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To: Engineering and Product Marketing Employees
From: Enrico Pesatori
September 16, 1994
Earlier today I met with senior managers from Engineering and Product Marketing
to discuss our new Product Management and Development organization and how it
will help us meet the needs of our partners and customers with innovative and
market-driven products. A copy of the announcement and Q&A is attached.
In a DVN that will be broadcast next week, you also will have the opportunity
to hear what I presented to your managers today. But I did not want to wait
until then to let you know how important your support is to the success of this
new organization and to our overall business strategy.
I look forward to meeting with many of you in the coming weeks as we discuss
our plans and put this new organization to work.
To: All Digital Employees
From: Enrico Pesatori
September 16, 1994
Subject: Announcement of SBU's Product Management and Development Organization
When we announced the restructuring of the Systems Business Unit in July, we
stressed the importance of a product development process that links our
engineering and product marketing groups in a market-focused, customer-driven
organization. We made a commitment that we would announce the new Product
Management and Development (PM&D) organization by October 1 and have it in
place by January 1. This morning I met with the engineering and product
marketing management teams to review the new PM&D structure and to announce the
names of several of those who will lead these groups. I want to give you a
brief description of the new organization and the principles behind it.
The new structure is a complete redesign of the way we manage, plan and develop
our products. It is an opportunity to build on Digital's well-deserved
reputation for engineering excellence by removing the barriers we have erected
between the product development process and our customers. It is also a major
step forward in our shift from large, functional organizations to accountable
business organizations.
The PM&D organization in the new SBU will integrate product management, product
planning, product development and product marketing into clearly defined,
market-driven business groups. Each will have the resources necessary to
develop profitable, volume products that our channel partners want to sell and
our customers want to buy. And each PM&D business manager will be accountable
for his or her results.
The new organization is built on five fundamental principles:
First, to foster innovation. Our customers are looking for creative ideas and
fresh approaches to their business problems. We will focus the considerable
talents in our engineering and product marketing organizations on meeting
customer needs.
Second, to return to profitability. This means delivering channel-ready
products to our partners and end-users at competitive costs -- costs that
support competitive prices and competitive margins.
Third, to define businesses and appoint business managers responsible and
accountable for the success of products over their entire life cycle. This
responsibility will be closely aligned with those levels in the organization
that have the most detailed knowledge of their customers, competitors and
marketplace economics.
Fourth, to provide product business managers with the resources they need to be
successful, including:
Product Management, which is responsible for leading the cross-functional
team and delivering business results over the entire life cycle of the
product,
Product Planning, responsible for translating market needs into product
requirements,
Product Development, responsible for designing and implementing channel-
ready products that meet customer needs, and,
Product Marketing, responsible for the key market-based aspects of product
success.
Finally, PM&D managers will take the lead role in achieving total product P&L
commitments, working with SBU manufacturing, sales and marketing; the Accounts
Business Unit; and Multivendor Customer Services.
With this new organization, we will position product development resources
closer to the market and to our customers. We will have a better understanding
of what our channel partners need and how to meet those needs. We will make
faster decisions. And by maximizing revenue and minimizing cost, we will
restore the SBU to profitability. The PM&D organization is the result of a
cross-functional team that has spent two months and invested a great deal of
thought working with me to develop a structure that will maximize our resources
and meet the needs of our customers. The design of this organization reflects
input from the Digital community worldwide.
PM&D is divided into three product business groups, whose managers will report
directly to me in my role as acting head of the SBU. These three business
groups align our core strengths with identifiable customers, distinct
competitors and market economics.
The primary role of the business groups is to define product and market
strategies, develop products to execute those strategies and deliver results.
Within some groups there will be business segment organizations. Business
segments will be primarily responsible for defining strategies, developing
products and delivering results within their product areas.
Both the group and segment managers will be taking on new challenges in filling
these roles. Their jobs represent a significant expansion of their
responsibilities over past positions.
The new organizations and their managers are:
Alpha Systems Business Group Position Open
The mission of this group is to grow profitably the volume of our Alpha AXP,
UNIX and Windows NT systems business. It is composed of three platform
business segments, each of which is accountable for its financial results,
and two operating systems software business segments.
Server Business Segment Pauline Nist, Vice President
Low-end Server Business Segment Position Open
Workstation Business Segment Philippe Ribeyre, Vice President
Philippe is also acting as the Low-end
Server Business Segment manager until
that position is filled.
UNIX Software Business Segment Don Harbert, Vice President
Windows NT Software Business Segment Position Open
Don Harbert will act as the Windows NT
Software Business Segment manager until
the position is filled.
In addition, I have asked Dick Fishburn to manage the Alpha Systems Business
Group on an interim basis while we recruit externally.
OpenVMS Business Group Jesse Lipcon, Vice President
The mission of this group is to achieve our OpenVMS revenue and profit goals.
It will be responsible for the OpenVMS operating system and OpenVMS layered
products. In addition, the group will have business responsibility for all
Alpha AXP systems that ship with the OpenVMS operating system and for VAX
hardware.
Software Business Group Bill Demmer, Vice President
The mission of this group is to develop a profitable layered software
business with volume products for both Alpha AXP and other industry
platforms. It will focus on network operating systems, work group software,
object-oriented software and enterprise computing. A strategy and
organizational concept is being tested by a task force whose work will be
completed in early October.
Other organizations will be established within the SBU to support and foster
the PM&D implementation. They include:
Shared Services -- Shared engineering and marketing services and other
supporting functions will be established to provide a common, cost-effective
resource across groups and segments. A task force will make recommendations
regarding scope, management accountability and principles in early October.
Options -- Given the importance of the aftermarket revenue and profit stream, a
focused approach is needed to manage this business. A task force will
recommend the principles of operation in early October.
Within the next few weeks I also will announce the creation of a Software
Partner Development group. This group will report to and play a vital role in
the SBU. It will be separate from the PM&D organization, but it will work
jointly with the PM&D and other SBU groups as well as with the ABU to assure
that the needed portfolio of software partners is in place. Responsibilities
will include establishing and managing business relationships with software
partners and providing technical support to help developers write and port
their applications.
In my role as Vice President and General Manager of the Computer Systems
Division, I am pleased to announce the appointment of Bob Supnik, Senior
Corporate Consulting Engineer, as Vice President, Architecture and Technology,
for CSD.
Bob has played a key role in developing the new PM&D organization. In his new
position, Bob will be responsible for evaluating the impact of new technologies
and long-term trends on CSD's businesses. He will work closely with the
Advanced Technology Group to foster the exchange of innovation and to create a
process for transferring technology between CSD groups. In that role he will
lead a small, highly skilled design team. Bob also will be responsible for
selecting and evolving the key architectural standards which support the
division's activities. And he will initiate an engineering stewardship program
to preserve those cross-product activities that promote innovation and
achievement in engineering.
I also want to congratulate Mahendra Patel, who will be the technology leader
for the ABU. He will report directly to Vincenzo Damiani.
The job of building the new PM&D organization has only begun. The newly
appointed group and segment managers are meeting as a team to start work on the
next steps. We will begin implementation after October 3, and the new
organization will become fully operational by January 1.
This will involve a complex transition. However, those in the engineering and
product marketing communities should have no doubts about the reporting
structure as of Monday. You will report to the same managers you report to
today. The same managers are in charge of the transition. It is very
important that you continue to meet the engineering and business commitments of
your current organization.
I have asked Ed Cotter to take responsibility for making sure that the
transition is smooth and that we have an objective, skills-based recruiting
process to fill positions in each group and segment. The process for staffing
the new structure will be announced in early October. At that time, we will
provide details on the structure, critical skills required and the process for
filling positions, recognizing both internal and external candidates.
I have complete confidence in this new organization and those who will lead it.
Together with the talented people from engineering and product marketing, they
will play a key role in returning the SBU to growth and profitability.
PM&D Implementation
Q&A Package
This Q&A package is grouped around questions about the PM&D concept
and about employee-specific, customer-specific and partner-specific
questions.
I. The Concept:
Q: What is PM&D?
A: Product Management and Development (PM&D) is a business concept
that integrates product management, product planning, product
development and product marketing into a single, market-focused process.
Organizations that employ the PM&D model are global, have focused P&L
accountability and apply resources to deliver competitive products to the
markets and manage them throughout their life cycle.
Q: How is this different from any number of past changes?
A: The new product businesses are formulated to serve specific markets.
Product marketing and Engineering are united within discrete
businesses. Managers are accountable for financial results, are
empowered to make business decisions and control key resources.
Q: What are the core problems addressed with this change?
A: The core problems being fixed are the inability to react quickly to market
changes, deliver efficiently innovative products to customers and
motivate our employees. Because the existing structure does not clearly
identify business responsibility and accountability, we miss
opportunities.
Without clear focus for our technical activities and timely connections
among all functions, we kept people from doing the very work that would
gain market acceptance and thus we lacked competitive advantage in the
eyes of our customers.
Q: What are the major benefits which will result from this change?
A: This new structure puts resources and decision making closer to the
customer, drives accountability and authority for business performance
down through the organization, and enables faster decision making.
Q: How does this structure relate to our overall product strategy? Our
software strategy in particular?
A: We will complete our current commitments for impending product
announcements and continue our work to refresh our product line. The
biggest change is that the people making product decisions are also
accountable for the business results. We're redesigning the work to ensure
that the products we bring to market are those that our partners want to
sell and our customers want to buy, and which have high volume
potential.
We are not satisfied with the robustness of our software strategy or
product set and work continues to improve both. We will make more
software available to our customers through a combination of expanded
use of partners and refocused internal development. Several senior
managers and technologists are in the process of examining the entire
portfolio and I expect a recommendation on software strategy in October.
Q: Where does Digital's product strategy come from?
A: The PM&D Group and Segment business managers are clearly
responsible for defining and implementing product strategy and
delivering competitive products. They will work closely with the CSD
Product Strategy, Business Strategy and Architecture & Technology
groups.
Q: Who really owns the P&L for products?
A: Product P&L responsibility resides in the PM&D organizations at the
levels with the most detailed knowledge of their customers, competitors
and marketplace economics. This is at the segment level for the three
platform business segments, and at the group level for the OpenVMS
Business Group and the Software Business Group. Decisions, work and
resources reside in the smallest business entity to drive market
responsiveness and rapid decision-making.
Q: Who was involved in formulating the plans to implement the PM&D process?
A: A Core Team of senior managers from across the corporation have been
involved in the design of this structure and support it. We have discussed
the changes with product designers, engineering, marketing and sales
managers, and product managers from several groups, in the USA and
internationally, to test the principles and plan out the implementation
process. The design reflects what customers and partners have told CSD
management they want to support their business needs and has also been
tested with industry experts.
Q: What was the rationale for organizing around these three major businesses?
A: Each business satisfied three criteria: identifiable customers, distinct
competitors and market economics specific to that group's product set.
Q: When will more details be available on how the new businesses will
interact, be managed, and succeed?
A: The phased implementation of the new businesses begins after October 3,
1994, and a detailed implementation plan will be announced at that time.
Our target for full implementation of the new structure is January 1995.
In the meantime, we will continue to honor our product and business
commitments without interruption through the existing organization.
Q: Digital has traditionally had a very strong central engineering function.
Why put Engineering into the PM&D structure?
A: By placing Engineering in the businesses we can more tightly connect
Product Development and Marketing, and link these to Manufacturing
and Sales, enabling the whole organization to react quickly to the market.
We can thus focus our limited resources on the most appropriate product
mix.
Q: What will be centrally managed across the product Groups and Segments?
How do you cost and allocate these functions?
A: The PM&D Leadership Team, comprised of the Group and Segment
Managers and leaders of several implementation support teams, is
currently working on the most effective ways to deploy and manage
shared marketing and engineering resources and other support functions
needed by more than one Segment or Group. This work is scheduled for
completion in October.
Q: How will the product PM&D Groups and Segments relate to other SBU,
ABU and Digital organizations and functions? For example, how does
forecasting get done?
A: The PM&D Groups and Segments will have direct and regular
interactions with SBU Manufacturing and Field Sales, Marketing and
ABU around product requirements, forecasts, product marketing and
product cost. SBU management is currently working with other business
units across the corporation to plan the deployment of resources to
support forecasting, logistics and other critical work. A new forecasting
process for the SBU, will be defined under the direction of the
Manufacturing organization and implemented by January 1, 1995.
Q: How will the management team ensure that this new structure is
effectively implemented?
A: The objective is to be fully operational by January 1995. An
implementation plan with clear deliverables and milestones will be
shared in early October. CSD management has established an
implementation team whose work is reviewed regularly, against
milestones and deliverables at CSD and SBU management team levels.
Progress will be communicated through employee meetings, special
editions of Digital Today, Readers Choice, Worldwide Web, VTX and
Infoteam, and the managers will be provided with briefing packages to
ensure that all the details are available and understood. It's not
possible for us to succeed without the understanding and support of each
employee.
Q: What is the role of those who are managing groups or segments on an
acting basis?
A: Acting managers will get the new businesses established by assembling
existing resources under an interim management structure. Our long-
term intent is to manage the new businesses with the best talent
available in the industry. We must now move forward with the new
market-focused businesses and implement new processes in order to best
bring competitive products to market. We will, however, develop a
management team that will draw on the very best talent over time.
Q: Is the OpenVMS Business Group responsible for AlphaAXP hardware
engineering?
A: No. OpenVMS is charged with the full OpenVMS business, but in the
area of development it is only responsible for OpenVMS operating systems
and OpenVMS layered products. It uses AlphaAXP hardware provided by
the Alpha Systems Business Group to supply OpenVMS systems to its
customers.
Q: Previous attempts like this failed in part because of difficulty in
tracking costs, allocations, etc. If the Group or Segment business manager
is going to be accountable for P&L, then that manager will also need
control over all of it -- even allocations. How will this control be
implemented?
A: Work is underway to provide the Group and Segment managers with the
systems necessary to make market-supporting decisions and to measure
their businesses. At the same time they will work through SBU
Manufacturing and Sales to achieve their business results.
Q: How will we ensure that innovation is fostered in the new structure?
A: It is clear that we must find ways to foster and support innovation within
the SBU. In ways similar to those our competitors use, the Groups and
Segments will encourage new sources of innovation, springing in part
from having a directed organization and talented employees. We will
direct both people and resources toward focused markets. This should
provide impetus and meaning for bringing ideas forward. We will
measure and incent managers to identify innovative programs at all
levels with the help of their organizations and to increase revenues from
new products.
Q: Will the PM&D business segment manager really have responsibility for
pricing?
A: Yes. The PM&D Business Managers, at Group and Segment levels, are
responsible for pricing strategy and setting worldwide list prices
throughout the life cycle of the products offered by their unit. They
agree to standard discount structures established by the Areas. This means
that the initial business plan must make pricing strategies clear.
Q: How long is this change in our business going to last? When can we expect
to see the next change?
A: The fundamental principles embodied in the PM&D organizations should
not change and our intention is to remain stable while best meeting the
needs of a changing customer environment and marketplace. Under such
circumstances we'll make whatever modifications are needed, when and
as they are needed.
Q: Who owns the salesforce? How do the product Groups and Segments get
the attention of the salesforce?
A: SBU sales & marketing and the ABU manage the salesforce and the
relationships for indirect selling. The PM&D Group and Segment
business managers will develop distribution plans for new products that
link to those of channels management in the SBU and to those of account
management in the ABU. The new PM&D management team, along with
ABU and SBU senior management, are working together to develop
consistency of operating principles for executing distribution strategies.
II. Employee Specific:
Q: How should I approach my current work in light of this change?
A: It is critical that we keep our eyes on our current goals and not divert
attention from essential priorities. The PM&D phase over plan will be
communicated by early October with information and schedules for
organization changes.
Q: Who decides who stays and who leaves the company?
A: These decisions will be made by managers within the individual business
units. These decisions will be based upon business needs, on the skills
required to satisfy those needs.
Q: Who is affected by the new structure and who is not?
A: All employees currently in the SBU engineering, product marketing,
product management and product segment organizations will soon be
working in the new PM&D structure. In addition, the business plans,
investments and products of the SBU's PM&D product Groups and
Segments will impact other parts of the SBU and other parts of Digital.
We are all affected by this fundamental change in the way we invest in
technology and people and the way we bring products to market. All our
work will have much more meaning as we measure our performance
against market goals.
Q: What is the process for assessing skills and putting the best people on
the job?
A: The new PM&D managers are accountable within established policy for
assessing skills and making the decisions for placement. Human
Resources has developed a staffing process for aligning the best skills
required to perform the new work. This process is designed to select the
most qualified candidates for open positions based on objective criteria
and to identify ways that training and education can enhance the skills of
selected candidates. We are also supporting an active college hire program
to provide the Groups and Segments with access to talent available
outside the Company.
Q: What will be invested in career development and planning and also in
skills enhancement and enrichment?
A: We are increasing our education/training investment. We are going to
train the people in our organization with new skills so we can achieve our
business and product goals. We are accelerating delivery of education
programs, beginning in the fall. Our new programs extend to engineering,
marketing, and management personnel worldwide.
Q: Is there a future in Engineering in Digital?
A: There is most definitely a future in Digital for innovative engineers with
the skills and experience most needed by the marketplace. Engineers will
participate in multifunctional teams within PM&D businesses where
their personal skills can and should grow. Some engineers, those
specializing in applied research and in other specialized activities, will
work in the ATG. In addition, Bob Supnik, as part of his new duties as
Vice President, Architecture & Technology for CSD, will initiate an
engineering stewardship program to preserve those cross-product
activities that drive toward engineering excellence.
Q: Is there a future in Product Marketing in Digital?
A: There is most definitely a future in Digital for product marketing
professionals with the skills and experience needed to develop product
marketing plans and programs to drive volume of products in their
segment. Product marketing professionals will work on teams where
their personal skills, total business experience and technical knowledge
can and should grow.
Q: How do we preserve the Engineering community if individuals are split
between SBU organizations, PM&D organizations and other business
units?
A: To ensure that engineering teams are connected to the market and are
part of a business team, we will no longer have a central engineering
organization. However, the PM&D management team understands the
importance of maintaining a feeling of community throughout the Digital
engineering groups, both inside the SBU and beyond the SBU. Managers
will be addressing ways to achieve this feeling of community by
considering items such as performance reviews, shared project work,
common development processes and standards, technical training and
seminars, career progression and mobility, etc.
Q: Is there an implementation plan to ensure appropriate
internationalization and localization of PM&D requirements?
A: Product focused Groups and Segments have worldwide responsibility, so
internationalization/localization will be a key requirement.
Implementation plans will address how to integrate the critical resources
to deliver channel-ready products on a global basis. The Core Team has
tested the principles and objectives of this plan with designers and
managers representing international groups.
III. Customer Specific:
Q: Won't product segments and groups favor selling through the captive
Accounts Business Unit (ABU) for selected accounts?
A: No, not at all. The ABU is measured on overall business in an account -
including systems integration and other business provided by resellers.
The incentives are clearly oriented to how the customer wants to buy, not
how we want to sell.
Q: If Digital is more focused on discrete product areas, does this mean that
customers won't be able to buy a complete solution any more?
A: No, the ABU will still be a full service channel for our larger accounts.
Other customers will receive full solutions via their indirect channel
suppliers. These full solutions will include a higher portion of
non-Digital products. The development of indirect channels is a critical
step toward achieving the volumes necessary to sustain long-term
profitability.
Q: How does this structure compare with other successful competitors'
techniques?
A: The segmentation and structure is similar to those of many competitors,
such as Hewlett Packard and Compaq, as is the creation of strong product
management and business orientation. We have gone further than most of
our competitors in aligning resources by business unit.
Q: Given that many products are bought together (HW, SW, etc.) and you've
split them into different product Segments, how will the new structures
operate in a "customer friendly" manner?
A: The three SBU product Groups are segmented by customer buying
preferences. Selling models for the ABU and the SBU will bring both
channel-ready products and consistent messages to our partners and to
our direct accounts.
Q: What happens to Industry Marketing?
A: What was Industry Marketing will reside in several places: the activity
that supports those specific industries on which we'll focus will reside
in the ABU; the activity supporting other partners will reside in SBU
sales & marketing; the activity supporting software development will
reside in the SBU Software Partners Development group. The phase over plan
will provide more detail in a few weeks.
IV. Partner Specific:
Q: How does this new approach change your commitment to partners?
A: This approach reaffirms our commitment to partners in a number of ways.
The field will be responsible for managing channel partners and the
PM&D organizations will be responsible for developing partner strategies.
Cross unit development/channel partners will be managed through an
SBU Software Partner Development group working with the line units.
Q: What is an Expertise Center? How does it support a partner?
A: The Expertise Centers provide support to application partners for
technology, customer events, and demonstrations. Expertise Centers
provide proof of concepts concentrated on particular areas such as
industries, products, and technologies.
Q: What will the product Segments do to increase market pull to support
Digital's new channels strategy? We plan to increase advertising and
marketing programs significantly from historical levels, both in absolute
terms and as a percentage of SG&A. We plan to have fully competitive
SG&A levels.
A: Increased efficiency in product marketing and increased market focus will
improve marketing activities such as advertising focused on key
product/customer sets. This focus will help us apply our scarce resources
best for market results.
Q: How will scarce products be allocated among partners and Digital's
Accounts Business Unit?
A: The ABU and external partners will be treated the same for allocation
purposes. In fact, all our business practices will treat internal and
external partners in an equal manner.
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