Analog Devices Inc.
PREPARED BY: KRUNAL DEGAMDIYA (119031)
DIVYESH CHADOTRA (119021)
KARTIK HINGU (119039)
ADI’s Industry in 2001
Rapid growth due to their products related to Internet devices, such as PC modems and
asynchronous digital subscriber line (ADSL) switches, components of mobile phones and
wireless infrastructure equipment, and components for PC accessories such as flat panel displays,
CD and DVD players, and digital cameras
Why rapid growth? During this time there was internet boom around the world. Internet was
changing the world at a very fast pace.
Challenges of this rapid growth
Different demand characteristics
A single product’s different components were made by numbers of companies so
there was very complicated supply chain, while previously whole product was
made by single firm.
The traditional distinct separation between digital and analog markets had
dissolved
The product design process required greater collaboration
New Demand Dynamics
Previously products having longer life cycle + the demand was from only
industrial and military side only = Demand can be predicted reasonably
Now in new era there was new consumer electronics and communication sector’s
products having shorter life = Difficult to manage inventory.
Due to speculative market ADI face 40% drop in revenue in 2001
Supply chain disaggregation increased
Semiconductor chip based manufacturing process required too much investment
in layman term investment like a nuclear power station.
It was volatile and risky so ADI was searching partner who is willing to take risks.
Out sourcing was becoming popular.
The Dominance of Digital Circuitry
Created New Competition
Price of digital devices was decreasing continuously world is moving towards
digital devices rather than analog devices.
But at that time, process of converting analog signals to digital and digital signals
back to analog was the most vital role for component manufacturers with analog
expertise.
ADI had built strength in digital signal processing so that they could offer similar
complete-solution products
Products Were Developed Collaboratively
ADI won a contract from 3Com to deliver components for a new 56K modem.
ADI’s proposal was viewed as superior because it integrated the function of
multiple chips onto a single chip—one that handled analog to digital conversion,
digital processing, and digital to analog conversion.
ADI’s design promised decreased size, better performance, and a faster time to
market
Time to market was critical because 3Com intended to release the product in time
for the back-to-school sales surge.
To handle the number and complexity of industry relationships, a traditionally skilled sales force,
adept at selling components that met customer specifications, was inadequate. As a result,
customer relationships were handled by “Field Application Engineers”.
ADI’s Strategy in 2001
In 2001, ADI still perceived that their greatest strength was in innovation and product
design
ADI sought to focus their efforts on “sweet spots” in the market for integrated circuits that
promised the greatest growth.
The Internet boom had created phenomenal growth in 2000. 2001 would not be a repeat.
the company believed that new product designs, which involved the integration of digital
signal processors and analog-digital-analog converters on single chips were the most
promising growth area.
ADI also planned to focus on improving demand for existing products.
ADI also planned to focus on improving demand for existing products. They planned to
invest
in better e-commerce applications and increase resources available to the sales force.
Cost and quality continued to be a concern for ADI
centralized manufacturing planning and intended to continue to progress on a
variety of manufacturing initiatives
These initiatives included:
1. Standardizing production across sites
2. Combining assembly and testing under one roof
3. Finding off-shore sites for less expensive testing
4. Efficiently releasing new product designs to factories.
ADI’s Scorecard in
2001
• After the year 2000 ADI’s business
was undergoing constant change, ADI
kept their system as flexible as
possible. ADI frequently introduced
new metrics as business conditions
changed
• Right hand side provides a
comparison between the 1987, 1999,
and 2001 scorecards.
• In the third quarter of 2001, the three
areas of focus were:
1. Revenue growth
2. New product introductions
3. Channel management
Goal Setting Process
• In their initial scorecard efforts in the 80s, ADI had set goals for many metrics
through a half-life improvement calculation
• ADI used two approaches to setting goals in instances where the half-life
calculation was inappropriate.
1. The first was very similar to a traditional business planning process
2. scorecard goals were established top-down by senior managers using a
combination of analysis and experienced judgment
• The goal-setting process required cross-functional collaboration.
Q-1 How did ADI’s industry change
between 1996 and 2001?
Internet era let to a 78 % increase in top line growth
Change in demand characteristics for ADI’s products
Disaggregation of the supply chain
Operators of chip fabrication
Global component distribution
Contract equipment manufacturers
Tradition distinction between analog and digital market was increasingly becoming blur
Greater collaboration required in the product design process
Reduce product life cycle
Q2. HOW ARE THE TARGETS SET FOR THE
METRICS ON THE SCORECARD? WHO SETS
THEM?
Gradual drift from half life concept as it was only suitable for weakness based me
asures
Goal setting process
Bottom up
o Divisions prepare the plans which are approved by the senior management, based
on the plan post consultation with both the parties goals are assigned
Top down
Senior management assigns goals to the lower rang managers
Cross Functional Team sets the targets
Q3. IS ADI’S SCORECARD AS USEFUL TODAY AS IT
WAS IN THE 80S? WHAT ARE THE LIMITATIONS TO
SCORECARD? WHAT CAN GO WRONG?
Not as effective as in 80s
Change in Business Environment
Extremely dynamic measures are not included in
the Executive information system and are captured through spreadsheets
Presence of too many measures make them less relevant as actionable information
The Scorecard was not linked with the employee compensation
Q4.WOULD YOU MAKE ANY CHANGES TO THE
WAY ADI MANAGES ITS SCORECARD? WHAT
CHANGES? WHY?
Metrics should be embedded in EIS & not on manual spreadsheets
Metrics should be kept flexible
Q5. DOES THE METRICS SYSTEM HAVE FLAWS?
CAN EMPLOYEES GAME THE SYSTEM? WHAT
ARE THE DANGERS OF THEEIS?
As employees and the organization get used to the old way of
doing things, new scorecard measures should be introduced
keeping in mind the following,
Dynamic nature of the semiconductor market
Time required to implement the project
Dangers of EIS
Ubiquity of information Presence of too many measures
make them less relevant as actionable information
Benefits hard to quantify
High implementation costs
System may become slow, large, and hard to manage
THANK YOU
