Analogue device
Harvard Business School
9-190-061
Rev. June 29, 1993
Analog Devices: The Half-Life System
A problem with management information systems is that they are strongly biased toward reporting financial information to stockholders and government agencies. Unless quality improvement and other more fundamental performance measures are elevated to the same level of importance as financial measures, when conflicts arise, financial considerations win out. To address this issue, we designed a division scorecard that reports only the barest of financial information and places greater emphasis on quality improvement goals.
—Ray Stata, chairman and president, Analog Devices, Inc.1
Company Background
Analog Devices, Inc. (ADI), headquartered in Norwood, Massachusetts, produced integrated circuits and systems for the high-end data acquisition market. The devices converted between physical and digital data in equipment such as high performance computer disc drives, aircraft sensors, medical instruments, and sophisticated consumer electronics (compact disc players, digital audio tape players and high definition television). As a senior ADI executive remarked, “The real world is not digital; it’s analog. Someone has to measure temperatures, pressures, and velocity and convert these data into digital form.”
ADI, with 5400 employees and seven manufacturing sites worldwide, had 1988 sales divided among the United States (56%), Europe (28%), and Asia (16%, principally Japan and Korea). Its customers were in the military/avionics, telecommunications, computer, instrument, and industrial market segments. Summary financial data appear in Exhibit 1.
Recently, the company had dedicated itself to an ongoing Quality Improvement Program.
Ray Stata described the motivation for the effort:
For more than fifteen years, Analog Devices grew consistently at a rate of about 25 percent per year. Then for the first time, between 1982 and 1987, we missed our fiveyear
9-190-061
Rev. June 29, 1993
Analog Devices: The Half-Life System
A problem with management information systems is that they are strongly biased toward reporting financial information to stockholders and government agencies. Unless quality improvement and other more fundamental performance measures are elevated to the same level of importance as financial measures, when conflicts arise, financial considerations win out. To address this issue, we designed a division scorecard that reports only the barest of financial information and places greater emphasis on quality improvement goals.
—Ray Stata, chairman and president, Analog Devices, Inc.1
Company Background
Analog Devices, Inc. (ADI), headquartered in Norwood, Massachusetts, produced integrated circuits and systems for the high-end data acquisition market. The devices converted between physical and digital data in equipment such as high performance computer disc drives, aircraft sensors, medical instruments, and sophisticated consumer electronics (compact disc players, digital audio tape players and high definition television). As a senior ADI executive remarked, “The real world is not digital; it’s analog. Someone has to measure temperatures, pressures, and velocity and convert these data into digital form.”
ADI, with 5400 employees and seven manufacturing sites worldwide, had 1988 sales divided among the United States (56%), Europe (28%), and Asia (16%, principally Japan and Korea). Its customers were in the military/avionics, telecommunications, computer, instrument, and industrial market segments. Summary financial data appear in Exhibit 1.
Recently, the company had dedicated itself to an ongoing Quality Improvement Program.
Ray Stata described the motivation for the effort:
For more than fifteen years, Analog Devices grew consistently at a rate of about 25 percent per year. Then for the first time, between 1982 and 1987, we missed our fiveyear