Conference 7.286::digital

It perhaps is not all our fault. The market is in considerable turmoil, at least
here in Europe, were the advance of UNIX-based solutions is forging ahead
creating much lamentation amongst those without. We are coming from behind,
playing catch-up on UNIX. This is a technical glitch that should be overcome
with time. 

The other facet of the problem is "open systems" and SI. Customers are reluctant
to migrate well-working existing systems to another platform, but wish to
integrate these with newer appications. How to do so. Our NAS strategy goes
a long way to meeting these objectives. But, the market takes time to react
to new announcements. 
In a market such as ours, it is miraculous to have all the products necessary
always at the right time. We're better of than most computer companies in terms
of our technological array. Now, if only would get the management side 
in shape...

For the moment, many customers are playing wait-and-see, understandably caught 
between fundamental technology changes and cautious economic signals.
We've got some convincing to do, but I doubt there's an account team out 
there without the "will to win." 

    REF: <<< Note 1240.1 by HERON::PERLA "Tony Perla" >>>
        
    >><<We've got some convincing to do, but I doubt there's an account
    team out  there without the "will to win.">>
    
    No question about that; I agree.
    
    But here is where I believe Dr. Deming is right on target with one of
    his 14 points -- namely that management by numbers is killing U.S.
    corporations.
    
    The "what" of the "win" in the field is CERTS -- numbers on goal
    sheets.  The Number One priority is not on improvement as it relates
    say to winning GREATER preference in the "minds" of customers to the
    point where we not only get the business, but we get it willingly, with
    customers WANTING to buy from Digital, willingly paying PREMIUM prices
    for desired WANTS as they relate to both our products and services, and
    to all actions within Digital as they relate to customer satisfaction.
    
    I was in a meeting a month or so ago.  The account is a long-time
    Digital customer.  Regarding a new contract for customer services
    maintenance (several millions of dollars) nearly all of the discussion
    was on whether to give the customer 55% or 60% allowance, up from 45%! 
    And the sales account manager was pushing to give a contract at 60% and
    ALSO give it on the VAX9000's, which the customer hadn't even bought
    yet!
    
    Ken and Jack: Do you think this customer, with us for MANY years, has
    INCREASED preference for Digital?  Or decreased preference for Digital?
    
    Again, many have the will but is the "what" of what is desired to be
    WON being defined correctly, and are the processes in place driving the
    right behaviors?  I think not, at least so far as the above referenced
    example I saw.
    
    Which is GREATER:
    
    DECREASED profit operating margins due to INCREASED expenses?
    
    DECREASED profit operating margins due to INCREASED allowances off
    MLP (manufactured list price)?
    
    Which is more correct:
    
    Many customers have INCREASED preference for Digital, reflected in our
    selling prices and sales margins?
    
    Many customers have DECREASED preference for Digital, reflected in our
    actions of giving greater allowances in order to 'bribe' customers to
    stay with us?
    
    Based on what I see in the field, the following assumptions are highly
    likely to be true:
    
    1.  We're giving away more in sales profit margins than losing to
    increasing expenses.
    
    2.  We cannot cost cut our away to success -- we MUST make MORE money
    from the marketplace.
    
    3.  The management by numbers system in Digital is driving the wrong
    behaviors, leading to less winning in reality.
    
    Here is a recent reprint of Dr. Deming's 14 points:
    
                 DEMING'S 14 POINTS FOR QUALITY

  1.   Constantly improve product and service to become 
       competitive, provide jobs and stay in business

  2.   Adopt a new philosophy.  Western management must awaken to 
       the challenge, learn its responsibilities and take on 
       leadership for change

  3.   Cease inspection to achieve quality.  Eliminate the need 
       for mass inspection by building quality into the product 
       in the first place

  4.   End the practice of awarding business based on price.  
       Move toward a single supplier for any one item, building a 
       long-term relationship of loyalty and trust

  5.   Improve constantly the system of production and service to 
       improve quality and productivity and thus decrease costs

  6.   Institute training on the job

  7.   Institute leadership to help people and machines do a 
       better job.  Leadership of management is in need of 
       overhaul, as well as leadership of production workers

  8.   Drive out fear, so that everyone may work effectively for 
       the company

  9.   Break down barriers between departments.  People in 
       research, design, sales and production must work as a team 
       to foresee production problems as well as potential 
       problems in use of a product or service

 10.   Eliminate slogans, exhortations and targets for the work 
       force, asking for zero defects and new levels of 
       productivity

 11.   A. Eliminate work standards (quotas) on the factory floor, 
       and substitute leadership, and B. Eliminate management by 
       objectives, numbers and numerical goals, and substitute 
       leadership

 12.   A. Remove barriers that rob hourly workers of their right 
       to pride in workmanship.  The responsibility of 
       supervisors must be changed from sheer numbers to quality; 
       and B. Remove barriers that rob people in management and 
       in engineering of their right to pride of workmanship.  
       this means abolishment of the annual or the merit rating 
       and of management by objectives or by the numbers

 13.   Institute a vigorous program of education and 
       self-improvement

 14.   Put everybody in the company to work to accomplish the 
       transformation.

       Source: W. Edwards Deming
       Excerpted without permission from ELECTRONIC BUSINESS
       October 15, 1990, page 46
    

    
    If you want premium prices for premium products, you cannot sell
    customers products which fail, and then take forever fixing the
    failures. Prouduct designers and impementors must be held accountable
    for products after the product is shipped, as well as meeting the 
    deadline of getting the product shipped. Somehow, the emphasis to
    meet deadlines has to be integrated with the proper testing and
    commitment to quality both before and after a product goes out the
    door.
    
    peter
    
    

    RE: .3 You mean we shouldn't ship software with showstopper QARs?
    What about when we need the money?

    			Alfred

    Please note: heavy sarcasm above. I've seen too many garbage
    releases in my time to believe that upper management really
    cares. Who is some lowly engineer to  tell senior management
    that the product isn't ready and that shipping it will result in
    lots of CLDs? Does management really care about the long term
    costs of shipping product that is not ready? I've seen little
    evidence of it so far.

You mentined the Japanese in the previous note in regards to competing and 
winning. Let's not over-myth the Japanese.

A recent scandal in Japan showed how one computer company entered a bid of
1 yen to obtain a very large contract with a state agency (which is how the
scandal came to light.) Apparently, this is common practice, not only in Japan
but elsewhere, of Japanese companies who will "buy" a contract to recuperate
profits later. Usually it involves a new area where they wish to develop 
expertise, but not always.

But, to get back to your original note. Account Managers should have great 
discretion in pricing. They are the ones with the budget to make, and are 
measured as well on sales margins. There is no other way of running a sales 
organization, that I know of, other than by the numbers. Sales is a 
goals-oriented profession. They behave uncomfortably with task-oriented jobs,
which is why we have a separate software services organization.

I dont think Deming would disagree with this - do you?

Our Customer Satisfaction rating remains amongst the highest of any
computer company. How do you explain that if we are doing everything wrong?
I agree that changes should be made internally, but would prefer that these
changes be in the quality of engineered software and in the leadership abilities
of certain staff management groups. Let's leave sales to get on with job of 
selling. God only knows what would happen if we started tweaking the sales 
equations.

     REF: <<< Note 1240.5 by HERON::PERLA "Tony Perla" >>>

    >><<You mentined the Japanese in the previous note in regards to
    competing and  winning. Let's not over-myth the Japanese.>>
    
    I was referencing the seeming loss of the software development industry
    as referenced in the long note 1225.12 -- yes, they have faults, and
    they have strengthes we should be emulating also.

    >><<I dont think Deming would disagree with this - do you?>>
    
    I think Deming does and so do I.
    
    >><<Our Customer Satisfaction rating remains amongst the highest of any
    computer company. How do you explain that if we are doing everything
    wrong?>>
    
    How do you explain that we lose accounts having high 9 ratings?  How do
    you explain with many accounts in the high eights and nines, we still
    have to give such huge allowances, which appear to be higher overall
    than previous years?  With such high scores, why aren't we retaining
    all customers and getting higher prices with LESS allowances needing to
    be given?
    
    To digress, pointing out the pitfall of scores vs. improving processes
    measurements, how do you account for tens of millions of children
    graduating from high school in the United States for the last 40 years,
    all having C's, B's and A's yet who cannot read a want ad and fill out
    a job application -- a proven fact.  Something's wrong.  The
    measurement system for success of a student is not effective.
    
    Forcing behavior to conform to a number does not work.  That is what
    Deming is saying, so am I.  Yes, you can measure a process
    quantitatively but then to do so in order to improve the process.  To
    reflect children, you measure writing ability, improve on that
    measurement and therefore improve writing and the process of teaching
    writing; and then to pass, you pass (in writing) the student NOT on
    getting A, B, C or D/F but rather on the student's measurable ability
    to write at the desired minimum level, that being the determinant
    difference.
    
    The difference is subtle but critical.
    

    Isn't a lot of the previous discussion obviated by a memo I saw this
    morning mandated measurement on profit, and not certs.  Same memo also
    stated that new CAM's (Customer Account Manager?) will be able to
    over-rule District Sales Managers on discounts, etc.  Looks like we are
    already heading the right direction.

	... company policies, but could you add a few details about that memo,
like author, date, maybe paraphrase key paragraphs?

	BTW, CAM means "Corporate Account Manager", assigned to those
multi-national, or very, very, very, high profile accounts.  They are sort of like
world-wide Sales Execs, IMHO.  I'm not sure what to make of this, as the last I
heard, the GEOGRAPHY DM's in ALL functions had ultimate P/L responsibility.
Judging by some CAMs I've run across, I shudder to think our profitability is in
their hands!

	Seeing as I sit in a District office, I hope I SEE the memo before you
can respond! :>)

	Thanks!

    In some ways, I have to chuckle at a couple of perspectives that have
    come up in this note.  Why?  Because I've seen it before and one of the
    U.S.'s top 10 companies plummeted in standing.  They got hung up on the
    same 2 steps in the constant climb to the top: Profit Margins and
    Customer Satisfaction.
    
    How'd they get stuck?  By envisioning each of these as the End rather
    than the Means.  They didn't get smart until they almost completed
    business suicide.  Are we going to do the same?
    
    Here's what's really important, if any one wants to think about it:
    
    1. The TOTAL CORPORATE PROFIT POT, not Profit Margins.  In some cases,
    one may have to LOOSE $ on somethings in order to significantly
    contribute to the PROFIT POT with other products/sales.  Sometimes a
    loss in a true investment in foreseeable future profit.  Since:
    
    	Overall Revenue	- Overall Costs = Total Profit Pot
    
    anything we have to do before, during or AFTER the sales that costs us
    money reduces the Total Profit Pot.  That means running around fixing
    something up after the sale, too (this is were up-front quality and
    products really meeting real needs plays a key role).
    
    2. Customer Satisfaction is a necessary fundamental for continued
    success - but is neither the only one nor will it make up for other
    faults.  Yes, we must achieve and maintain REAL, high customer
    satisfaction - that's gold!  But the other customer and prospect decision 
    factors are the silver.  Both gold AND silver are $ - and the more we have 
    of each, the more total $$ we earn.
    
    Of course, plain old common sense plays a big, everyday role in these
    areas - on all levels of magnitude.

    re: .9
    
    Makes too much sense. For all the lip service rendered by the service
    delivery organizations in this company about being good corporate
    citizens and doing what's best for Digital, they are the ones who
    insist on retaining their own Operations.  Forget all the crap about
    measuring Sales on profits - Sales should sell the products which are 
    the best for the customers, not what's best for Digital.  
    
    Combining the three business Operations into a single entity charged 
    with overall profitability would risk exposing the Big Lie - that hardware 
    is so much less profitable than services.  There's no question that there 
    is an element of truth to that; however there is no denying the fact that 
    one of the main reasons that services in Digital are as profitable 
    as they are is because the hardware product lines have been subsidizing 
    them for years.
    
    Al
    

    RE: .8 (and others)
    
    I have seen said memo, and the same topic was a major point of
    discussion at a K.O. luncheon meeting. CAMs (Corporate Account
    Managers) are being measured on profit, NOT CERTS! This is a major
    shift. The CAM for a major account is to have final discount/allowance
    authority for all his/her accounts world wide.
    
    The memo I saw specifically references the fact that DM's will no
    longer tell a CAM that he/she can not give a particular level of
    discount. It also indicated that there was some resistance to this
    change (apparently from the Sales DM's) but they had "better get with
    the program and quit hugging trees."
    
    Overall, I think this is the right way to go. It allows the CAM the
    flexibility to discount workstations heavily, if required, to win a
    certain contract. However, the CAM needs to have some kind of plan on
    what services, software, or follow on business is going to result from
    the initial investment, and make certain that, in the end, the account
    makes a PROFIT.
    
    What will get in the way of this strategy working is that on most (if
    not all) of our Corporate Accounts, there are Account Managers who sell
    to the Corporate Account but do not work for the CAM. They work for the
    local Sales DM. Guess what they're measured on ... you've got it ...
    CERTS!
    
    Now, if all the people who worked on an account reported to the same
    person, and they all had one operational goal in mind ... PROFIT ...
    Hmmmmmm. Nah, makes too much sense.
    
    /se
    

RE:      <<< Note 1240.10 by ALOSWS::KOZAKIEWICZ "Shoes for industry" >>>

>		.............................................................
>    is an element of truth to that; however there is no denying the fact that 
>    one of the main reasons that services in Digital are as profitable 
>    as they are is because the hardware product lines have been subsidizing 
>    them for years.
>    
>    Al
    
	You got some HARD numbers to back that up???  Don't try to cite IEG 
discounts because that applies to everybody.  Allowances off hardware are 
done, granted, but is it in 100% of all EIS sales? 90%?  Give some numbers!
And speaking of hardware allowances, how many of those were because Sales set
the wrong expectation in the customer's head and were forced to "eat" their
words??  I've seen more than my stomach can take.

	We pay our share of overhead expenses, we also pay a percentage of EIS 
certs BACK to Sales each year for their (gag!) support in selling EIS services.
The EIS DMs have been authorized levels of allowance approval that this time 
last year required Country approval, and locally speaking, mine has used it!
EIS is pulling its share in the troika, IMHO!  It's time some SUMs and SDMs 
learned what "doing the right thing" means from DEC's side!

	If what you say is true, then what will HAVE to happen is that 
geography SDMs will lose ALL resposibility for these corporate accounts. And 
indeed, this has happened in the Southern States Rregion with Dupont, MCI, and 
maybe one other I can't remember.  It happened a couple of years ago when the 
Government Districts split off.

	Having a situation that you described, of divided metrics, would not
make sense even in DEC!  :>) 

	IMHO, I think what will evolve will be a totally account-measured 
organization, with what we now call DMs becoming true mentors, executive 
relations consultants, and also applying the "leather" when the account 
managers don't meet their goals.

    re: .12
    
    Someday soon I'll have the mental energy required to compose the
    lengthy tome necessary to even start addressing some of the issues you
    raise or hint at.
    
    Suffice it to say for now that I've worked in both organizations.
    Leaving SWS/PSS/EIS (yeah, that's the ticket! don't change the product,
    change the name!) was like waking up from a bad dream.  It's
    interesting what a broader perspective gives you.  At any rate, no
    piece of service business gets proposed at anything less than margins
    acceptable to the delivery organization.  Total profitability never
    enters into the equation.  
    
    Whenever you propose solutions and you need a certain price in order to 
    win some strategic (the S-word; considered to be profanity if you are 
    in EIS) business, it's virtually guaranteed that the service
    delivery businesses won't go below their 50% or 30% or whatever
    margins.  The hardware is discounted instead to make up the difference, 
    because it's the only thing under the Sales DM's influence.
    
    If it were up to me, I'd tell EIS to cancel that check they write to
    Sales (I've heard about this money many times but never seen any
    evidence of how the transaction works.  I wonder if it's another Big
    Lie.) and fund their own sales effort.  Maybe then they could see how
    little value they add to their offerings and how extraordinarily
    complicated they have made the sale of their products.  Or, much
    simpler, they could surrender control of margins to a single Business
    Operations entity charged with overall corporate profitability.  
    
    Enough for now...
    
    Al
    

	... single operation concept, I don't think it has happened soon enough!

	As for my response in .12, I guess I have seen a different breed of DM's
down here the last few years, because SWS/EIS and Sales have tried to share the
"pain" where it made business sense.   However, there have also been some real
blunders by Sales Reps that put EVERYONE in a box that had NO relief from the
pain!

	It will be interesting to see how some CAMs operate in this new world!

    The CAM's concept has been kicking around for a year and a half now in
    one form or another.  Just my opinion, but the implementation seems so
    riddled with problems that I can't believe it's anything other than
    someone's wet, ahhhh, idea.  Of course with Bob Hughes (what a radical
    concept - a salesman in charge of Sales!) in the position to actually
    do something about this, maybe it's not as far-fetched as I think. For
    those that don't know, he's long advocated a more industry/account
    focused approach to our selling, and his ideas are sound.  I'd keep my
    eyes on this guy, we could use a lot more like him; a real leader.
    
    At any rate, the EIS DM here is not the problem.  He's willing but 
    effectively unable to share the pain, largely due to the organizational 
    stovepipes. Business has not been good either, which makes local initiative
    impossible.  Like it or not, you tend to get what goal people on.  If
    you measure them on margin dollars, you won't see a whole lot of
    investing.
    
    There's no question in my mind that we need to sell lots of services
    to ensure survival.  The problem is that I see a large gulf between 
    the EIS promise and reality.  I see an organization which has a vision 
    of itself not shared by anyone else in the corporation.  I keep hearing
    how they are supposed to move towards more projects, yet local
    specialists and management are not supposed to ignore their current
    business.  I'm told about the SI capability they now have, yet we are
    forming partnerships with the likes of Deloitte Touche because we aren't
    ready to deliver on the SI promise.  The local districts returned an
    average of 35% gross margins to the geographies last year, yet by the
    time it got to the country it was negative.  And specialists STILL
    don't get the kind of equipment, training and nurturing needed to
    justify the value-added rates we're expected to charge customers.
    
    Hmmm, I've probably wandered pretty far afield from the original topic
    (what was it anyway??).  Enough for now...
    
    Al