER RAISE OUR

PROFIT MARGINS.

AS YOU KNOW, CONTROL DATA'S COMPUTER BUSINESS COMPRISES

THREE BROAD CATEGORIES OF PRODUCTS AND SERVICES. SERVICES, THE

MAJOR THRUST OF OUR BUSINESS, PERIPHERAL PRODUCTS, AND COMPUTER

SYSTEMS.

WITHIN THESE BUSINESSES, CONTROL DATA IS MORE

COMPREHENSIVELY INVOLVED IN THE INFORMATION INDUSTRY THAN ANY

OTHER COMPANY IN THE WORLD. AT ONE AND THE SAME TlMEy WE ARE

THE LEADER INLARGE-SCALE SCIENTIFIC AND ENGINEERING COMPUTERj

SYSTEMS, THE LARGEST SUPPLIER OF PERIPHERAL PRODUCTS, OUTSIDE

IBM, AND THE LARGEST DATA SERVICES COMPANY'. ' SO/OVER THE YEARS

WE HAVE EVOLVED FROM JUST A MAINFRAME MANUFACTURER INTO WHAT IS

BEST LOOKED AT AS A SERVICE COMPANY — A UNIQUE SERVICE COMPANY. \

THE BTT.STNEFff ^PP^RTPNTTY F^FM=H;I^PT^T^"^Ti:lWrtT' TV, "VEP-

ST&TEEUÂT.L THE--MAJ^V^6e$g?A^-^S^ÊMS-fMV0L^^--A^-OVER-

WiIEiÎlJG«4*Efi©-FeR~"^F«R^^

-EDiOOJlJON»vAIJD.~P«OFBSSION^ .J_CONTROL

DATA CAN BE VIEWED AS BEING A HIGHLY VERTICALLY INTEGRATED

INFORMATION SERVICE COMPANY. THAT IS, WE PRODUCE ALL THE

COMPONENTS — THE COMPUTER MAINFRAMES, THE PERIPHERAL PRODUCTS,

THE SOFTWARE PRODUCTS, THE FINANCIAL SERVICES AND THE

CONSULTING SERVICES THAT GO INTO OUR FINAL INFORMATION SERVICE.


SECURITY ANALYSTS PRESENTATION-06/14/79R. M. PricePage - 4 -

AT THE SAME TIME, THE TOTAL MARKET FOR INFORMATION SERVICES

IS SO HUGE AND IS APPROACHED IN SO MANY WAYS BY SO MANY

DIFFERENT COMPANIES THAT THERE ARE ENORMOUS MARKETS FOR EACH OF

THESE INDIVIDUAL COMPONENTS AS WELL. THUS, IN PERIPHERAL

PRODUCTS BY SELLING OEM, OR IN COMPUTER MAINFRAMES BY SELLING

COMPLETE SYSTEMS, OR IN CONSULTING SERVICES BY TREATING THAT AS

A SEPARATE SERVICE, WE ACHIEVE ECONOMIES OF SCALE NOT POSSIBLE

TO ANY OTHER SERVICE COMPANY. ANOTHER WAY TO LOOK AT IT IS

STARTING FROM THE BASE LEVEL PRODUCTS SUCH AS PERIPHERALS,

COMPUTERS, FINANCIAL SERVICES, SOFTWARE AND PROFESSIONAL

PEOPLE, A VERY LARGE NUMBER OF EVER INCREASING VALUE ADDED

PRODUCTS AND SERVICES CAN BE GENERATED. THE HIGHEST VALUE

ADDED COMBINATION IS A SPECIFIC DATA SERVICE; THE LOWEST IS A

SIMPLE PIECE OF HARDWARE. SO THESE COMBINATIONS CAN BE THOUGHT

OF AS LEVELS OF VALUE ADDED SERVICES. AND, AS I HAVE

INDICATED, ATTRACTIVE MARKETS EXIST FOR ALL LEVELS, WHILE AT

THE SAME TIME THEY REINFORCE THE ULTIMATE SERVICES THRUST OF

HTTP RTT.Q TN^-SS^^A —•~~.i..-^...» ->..^.,t.>^^^^^ —»~..^»B^ylw3w«w»qM^^

THE ELEMENTS OF OUR COMPUTER BUSINESS ARE HIGHLY

INTERRELATED AND SUPPORTIVE OF ONE ANOTHER. FOR EXAMPLE, THE

LARGEST COMMERCIAL CUSTOMER OF OUR COMPUTER SYSTEMS BUSINESS IS

OUR OWN DATA SERVICES ORGANIZATION AND, IN TURN, THE PRINCIPAL

SUPPLIER TO COMPUTER SYSTEMS IS THE PERIPHERAL PRODUCTS

ORGANIZATION. MOREOVER, COMPUTER SYSTEMS PROVIDES PRODUCTS FOR

EDUCATION AND FOR COMMERCIAL CREDIT. ON THE OTHER HAND,

COMMERCIAL CREDIT IS OUR MAJOR SOURCE OF LEASE FINANCING.



Page - 5 -

AND PERIPHERAL PRODUCTS NOT ONLY PROVIDES THE PERIPHERALS

FOR SYSTEMS, IT ALSO SUPPLIES PERIPHERALS TO DATA SERVICES FOR

USE ON THEIR IBM COMPUTERS. ECONOMIES OF SCALE IN PERIPHERAL

PRODUCTS ARE ALSO ACHIEVED THROUGH MAJOR COOPERATIVE AGREEMENTS

SUCH AS THOSE WITH NCR AND HONEYWELL.

OUR STRATEGIES ARE UNIQUE IN THE COMPUTER INDUSTRY AND

TODAY IT IS WIDELY UNDERSTOOD. SEVERAL YEARS AGO THAT WAS NOT

THE CASE AND AT TIMES IT GOT TIRESOME TRYING TO EXPLAIN AND

CONVINCE PEOPLE. TODAY, BY CONTRAST, IT IS AS EASY AS READING

DATAMATION. (EXCERPTS FROM MAY 25, 1979 ISSUE, PAGE 90, 98,

101)

"SERVICE IS THE SOLUTION CONTROL DATA AND IBM ARE ALREADY

THE WORLD'S LARGEST COMPUTER SERVICES VENDORS INSTEAD OF

ALL COMPUTER SERVICES ENDING UP IN HARDWARE, AS SOME BELIEVE, WE

EXPECT THAT MOST HARDWARE WILL BECOME A COMMODITY, WITH MAJOR

VENDOR DIFFERENTIATION TO BE DERIVED FROM SERVICE."

"IN EFFECT, THE ISSUE IS THIS: THE MAJOR MAINFRAME COMPANIES

MUST NOW DIVERSIFY THEIR FUTURE SOURCE OF PROFITS AT THE

SAME TIME, THEY MUST PERFORM THE JUGGLING ACT OF PROTECTING

THEIR OLDER LEASE BASES WHILE INTRODUCING NEW MODELS "

"CONTROL DATA, OF ALL IBM'S MAINFRAME COMPETITORS, IS IN THE

BEST POSITION TODAY TO WEATHER CHANGE, "

IN ANY EVENT, MORE AND MORE CUSTOMERS OF THE COMPUTER INDUSTRY

ARE INTERESTED IN OBTAINING THE APPLICATION OF COMPUTING TECHNOLOGY

TO SOLVE THEIR PROBLEMS — AND THEIR INTEREST IN THE COMPUTER

HARDWARE, PER SE, IS DIMINISHING ACCORDINGLY. THIS CHANGING

EMPHASIS DOVETAILS PERFECTLY WITH THE PRINCIPAL THRUST OF OUR

COMPUTER BUSINESS, WHICH IS DATA SERVICES.



Page - 6 -

MOREOVER IN THE EARLY DAYS, SCIENTIFIC AND ENGINEERING

COMPUTATION WAS ASSOCIATED PRIMARILY WITH MILITARY APPLICATIONS. IN

THE EARLY 1970's THIS AREA OF COMPUTING GREW SLOWLY AND WAS VIEWED

AS BEING OF DECLINING IMPORTANCE. OVER THE PAST FEW YEARS, WE HAVE

SEEN A REAL RE-EMERGENCE OF DEMAND FOR THE KIND OF SCIENTIFIC AND

ENGINEERING SYSTEMS THAT WE ARE FAMOUS FOR. THE MAJOR SOCIETAL

PROBLEMS OF TODAY ALL REQUIRE OUR KIND OF EXPERTISE — ENERGY

RESEARCH, PETROLEUM EXPLORATION, REDESIGN OF AUTOMOBILES FOR WEIGHT

REDUCTION AND ENGINE EFFICIENCY, AGRICULTURE, WEATHER, EDUCATION,

TECHNOLOGY TRANSFER AND JOB CREATION, URBAN REVITALIZATION, BETTER

HEALTH CARE, WATER CONSERVATION AND SO ON. AND, BY THE WAY, THESE

PROBLEMS ARE NOT CYCLICAL, THEY ARE FUNDAMENTAL AND GROWING. AS WE

PURSUE THESE OPPORTUNITIES THERE ARE A FEW FUNDAMENTAL PLANNING

PRINCIPLES WE ADHERE TO:

FIRST WE ARE LOOKING FOR CONTROLLED GROWTH. SINCE 1974, THE

OVERALL AVERAGE ANNUAL REVENUE GROWTH RATE HAS BEEN 14%, ALTHOUGH

1978 WAS GREATER THAN THIS AND 1979 WILL BE ALSO. AN ANNUAL 12% -

15% GROWTH RATE OVER A FIVE-YEAR PERIOD IS WHAT WE MEAN BY

CONTROLLED GROWTH. DATA SERVICES IS ONE AREA IN WHICH REVENUE

GROWTH IS A SPECIFIC STRATEGIC OBJECTIVE. THE ELECTRIC POWER

UTILITY MARKET SEGMENT FOR SYSTEMS IS ANOTHER. AND WE HAVE MADE A

CONSCIOUS STRATEGY OF REVENUE GROWTH IN PERIPHERALS FOR

MINI-COMPUTERS. IN ALL OTHER PARTS OF THE BUSINESS PARAMETERS OTHER

THAN REVENUE GROWTH PREDOMINATE. COLLECTIVELY, THIS MEANS A STRESS

ON QUALITY OF BUSINESS, SETTING STANDARDS AND IMPROVING OPERATING



Page - 7 -

EFFICIENCIES. THE RATHER HIGH GROWTH RATE OF 23% IN 1978 AND THIS

YEAR'S HIGHER GROWTH IS DUE TO SOME UNIQUE MARKET OPPORTUNITIES,

PARTICULARLY IN PERIPHERALS FOR MINI-COMPUTERS.

THE SECOND PRINCIPLE HAS TO DO WITH MARKETING. WE HAVE STEADILY

INCREASED OUR EXPENDITURES FOR MARKETING — NOT JUST IN ABSOLUTE

DOLLARS BUT AS A PERCENT OF REVENUE. PART OF THIS IS CONNECTED WITH

DATA SERVICES GROWTH — WE NOW HAVE ABOUT 1500 PEOPLE SELLING DATA

SERVICES WORLD WIDE — BUT A MAJOR PART OF IT IS SIMPLY LAYING THE

FOUNDATION FOR A COMPANY THAT IS MORE SOUNDLY BASED ON MARKETING

STRENGTH.

THIRD, WE MAKE A CONSCIOUS EFFORT TO SEEK UNIQUENESS BASED ON

APPLICATIONS AND MARKET AREA EXPERTISE RATHER THAN JUST HARDWARE

TECHNOLOGY. AN EXAMPLE OF THIS IN COMPUTER SYSTEMS IS IN THE AREA

OF PETROLEUM EXPLORATION AND USE OF LARGE-SCALE COMPUTERS FOR

SEISMIC DATA PROCESSING, WHERE THE NUMBER OF SYSTEMS ORDERED HAS

INCREASED FROM FIVE IN 1975 TO THIRTEEN IN 1978 TO AN ESTIMATED

TWENTY IN 1979. NINETEEN OF THE TWENTY ARE ALREADY IN-HOUSE ORDERS.

FINALLY, ASSET EFFICIENCY IS A BASIC PLANNING PRINCIPLE.

DATA SERVICES HAVE A RELATIVELY LOW ASSET INVESTMENT PER DOLLAR

OF REVENUE. THE INCREASING PORTION OF THE BUSINESS DEVOTED TO

DATA SERVICES ALONG WITH IMPROVED ASSET MANAGEMENT HAVE BEEN

IMPORTANT FACTORS IN THE IMPROVEMENTS OF THE PAST FOUR YEARS.

THE SECOND CATEGORY OF FUNDAMENTAL PROGRAMS ARE THOSE

HAVING TO DO WITH IMPROVING THE SYSTEM OF MANAGEMENT. FOR

SEVERAL YEARS, WE HAVE BEEN WORKING AT THIS PROCESS OF



Page - 8 -

DEVELOPING SOUND STRATEGIC PLANS, CONVERTING THE PLANS INTO

OPERATING BUDGETS AND THEN ACHIEVING RESULTS WHICH EXCEED THE

BUDGET. UNDERPINNING THIS BASIC MANAGEMENT PROCESS, THERE HAVE

BEEN AND ARE A LARGE NUMBER OF PROGRAMS.

SOME PROGRAMS WERE DESIGNED TO ADDRESS IMMEDIATE PROBLEMS

— SUCH AS THE ASSET REDUCTION PROGRAM OF 1975 AND 1976. SOME

ARE MORE ON-GOING AND I WILL COMMENT ON FOUR OF THEM. THE

FIRST HAS TO DO WITH MANAGING TECHNICAL EFFORT — WHICH IN OUR

BUSINESS IS THE SINGLE MOST CRUCIAL RESOURCE. THE EFFECTIVITY

OF MANAGING TECHNICAL EFFORT IN THE COMPUTER BUSINESS IS THE

EQUIVALENT OF EFFECTIVITY OF MANAGING CAPITAL ASSETS IN MORE

TRADITIONAL INDUSTRIES. THIS MANAGEMENT PROCESS IS CALLED

PHASE REVIEW MANAGEMENT SYSTEM.

EACH SIGNIFICANT PRODUCT OR SERVICE GOES THROUGH FIVE WELL

DEFINED PHASES OF STRATEGY, DEVELOPMENT, VALIDATION, DELIVERY

AND PHASE-OUT. AT EACH PHASE, THE MARKET REQUIREMENTS,

TECHNICAL CONSIDERATIONS, PROGRAM COST AND LIFE CYCLE FINANCIAL

PLANS ARE REVIEWED BY SENIOR MANAGEMENT BEFORE PROCEEDING TO

THE NEXT PHASE.

THE PROCESS INVOLVES EVERY ORGANIZATION WHICH HAS OR WILL

HAVE A RESPONSIBILITY FOR THE FINAL PRODUCT OR SERVICE.

TYPICALLY, AS YOU MAY IMAGINE, THIS INCLUDES ALMOST EVERYBODY

— PERIPHERAL PRODUCTS PEOPLE, MAINTENANCE SERVICES, CONSULTING

SERVICES, SALES, APPLICATION DEVELOPMENT AND SO ON.

ACCOUNTABILITY IS THE KEY WORD OF THE PHASE REVIEW SYSTEM. IT



Page - 9 -

IS A PROCESS OF PRE-COMMITMENT AND ACOUNTABILITY FOR ACHIEVING

A GIVEN FINANCIAL RESULT FOR A GIVEN INVESTMENT OF TECHNICAL

EFFORT.

THE SECOND MAJOR PROGRAM IS ASSET MANAGEMENT. SINCE

BEGINNING OUR "WAR ON ASSETS" IN 1975, MANY OF THE LESSONS WE

HAVE LEARNED HAVE BECOME INCORPORATED AS PART OF THE STANDARD

MANAGEMENT PROCESS. FIRST WAS A GOOD REPORTING AND CONTROL

SYSTEM. THIS INVOLVED DEVELOPING KEY RATIOS AND INDICATORS

TAILORED TO EACH OF OUR SEVERAL DIFFERENT BUSINESSES.

INVESTMENT ANALYSIS IS NOW COMPUTERIZED AND SELF-TEACHING SO

THAT AS OUR FAR FLUNG BUSINESS GROWS, FINANCIAL ANALYSTS IN

OPERATING DIVISIONS DON'T RE-INVENT THE WHEEL. RECEIVABLES

COLLECTION TECHNIQUES WERE ANALYZED AND IMPROVED AND NOW THERE

IS A COMPUTER-BASED TRAINING PROGRAM WHICH CAPTURES THOSE

TECHNIQUES AND SIMULATES REAL-LIFE SITUATIONS FOR THE

COLLECTION TRAINEE. AD HOC TEAMS SET UP INITIALLY TO REDUCE

ASSETS HAVE GIVEN WAY TO AN ANNUAL OBJECTIVE SETTING AND

ACCOUNTABILITY PROCESS FOR HUNDREDS OF FIRST-LINE MANAGEMENT

EMPLOYEES WHO ARE POSITIONED TO HAVE THE MOST EFFECT ON ASSET

ACQUISITION AND USE. THE RESULTS HAVE BEEN GRATIFYING. FOR

EXAMPLE, OUR AVERAGE DAYS OF TRADE RECEIVABLES OUTSTANDING

IMPROVED FROM 61 IN 1975 TO 46 IN 1978. OVER THE SAME PERIOD,

WEEKS OF INVENTORY IMPROVED FROM 21 TO 17. TOTAL ASSETS

EMPLOYED PER DOLLAR OF REVENUE DECLINED FROM $1.06 TO 70$.

THIS WAS LARGELY RESPONSIBLE FOR OUR DEBT TO EQUITY RATIO

IMPROVING FROM 1.96 IN 1975 TO 1.11 BY 1978.



THE FINAL AREA IS THE SYSTEM OF MANAGEMENT EDUCATION. THE

INTENT OF THIS PROCESS IS REALLY IMPROVED INDIVIDUAL

PRODUCTIVITY WHICH BOILS DOWN TO TRAINING AND MOTIVATION.

SINCE 1973, OUR INVESTMENT IN TRAINING HAS BEEN GATHERING

MOMENTUM. THE BREADTH OF TRAINING AS WELL AS THE DEPTH HAS

INCREASED. FOR EXAMPLE, OVER 3800 HOURS OF COMPUTER-BASED

MANAGEMENT EDUCATION IS NOW AVAILABLE AND 2000 MORE HOURS WILL

BE ADDED IN 1979. IN SALES TRAINING, STUDENT TRAINING DAYS

INCREASED 18% IN 1978. I COULD GO ON AND ON BUT THE MESSAGE IS

OBVIOUS, I THINK.

NOW LET'S LOOK AT HOW THIS FRAMEWORK OF FUNDAMENTALS —

STRATEGY, MANAGEMENT SYSTEM, AND INDIVIDUAL EXECUTION — WORKS

WITH REGARD TO SOMETHING AS BASIC AS QUALITY. FIRST OF ALL,

PRODUCT AND SERVICE QUALITY GOES TO THE VERY HEART OF OUR

STRATEGY, AND HERE I AM REFERRING TO QUALITY AS THE CUSTOMER

SEES OUR EFFECTIVENESS IN SOLVING HIS PROBLEMS. THERE IS A

QUALITY OF SALES REPRESENTATIVES, OF PRODUCTS OR SERVICES

OFFERED, OF THE SUPPORT SERVICES AND OF THE FINAL SOLUTION. IN

ALL OF THESE AREAS THE BASIC QUALITY MUST BE BUILT INTO THE

PRODUCT OR SERVICE AT THE ONSET AND REFLECTED IN ENGINEERING

SPECIFICATIONS, PRODUCT DEVELOPMENT PROGRAMS, TRAINING OF

PERSONNEL AND SO ON. IN OTHER WORDS, ALL PRODUCT AND SERVICE

STRATEGIES MUST REFLECT THE QUALITY DIMENSION. SECOND, WE HAVE

ESTABLISHED A SYSTEM TO MANAGE QUALITY. WHILE QUALITY IS

GENERALLY CONSIDERED DIFFICULT TO MEASURE, WE HAVE ESTABLISHED



MEASUREMENT TECHNIQUES TO ASCERTAIN OUR PROGRESS AND HAVE

ACHIEVED VISIBILITY AND HIGH-LEVEL MANAGEMENT REVIEW RESULTS.

IN DEVELOPMENT, MANUFACTURING AND MARKETING, WE HAVE QUALITY

ORGANIZATIONS WORKING WITH THE LINE ORGANIZATIONS TO ACHIEVE

INCREASINGLY BETTER RESULTS.

GIVEN A SOUND STRATEGY FOR QUALITY AND A SYSTEM OF

VISIBILITY AND CONTROL, WE COME THEN TO MOTIVATION AND

EXECUTION. AGAIN I WILL ILLUSTRATE THIS WITH AN EXAMPLE. ON

OUR COMPUTER SYSTEMS SHOP FLOOR WE HAVE ESTABLISHED INVOLVEMENT

TEAMS WHERE EMPLOYEES AT THE OPERATING LEVEL HAVE AN

OPPORTUNITY TO SEE THE IMPACT OF THE QUALITY AND QUANTITY OF

THEIR WORK ON THE ORGANIZATION AND ULTIMATELY ON THE CUSTOMER.

THIS, IN TURN, HAS LED TO GROUP EFFORTS TO DEVELOP IDEAS FOR

IMPROVEMENT AND TO IMPLEMENT THEM. WE FEEL THAT WE ARE MAKING

HEADWAY AGAINST A NATIONAL TREND WHICH SEEMS TO FIND A TYPICAL

WORKER LESS AND LESS CONCERNED ABOUT THE EFFECT OF HIS WORK.

THERE ARE MANY OTHER AREAS WHERE I COULD GO THROUGH THE

SAME THING I HAVE JUST DONE WITH QUALITY — TYING TOGETHER THE

FUNDAMENTALS OF STRATEGY, SYSTEM OF MANAGEMENT AND INDIVIDUAL

MOTIVATION AND PERFORMANCE. BUT THE RESULT IS WHAT COUNTS —

THE IMPROVED GROSS MARGINS THAT ALLOW MORE INVESTMENT IN

MARKETING AND TECHNICAL PROGRAMS FOR THE FUTURE, THE ASSET

EFFICIENCIES THAT HAVE REDUCED DEBT AND INTEREST EXPENSE AND

LAST BUT NOT LEAST AN 89% IMPROVEMENT IN PRE-TAX NET PROFIT

LAST YEAR. ON THE OTHER HAND, 1978 WAS NO BIG MILESTONE FOR US

EITHER.



Page - 12 -

FOR WE ARE COMMITTED TO STRONG, STEADY IMPROVEMENT IN

FINANCIAL RESULTS NOT JUST FOR 1978 OR 1979 BUT FOR ALL THE

COMING YEARS. HAVING ACHIEVED A BROAD BASED BUSINESS AND GIVEN

A STRATEGY GEARED AROUND MEETING SOME OF THE MOST FUNDAMENTAL

NEEDS OF THE FUTURE AND WITH CONTINUED EMPHASIS ON IMPROVING

THE FUNDAMENTALS OF THE BUSINESS I AM CONFIDENT WE CAN ACHIEVE

THE IMPROVEMENTS WE HAVE PLANNED.

#5254A


brown, executive vice president, peripheral products … · controlled expense levels, and reduced...

Documents