Professional Documents
Culture Documents
IBM - Rochester
IBM - Rochester
IBM - Rochester
IBM today is not the organization that it was in the late 80's. IBM Rochester is no
exception and is a much changed organization, having built on its solid foundation of
total quality management employed in the late 80's to become the dominant, world
class, global supplier of mid-range commercial computer solutions. IBM Rochester’s
story is interesting in the context of the Baldrigeplus case study collection because of
the eight, it represents the oldest award − ten years have passed since a 17-person
IBM team put together the 1990 winning application.
It’s also interesting because it still reads well − it could be a 1999 application
(although not at the national Malcolm Baldrige level, where standards are now much
higher − maybe for a state award?). That’s an important observation to me (read
through the material and see if you agree) because as an enthusiast, I argue that
Baldrige is not just another passing management fad, not just another tool du jour, but
rather is a continually adjusted, ‘at the validated leading edge’ (Harry Hertz, personal
communication, 1999) approach to management excellence.
The case study begins with a run through the 1990 application material, represented
by, extracted and edited from, the 1991 second edition of the 20 page Baldrige
application summary and the two-page fact sheet that NIST publishes.
For a rounded picture check the IBM Rochester exhibits which deal with specific
issues; the quality dashboard; customer feedback and, customer satisfaction and
market share exhibits.
Malcolm Macpherson
1
Introduction to IBM Rochester
The IBM site in Rochester, MN is a 1 mile long facility consisting of 32 interconnected
buildings covering 32 acres, with 7,000 employees. It is the ‘home of IBM's AS/400
commercial mid-range computer,’ where both development and manufacturing are
performed. It is also the location of manufacture for the RS/6000, IBM's mid-range
commercial UNIX-based computer system. The AS/400 and RS/6000 products span
the range from desktop PC's to mainframes. There’s also some disk substrate
manufacturing at this site. Most of the Rochester site staff are engineers, programmers
and professionals. At the time of writing (early 1999) one AS/400 was shipped every
12 minutes, and the AS/400 business was worth about 15% of IBM’s total revenue.
The AS/400 is the world’s most popular multi-user business computing system, with:
• a broad range of customers
• 600,000 systems installed in 150 countries
• 97% of FORTUNE 100 industrials are users
• 28,000 commercial applications in use (more than any competitor) written by
IBM’s business partners and customers, in 40 national languages
• Y2K certified
Both systems are developed and manufactured world-wide, and both products and
their manufacturing sites are world-wide ISO 9001 and 14001 registered.
In 1990 the concept of quality at IBM Rochester was linked directly to the customer.
Detailed features were crafted by analyzing the needs and expectations of existing
and potential owners of the firm’s computer hardware and. At every step, customers
were directly involved in product from design to delivery − through advisory councils,
global information systems, trials of prototypes, and numerous other feedback
mechanisms.
The IBM Rochester quality culture had been transformed from reliance on technology-
driven processes delivering products to market-driven processes directly involving
suppliers, business partners, and customers delivering solutions. A 30% improvement
in productivity occurred between 1986 and 1989. Product-development time for new
mid-range compute systems had been reduced by more than half, while the
manufacturing cycle had been trimmed 60% since 1983. Customers benefited from a
3-fold increase in product reliability; an increase from 3 to 12 months in the product
warranty period; and a cost of ownership that was among the lowest in the industry.
IBM’s share of the world market for intermediate computers increased in both 1988
and 1989.
2
IBM Rochester at a glance in 1990
Rochester manufactures intermediate computer systems − currently the AS/Entry
Systems and the Application System/400 (AS/400). More than 400,000 IBM Rochester
systems had been installed worldwide by 1990.
The Rochester location also made hard disk drives, sales of which accounted for
about a fifth of IBM Rochester's revenues in 1989.
IBM Rochester provided employment to more than 8,100 people and was responsible
for product development and US manufacturing. In addition, its processes were
implemented in plants in Japan, Mexico, the UK and Italy.
Each senior manager “owned” one of the six factors and assumed responsibility for
plans and implementation. Progress toward achieving improvement goals was closely
monitored. Support processes were a part of this network.
Quality goals were established in five-year business plans and annual operations
plans. Strategic targets were derived from comprehensive benchmarking processes.
With the aid of financial planning models and mathematical decision-making tools,
quality priorities were set, and the resources human and capital necessary to carry
out these priorities were determined.
Most plans for achieving quality objectives originated with employees, and cross-
functional teams identified needs for equipment, staffing, education, and process
development. Each quality improvement plan had an owner, a managerial or non-
managerial employee who headed the project team. With employee input, objectives
and requirements were established for each employee, and a measurement system for
monitoring progress was developed in advance of the project. Close coordination and
efficient communication were ensured through regular planning meetings, in which
key suppliers and customers participates.
IBM Rochester invested heavily in education and training, the equivalent of 5% of its
payroll. Employees, supported by IBM's tradition of full employment, were
encouraged to develop the skills and expertise for a variety of jobs. In 1989, about a
third of the work force moved into new positions, and 13% were promoted. IBM
Rochester was implementing a Management System for Education, which offered skill
planning, needs assessment, individual education plans, and educational road maps
on-line. Job flexibility and security, ample opportunity for advancement, and a well-
developed recognition process were among factors contributing to rates of
absenteeism and turnover well below national averages. Employee contributions to
quality improvement were recognised in a variety of ways, including luncheons,
receptions, and monetary and non-monetary awards.
3
Morale was high, as determined in IBM annual surveys, and by an independently
conducted survey that compared levels of worker satisfaction at 34 US companies.
Equipping workers with the tools and information they need to accomplish quality and
customer satisfaction objectives was also a priority. Over 11,000 on-line terminals
provided employees with world-wide access to extensive communication
capabilities, databases, and design and analysis tools. For example, since 1966, IBM
had invested more than $300m in improving its processes and information systems.
Such investments, many of them designed to improve problem-solving capabilities
ensuring that defects are prevented rather than detected after they occur; paid for
themselves. Capital spending on equipment for defect detection declined 75% during
the 1980s, and write-offs as a proportion of manufacturing output dropped 55%.
At the start of the product planning process suppliers were included as partners to
ensure that new hardware and software achieved IBM’s goals for manufacturability,
serviceability, reliability, performance, and cost. Accounting for about 30% of
production output, IBM Rochester's approximately 700 production suppliers were
expected to provide defect-free shipments- and to keep pace with progress in
improving quality and reducing development and manufacturing cycles. Suppliers
were trained, audited, and certified, and required to submit quality plans. IBM
Rochester shared its own state-of-the-art technology with suppliers and, in turn,
suppliers provide valuable expertise to IBM. Since 1984, IBM Rochester employees
had instructed more than 1,909 supplier employees on continuous flow
manufacturing, statistical process control, and design of experiments.
The Rochester quality process was a continuous loop that began, ended, and began
again with the customer. Of the approximately 40 data sources analysed to guide
improvement efforts, most either provided information on customers' product and
service requirements or guide steps to refine these expectations into detailed
specifications for new IBM offerings. Customers were also active participants. For
example, customers and business partners- representing over 4,500 businesses
worldwide participated on customer advisory councils throughout the development of
the AS/400.
To strengthen its competitive quality position, IBM Rochester was aiming for a tenfold
improvement in key quality areas by I 991, a hundredfold improvement by 1993, and
a six sigma level of defects by 1994.
The Rochester site at that time reported to two of the seven lines of business in the
IBM Corporation the Application Business Systems (ABS) line of business for its
AS/4000 family of products, and to the Enterprise Systems (ES) line of business for its
hard disk drive family of products. Inside the US sales and service support was
provided by the US Marketing and Service line of business, and outside the US this
line of business was supported by the World Trade Organisations. Corporate quality
guidance to all lines of business was the responsibility of the ‘Market-Driven Quality
Organisation.’
4
The IBM organisation, March 1991
IBM corporation
management
committee
Canada/Latin
America
Application Enterprise
business systems systems line Other lines of business,
line of business of business marketing and service
Personal systems
Technology products
Comms systems
IBM Endicott
Other IBM sites
At that time more than 400,000 AS/400 and predecessor systems (System/38 and
System/36) have been installed worldwide. The AS/400 system software had been
translated into 28 national language versions to support the over 60% of AS/400
systems installed outside the US.
The AS/400 system was sold directly by IBM as well as by over 7,000 independent
business partners worldwide. A 6,000-member independent user's group called
COMMON provided valuable input to IBM Rochester for future product needs and
requirements.
The storage devices produced in 1990 at Rochester included hard disk drives for the
AS/400 and RS/6000 systems, and the PS/2 computer. Rochester also provided
hard disk drives to other computer equipment manufacturers. These hard disk drives
were considered leaders in their class in reliability, performance and diagnostic capa-
bilities.
The Rochester site housed electronic hardware and software systems development,
hard disk drive development and manufacturing, as well as prototype facilities for
machining, plastic molding, heat treating, plating and integrated circuit processing.
IBM Rochester also had its own tool and model makers who built test and process
equipment.
5
Sixty-six percent of IBM Rochester's then 8,100-person workforce was comprised of
engineers, programmers and other professionals, who continuously recorded very
high morale − the highest among IBM sites − as measured by annual opinion surveys.
The site’s safety record was 60% better than the industry average, and its turnover
rate was significantly below the industry average.
Quality deployment
The cornerstones of the IBM culture, said the 1990 application summary, were IBM’s
basic beliefs, respect for the individual, the best customer service, and pursuit of
excellence − fundamental cornerstones of the business that had remained unchanged
for 75 years.
Corporate Policy Letters and Corporate Instructions (CIs) provided guidance for
implementing these basic beliefs. For example, CI 101 required that all business
processes, product and non-product, improve continually to make them more
efficient, effective, and adaptable.
CI 105 stated that each new product must be superior in quality to previous products
(both IBM's and competitors'). Before announcing a product, each IBM development
lab had to demonstrate to the corporate quality organization and other line executives
that it was complying with CI 105.
Goals and market-driven quality principles were developed from the Corporate Policy
Letters and Instructions. IBM's Market-Driven Quality Principles were:
• make the customer the final arbiter
• understand our markets
• commit to leadership in the markets we choose to serve,
• deliver excellence in execution across our enterprise.
IBM Rochester had a quality policy, a vision, and a set of quality goals that are
deployed throughout the site to individual departments. This policy was supported by
the site vision:
• Customer − the final arbiter
• Products and services − first with the best
• Quality − excellence in execution
• People − enabled, empowered, excited, and rewarded.
Quality objectives were integrated into employee performance plans and agreed
upon by both the manager and the employee. This process fostered employee
participation and empowerment. Each element of quality improvement built a solid
foundation for achieving Rochester's business objectives.
The illustration below (next page) is the 1999 version of Rochester’s quality journey.
In 1990 the staircase ended at 1990-1994, and the mid-decade goal was “undisputed
leadership in customer satisfaction. IBM Rochester is now strategically positioned to
implement an expanded set of initiatives that build upon prior successes.
“The new initiatives consisted of six critical success factors and proactive customer
satisfaction processes that integrate all elements of development, manufacturing,
marketing and service. The goal of IBM Rochester is to be the undisputed leader in
customer satisfaction.”
6
1988 1989
Self assessment Application/site visit
- the value of ‘writing it down’ - taking an enterprise-wide view
- transforming data into information - lack of trend data identified
1991 1990
AS/400 MDQ Gold Award Malcolm Baldrige National Quality
- tying management/measurement Award winner
system to goals - value of teams recognised
- constancy of purpose - necessity of committment to leadership
1992 1993
ISO 9001 site registration Worldwide AS/400 MDQ Gold Award
- continuous improvement process - value of worldwide view
with category champions in place - alignment of business through the
AS/400 quality process
1995 1994
Self assessment Improvement
- value of disciplined decision making - continuous improvement process
- teaming beyod AS/.400 with senior executive ownership
- improved customer focus of five key opportunities
1996 1997
Self assessment Self assessment
- improved key business and - reenergise focus on customer care
customer measurements - expedite skill building in the
- strong customer focus marketplace
- balanced scorecard of measurements
- ISO 14001 registration
A twenty year journey
IBM Rochester’s excellence timelines
1998
Assessment integration
- continual assessments via
internal business processes
20
00
n
Visio Reforming
Strategic
19
Process
80
Process and
product
simplification
Product ISO 9001 and
Enterprise 14001
Market-driven integration Process
quality, Global reengineering
Benchmarking business Business and
Product Customer Empowerment customer-
Zero Manufacturing introduction relationship Baldrige focussed
defects cycle time cycle time management assessment measurements
Leadership
7
According to the 1990 summary, Rochester's quality journey began in 1981 with the
People Responsibly Involved in Developing Excellence (PRIDE) initiative, which
focused on improving product reliability. In 1984 the quality journey was expanded to
include process efficiency and effectiveness, and manufacturing cycle time
improvements. In 1986 the quality journey continued with planning and development
cycle process improvements and integrating suppliers and customers into
development and production processes. In 1989 Rochester's quality journey led to
embracing market-driven customer satisfaction goals, focusing on total cycle time to
the market, and extending customer involvement even further.
Strategy
Support customer success
Meet customer needs
Expand the market Requirements
Establish accurate
Gain product and service
satisfied customers specifications
Key
Cycle time Six sigma
reduction
measurements
Create faster
Prevent development,
solutions and
manufacturing and
increase competitive
service rework
advantages
Improve Employee
Employee
productivity education
involvement
and cost
Working toward ‘Six-Sigma quality goals,’ IBM Rochester had reduced development,
manufacturing, and service rework by ensuring that processes produced correct
results the first time. Improving education and employee involvement had increased
productivity and reduced cycle times, enabling faster market response and
competitive advantage. Key measurements verified that processes were definable,
repeatable, and predictable. As this cycle continued, Rochester's strategy was to
‘delight its customers by providing solutions that helped them achieve success in their
business.’
8
Market analysis
Interrelationships between company policy, business goals,
Corporate goals
and segmentation policy, and business and functional strategies and operating plans
instruction
Supplier
Benchmarks
strategies
Customer solution
Source IBM Rochester’s Malcolm Baldrige National Quality Award
summary publication, second edition, IBM, Rochester, March 1991
9
The illustration above (previous page) is redrafted from the 1990 application. Below is
the 1999 version, from an IBM Rochester view graph.
Strategic planning
In 1990 an annually written strategic plan looked forward five years, using
information from market analysis, competitive and industry data, and evolving
technology, in the context of long-term business and quality goals set by IBM
Corporate HQ.
• Customers provided product direction
• suppliers assisted in product sourcing
• teams of employees developed a business strategy that included product and
business goals
• manufacturing, development, marketing, service, and support teams developed
functional strategies that contained the quality improvement plans required to
achieve the strategy.
10
IBM Rochester’s product processes in 1990
Planning Development Manufacturing Marketing
Service
Market analysis High-, low-
Segmentation level design Branch office
Component
Position
Simulation manufacturing
Supplier Customer order
Customer manufacturing
Build hardware Order
requirements
test units Sub-assembly validation
Engineering, manufacturing
product,service, verification,
objectives Installation
manufacturing, planning
System
certification 1,2
Customer manufacturing
validation Software, hardware, Installation
component, unit
integration Shipping
Component
Maintenance
specification Customer Sub-system,
Failure service and
validation system test
analysis support
Customer
Information flow Major transition
The manufacturing process engaged suppliers and the product development team
through joint decision making activities early in the cycle. The marketing and service
process tailored solutions to customer’s needs and represented the voice of the
customer in defining new requirements.
Rochester’s global market analysis and segmentation process gathered data from
sources in all geographic markets − consultant reports, government demographics,
economic forecasts, university studies, and user group feedback − each segmented
into small, medium, and large enterprises and establishments and then into industry,
sub-industry, and application opportunity market segments.
For example, the distribution industry could be segmented into wholesale, specialty,
and retail; retail into drug stores, auto parts, and hard-goods segments (next page).
11
Market analysis and segmentation
Geographies
Industries Sub-industries
Mfg Wholesale
etc …
Drug stores
Health Distribution Retail Auto parts
Hard goods …
Specialty
Process Finance
small
medium Application opportunity segments
small enterprises large establishments
large enterprises
medium enterprises
Source - adopted from IBM Rochester’s Malcolm Baldrige National Quality Award
summary publication, second edition, IBM, Rochester, March 1991
Analytical hierarchy
Target markets
To select target markets, Rochester evaluated market segments for their attractiveness
and for product and service fit. Attractiveness and fit comparisons were analyzed
using the analytical hierarchy process, comparing the relative strengths of each
market segment with the ability to deliver solutions to it. From this analysis, target
markets were selected and pursued.
12
Product quality features and requirements were weighed against the resources (both
people and expenses) needed to achieve those requirements. To balance the plan, the
items were prioritized into short-term (2 year) and long-term (5 year) projects. This
plan was validated through customer councils and marketplace feedback and
adjusted as required.
Defect prevention
Design Early
10 support
programme
5
Test Testing
13x
Design
x 0
ESP GA
Inspection Verification
Time
Future
development cycle
Design time Test time
1988 development cycle
Historical data were used in the software development process to build a defect
removal profile. With this profile, a model was established to track development and
accurately predict the number of defects to be removed at each step in the process.
13
Cycle time benefits realised through hardware
simulation and a new software development process
System/36 and System/38 sequential development
Hardware pass 1
Hardware pass 2
Hardware test
Software development
System test
Hardware
development with
EMI
Hardware test
10 months saved
Software
prototyping
Software development
Customer review
System test
16 months saved
Ship
Using an ‘Early Verification Engine (EVE)’ to simulate the system design resulted in
80% improvements in the time required to debug hardware from the initial design,
eliminating a need for multiple design iterations.
Customers played a major role in clarifying requirements and ensuring that products
met their wants and needs. An iterative software development process was used to
involve customers. Customers were asked to validate the development decisions.
Required changes were made in subsequent iterations.
14
IBM Rochester
Customers are involved throughout the product cycle
Customer User groups Software Customer Early Customer
and partner usability availability partnership
business COMMON laboratories testing programme calls and
partner surveys
councils
A Software Partner Lab provided an opportunity for customers and business partners
to jointly develop solutions for future product releases. Customers validated that their
requirements were being met, verified that their application programs would operate
effectively on newly designed systems. Customers participated regularly in the
usability testing center to verify that Rochester's products met their operational
requirements.
Contacted by IBM 90 days after receiving an AS/400 system, customers were thanked
for their business and asked about their satisfaction with their new system. See the __
item for detail of how this process works in 1999.
Online tools
An ‘electronic office system’ linked employees worldwide, allowing ‘real-time
communication.’ Online systems ensured that accurate and consistent data was
available for quality improvement and root cause analysis. Rapid communication with
sales representatives, systems engineers and field engineers aided in problem solving
and in communicating opportunities for improvement.
Manufacturing process
The process of moving a product from development to manufacturing was highly
automated. Design data was translated into online manufacturing controls to improve
the quality of manufactured parts. The central control point of the manufacturing
processes was the Manufacturing Control System. Customer orders were
automatically transmitted from the branch office to the Manufacturing Control System
and fed directly to the assembly line.
15
Production was controlled by the customer order, with design data automatically
translated into manufacturing process control information. Assembly and sub-
assembly areas provided process information to manufacturing control, and data were
analysed and reviewed by cross-functional teams for future improvements. Online
systems provided timely and consistent design information to world-wide
manufacturing locations. The automatic translation of information eliminated
opportunities for errors and reduced process steps and time.
Process management
Root cause analysis
Confirm
Recreate problem
Repeat failure
Restate process deficiency
Complete process review
Visit supplier or customer location
Probe
Examine with electron microscope
Examine checkpoints, dumps, and traces
Examine vital product data
Find last point before failure
Analyse
Determine frequency of occurrence (using a Pareto diagram)
Review trend data (trend diagram)
Review statistical process control charts
Decide how exhibited and how found
Evaluate single supplier vs multiple supplier
Analyse execution path, system state, and environment
Correlate
Correlate supplier data, in-house data and customer data
Find indications of problems in other measures
Identify recent process changes
Determine batch, job lot, time stamp and release level
Isolate
Isolate possible causes (using a fishbone diagram)
Rank by probability
Perform additional testing
Perform experiment at suspected point of origin
Test for stress (heat, voltage, strength, life etc)
Test boundary conditions
Online systems provided the data used in root cause analysis − based on an ability to
trace information back to its source. For example, information from manufacturing
control was analyzed to assess changes in new designs or to track problems back to
source. IBM Rochester followed a disciplined approach to track down the causes of
process ‘upsets,’ consisting of the steps in the illustration above.
“This method uncovers the root cause of a problem, identifies required improvements
for products or processes, and expands existing knowledge of the complex
interrelationships involved in satisfying customer needs," the 1990 summary
concluded.
For example, the transformation of the engineering change process from traditional
printed copy to an online environment was successfully completed by a quality
improvement team. The process owner, a line manager, was also a member of the
team. Working closely with its internal customers, the team began by modeling the
process, using root cause analysis to determine what caused process upsets.
16
The process was restructured and unnecessary steps were removed. To implement
the new process, education and support were provided to customers across the site.
Business gains were realized in product cycle time, efficiency, and communication.
Continuous Flow Manufacturing begins with an examination of the total process, from
a customer order to raw material gathering through manufacturing and customer
installation. Order sizes, improvements in tooling and changes in process flow are
some of the factors affecting CFM cycle time.
Expert system
configuration Plant and manufacturing
control system
Order entry
and validation Build order and assembly
Customer Branch office sequence control
order
and marketing
Distribution
On-line ordering was in use at Rochester in 1990, linking customers to the AS/400
production process. Orders, configured with the assistance of sales representatives
and validated when entered into the system, were routed directly to manufacturing
control, where build order and assembly sequence information was generated and
sent to the plant floor.
Human resources
Achieving market-driven quality goals depended on enabled, empowered, excited
and rewarded employees, the 1990 application summary said.. IBM Rochester’s HR
strategy attempted to bring about a cultural shift from a product-driven focus to a
market and customer-driven quality focus, and consisted of three initiatives:
1. formal education
2. on-the-job customer contact
3. participation.
17
Integrating people into quality and business plans
The Customer Partnership Call process thanked customers for purchasing an AS/400.
The call was (and still is, see the Customer calling at IBM Rochester exhibit) made 90
days after shipment from Rochester, seeking the customer's likes and dislikes, as well
as any comments they may have. These comments were placed in a database, ana-
lyzed, and distributed regularly to engineering, programming, marketing,
manufacturing, and service teams for evaluation.
18
Dissatisfied customers or customers with concerns were contacted by marketing to
understand their concerns in more detail. The Customer Satisfaction Project Office
received notification of the results of the customer contact. Thirty days later, the same
customers were called back to ensure they were satisfied. Other methods to ensure
leadership in customer satisfaction included customer satisfaction surveys,
independent consultant reviews, and industry-accepted reports.
Customer satisfaction
Corporate/LOB
management team
- sends feedback
complaints
to branch office
Area/branch - records complaints
- analyses complaints
Investigator
assigned
Analysis of results
the same day
presented to:
- customer satisfaction
Close complaint council
within 2 weeks - customer satisfaction
process council
- LOB general manager
Product, service,
and process improvement
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