Analog Devices, Inc.
1. Strategy in the second half of the 1980s: Having innovative, high-quality products and being a reliable, responsive supplier.
2. (1) Benefits of the “half-life”: it will encourage the company to reduce cost and defective rates. The total quality of the production has been improved. (2) Limitations of the “half-life”: it focuses only cost, not revenues. The quality goals and the company’s goals were in conflict. Half-life made the whole company centered on the quality improvement, while other key factors were ignored. (3) The half-life is not the same for all processes. It depends on the complexity of the process. There are two dimensions to complexity: technical and organizational. Technical complexity is high for new technologies, where part of learning process is related to understanding and refining that technology. Over time, as the technology matures and its use becomes more routine and familiar, technical complexity declines. Organizational complexity arises when a process has linkages to processes outside of its boundaries. These processes may be internal or external to the organization. The linkages may be one-way, one-time or interactive, routine or requiring real-time negotiation. So processes can run the full organizational gambit, from completely self-contained to cross-functional or cross-organizational. As the cultures, goals and objectives of the various players come into potential conflict, the rate of improvement will be expected to slow. (4) Differences between the half-life concept and the experience curve concept: the experience curve, like the half-life, is also an empirical observation. It states that for each doubling of cumulative experience, real unit cost drops by a constant percentage. Half-life deals with defects, not cost. The half-life method, on the other hand, predicts that the rate of decline of defect level is constant over time. The experience curve is a purely empirical observation and is not based on any
2. (1) Benefits of the “half-life”: it will encourage the company to reduce cost and defective rates. The total quality of the production has been improved. (2) Limitations of the “half-life”: it focuses only cost, not revenues. The quality goals and the company’s goals were in conflict. Half-life made the whole company centered on the quality improvement, while other key factors were ignored. (3) The half-life is not the same for all processes. It depends on the complexity of the process. There are two dimensions to complexity: technical and organizational. Technical complexity is high for new technologies, where part of learning process is related to understanding and refining that technology. Over time, as the technology matures and its use becomes more routine and familiar, technical complexity declines. Organizational complexity arises when a process has linkages to processes outside of its boundaries. These processes may be internal or external to the organization. The linkages may be one-way, one-time or interactive, routine or requiring real-time negotiation. So processes can run the full organizational gambit, from completely self-contained to cross-functional or cross-organizational. As the cultures, goals and objectives of the various players come into potential conflict, the rate of improvement will be expected to slow. (4) Differences between the half-life concept and the experience curve concept: the experience curve, like the half-life, is also an empirical observation. It states that for each doubling of cumulative experience, real unit cost drops by a constant percentage. Half-life deals with defects, not cost. The half-life method, on the other hand, predicts that the rate of decline of defect level is constant over time. The experience curve is a purely empirical observation and is not based on any