1. Analog Devices, Inc. Presented by: Joyce K. Fred and Darnell Price

2. ADI Overview  Who is ADI?  1996 Operations  Company Goal  1996 Company Strategy

3. ADI’s Successes  1965 to early 1980’s  Growth at 27% per year  1984 to 1986  Revenues grew by 46% ($313 M)  Profits grew by 105%  1988 Goal  Revenue Growth of $1 Billion

4. Warning Signs  1984 – 1986  Sales grew only 6.7%  Profits fell by 38%  Operational Problems  Process yields less than 15%  Defect Level > 20,000 PPM (Motorola @ 1,000 PPM)  On-time delivery was missed 40% of time  Customers complaining about quality  1986 Revenues Stagnant & Profits Declining  Sales declined by 5% - Industry sales up by 25%  Income Statement Income Statement

5. Looking for Solutions  Half Life (QIP)  Scorecard  TQM  Hoshin Kanri

6. Hoshin Kanri Planning Principles  Identify important areas of opportunity for the organization to change or improve  Determine the most cost effective actions throughout the organization to achieve these changes  Create a detailed implementation plan; and  Provide a review mechanism to identify corrective actions and learning.

7. Vision 2000  Build leadership positions in seven critical areas for signal processing  Grow sales & profits more than 20%  Develop employee’s skills and competencies

8. ADI’s Plan  Four Business Drivers  Customer Satisfaction  New Product Development  Organizational Capabilities  Financial Expectations  See Exhibit 8 (in case)

9. Group Discussion Questions  Given the solutions in the case, what strategy should ADI employ to accomplish its Vision 2000?  What organizational changes need to occur to implement the strategy and how will it be done?  Why?

10. Groups for Discussion  Group Members  Lisa, Ken, George  Group Members  David, Yasu, Bea, Van  Group Members  Amy, Elvira, Jeff

11. Michael Beer Graduate School of Business Administration Harvard University  “I view TQM as the continuous improvement of work processes to enhance the organization’s ability to deliver high-quality products or services in a cost-effective manner.”

12. Why TQM Failed at ADI !  Lack of commitment by senior teams to TQM, in adopting TQM, and agreement on implementing TQM  Lack of commitment to organizational and cultural changes for TQM  Lack of company wide two way (vertically and horizontally) communication for TQM  Lack of managerial capabilities in all sub-units with commitment to TQM

13. How to Implement TQM Insist that:  Leadership teams discuss the appropriateness of TQM to their sub-unit’s business model and problems.  The senior team conduct a diagnosis of organizational and management barriers to TQM and develop a comprehensive action plan for change.  The data collection and discussion process allow important, often threatening, issues to get raised and “publicly” discussed without negative repercussions.  New plans be stress-tested by those who implement them to determine their validity and the organization’s willingness and capacity to implement them.

15. Wrap Up-ADI: Dying Giant or Smart Student  ADI:2000 and Beyond  TQM Infrastructure: 7 Elements for Success  2003 (3 rd Q) Total Outgoing Electrical PPM = 25  2000 Revenues @ $2.5 Billion, EPS Rose 170%  Struggling some since 2000 (dip to $1.7 Billion)  2003 Revenues @ $2 Billion  WINS INTEL’S PREFERRED QUALITY SUPPLIER AWARD for the fourth consecutive year-2004  www.analog.com www.analog.com  www.forbes.com/finance/mktguideapps/compinfo/Compan yTearsheet.jhtml?tkr=ADI www.forbes.com/finance/mktguideapps/compinfo/Compan yTearsheet.jhtml?tkr=ADI