troubled, which has become a jj&eg jerk association with ... · 3/10/1986 · 6515y - draft...

6515Y - Draft #4-FEXECUTIVE BRIEFING

R. M. Price

March 10f 1986

Good Morning.

I know that the invitation to be here this morning came to you on

short notice, but there are a number of things we needed to talk

about ... and we needed to talk about them as soon as possible.

In a few weeks we will issue the 1985 Annual Report to the

stockholders of Control Data Corporation. In that report, people

are going to read about a year of the worst financial performance in

our corporate history. They're going to see loss numbers that a

couple of years ago we wouldn't have dreamed of in our worst

nightmares.

1985 is over. There's nothing we can do now to change what happened

last year. But we carry its legacy. You, like I, must be sick of

seeing in every media piece on Control Data the phrase "financially

troubled", which has become a Jj&eG jerk association with the Control

Data name. What we can do is change what's going to happen this

year...and what will happen in the years that lay ahead of us. This

is our challenge—yours and mine. And the goal? — Just think of it

as being to eradicate the phrase "financially troubled Control Data"

from the vocabulary of the media. I'll talk about some goals which

are essential to achieving this goal in a moment.

R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>

- 2 -

We've started talking about "A New Day" for Control Data. We've

been saying that we've taken our lumps, have learned our lessons and

have set off on a new direction for the company.

Well, it's true. We have begun a new day and we are going to be

taking a new direction. That's what we want to talk with you about

today...because each of you will be playing an essential role in the

New Day of Control Data. I want to discuss this vital issue with

you face to face, rather than have you read about it in the annual

report or in some executive memorandum.

Over the years, Control Data has spent a lot of time talking about

values. We have whole volumes that contain lists of beliefs...and

principles...and objectives. We have created a whole set of

historical myths that we repeat to each other at the proper time.

But after a while, these myths become like a familiar

tune...Everyone sings the song, but nobody hears the words.

This morning, I want to go over some of those words.

I know there are a number of unspoken questions hovering around this

room right now. I would like to answer some of those questions. I

want to discuss some of the basic business issues which—if they're

not brought out in the open—could continue to eat away at the

organization.


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The new day for Control Data doesn't mean that all the problems are

behind us, or even the practices that caused the problems in the

first place. It does mean, however, that we will bring these things

out in the open; that we will deal with them honestly and candidly.

It means we will change — we will make the changes we need to make

and then move forward with confidence.

The toughest management challenge we face right now is to make a

solid connection between what we say...and what we actually do. We

haven't made that connection very well over the past few years, and

as a result our credibility has suffered greatly...So let's face it

squarely. The financial community doesn't believe us. The media

doesn't believe us. Customers question our claims, and employees

work under a cloud of doubt.

Those of us in this room are responsible for that loss of

credibility. Hell, there are people here who don't even believe

what they themselves say!

How would you feel if you were a supplier to Control Data, and were

asked to hold an invoice for 90 days as the company declares a

half-billion dollar net loss? How would you feel if you were a

Control Data customer and shipment was delayed time after time. And

then didn't work when it finally got there?


- 4 -

We can put these questions to each other all day long, but until we

come up with some answers...until we come up with some solutions,

we'll just be beating our gums without making any progress.

The answer...the solution...to this serious credibility problem can

be expressed in deceptively simple terms. One word, in fact:

QUALITY.

Quality in every aspect of corporate existence, in every nook and

cranny of this huge organization. Quality in every action, every

process, every procedure, every decision...every individual who

draws a Control Data paycheck...and that includes you and me.

Quality isn't an empty word. It isn't a task force, it isn't a

program. It is a total way of doing business — a process and

approach to how we carry out each task.

As much as we've talked about quality around this company, there are

still too many people who find it too easy to just "get by." On the

individual level, we do not have a pervasive mindset that holds

absolute quality as standard operating procedure.

It's difficult to create that mindset among 40,000 people, but it

starts with probing and unquestioned attention to detail. Attention

to detail is simply not an integral part of Control Data's

culture — and it shows.


- 5 -

In effect, people's first question seems to be: "What does my boss

expect?" Instead, the first question should be, "Is there a better

way to do my job?" That kind of a prevailing attitude needs to be

fostered at all levels of the company. And it begins right here in

this room.

In a company the size of Control Data, almost anyone can do enough

to just "get by." But the other people on either side know what's

going on. And if they're making the effort, and you are not—and

the company is treating all of you the same—then one of two things

is going to happen. Either the good people will leave in disgust,

or everyone will sink to the same level of mediocrity.

Mediocrity is not good enough for me, and it shouldn't be good

enough for you.

In this respect, absolute quality is a function of intellectual

honesty—as well as prompt recognition and generous reward for

performance. A dedication to being the best — quality — "Control

Data means quality" — that's my first goal.

If we are honest about it, we can see how things we've said in the

past have become acceptable excuses for present performance.


- 6 -

The phrase "long-term," for example, has become a kind of shorthand

for "no-profit-in-sight. In that topsy-turvy culture losses almost

seem to have become a badge of honor ... proof that we are at work

on something hard. We could be excused—from the burden of showing

a profit, or from accountability in general. We would argue that

our strategy was so fundamentally sound that it would inevitably

turn to gold.

Well, where is the gold?

Some years ago Phillips Petroleum used a marketing slogan with all

that advertising: It's performance that counts.

I like that. It sums up some very real expectations.

We like to believe, for example, that we in Control Data are

...entrepreneurial. That's very fashionable in business circles

these days.

In fact, we have actual more like bureaucratic sloth. If you don't

believe me, you track some of the incredible paperwork your people

process. Examine the paperwork you've got on your desk and see how

much of it is really essential. You tell me how valuable the last

ten committee meetings you attended were.


- 7 -

It's all illusion. The reputation for entrepreneurship is one of

the most cherished myths about Control Data and it grows out of the

way Control Data was started and a few of its more daring

undertakings. Like other myths, it has little to do with how we

actually operate.

So the more we keep saying we're entrepreneurial, the dumber we

look. Talk about credibility...

It's time we stop saying we're entrepreneurial and start making

something called individual initiative a fact of daily life. It is

individual initiative and accountability for results that we seek.

That means taking the shackles off your people, freeing them to use

their creative energies. And by the way, you can feel free to make

that same demand of me. Either we're going to act with

accountability and initiative or we're not. We can't say one thing

and do another. "Control Data means people with initiative" —

that's my 2nd goal.

Look at the way we address the marketplace. We like to say that

we've been product-focused, but that we've finally seen the light

and are now moving to become a market-focused company. The problem

is that everyone seems to have a different definition of what that

means. There's almost no consistency.


- 8 -

We need to discriminate between needs defined by existing markets

and markets that do not yet exist. And then we need to find ways to

put those market requirements into priority while making certain

there is adequate funding to support the new product or market

development efforts.

A frequent criticism of our company is that we have not been strong

enough or fast enough to fully understand market needs and then to

fashion the products and services needed to meet those needs. While

we weren't paying attention, the computer industry changed the way

business was being done.

In the past, competition was far less severe than it is today.

Customer needs usually exceeded the solutions the industry could

deliver with our products and services. And because of that great

need, almost any answer was marketable, or at least there was plenty

of time to go back and patch things up. Patch and fix, patch and

fix while the money drained away.

It's a far different situation today. The essence of the computer

industry today is "value-added." George Troy will be talking about

that in a few minutes. The basic point is that in today's

hyper-competitive, high-technology market customers can be a lot

more choosy about what they buy. And they're a lot smarter, too.


- 9 -

The old ways of doing business aren't acceptable today. We need to

recognize, for example, that pure hardware markets offer limited

potential for profitable revenue growth and product

differentiation. Just about anybody can build the box. And yet

there are a number of us in this room who still cling to the

tattered notion that we should only be selling computer systems; and

that everything else—all the ancillary services and

applications—are unfortunate encumbrances we are obligated to carry

as well. That's a certain road to nowhere.

We need to allocate adequate resources so that we can develop

proprietary applications for the particular markets we have

selected. We can only make those allocations if we candidly and

continuously reassess the market requirements and the competition

first, and then move to make the commitments required.

That's how we'll find those markets where customers will see the

added value our products and services can offer. That's how we'll

develop those markets where we can distinguish ourselves by

providing high-quality products and services with high levels of

customer support.

That's marketing. And I intend for Control Data to become a

marketing company. In 25 years at Control Data I have known some of

the finest sales people in the computer industry. That's one place


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where we've experienced some fantastic individual initiative. But

individual sales effort, no matter how spectacular, does not a

marketing company make. My goal very simply is to change that —

"Control Data" — the marketing company" — that's my third goal.

Now we are, a bunch of highly paid executives sitting in a hotel

meeting room. The boss is up in front, making with big talk about

what's wrong with the company and what we need to do to make it

right.

But the truth is, we in this room can't do it all alone. There are

40,000 other people out there who also work for this company, and

they're the ones who are going to make it possible to achieve these

goals.

We need to think about them today.

Some time ago we distilled our approach to managing people into 5

principles. I want to repeat them to you:


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(1) Place a high value on reward for performance

(2) Create an environment for continued self-growth and achievement

for each individual

(3) Faster management practices that ensure fair and just treatment

(4) Provide benefits and support services which recognize that

personal quality of life affects job performance

(5) Provide an increasing level of job security for employees

I think that everyone here ought to go back to his/her office today,

shut the door, and spend five minutes re-reading those people

management principles. And then spend the next month figuring out

how to take those words and put them into action.

The employees of Control Data share in the commitment for

improvement as much as we do. And a commitment to continuous

improvement is paramount to success as a corporation. This

improvement has three dimensions—financial results, operational

process, and improvement in personal development for all employees.

We're blessed with many very good people in Control Data. Some have

been with us for a very long time, others joined us just recently.

In every case, we chose those people. And they chose Control Data.

There is an obligation that comes with that mutual agreement, and a


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part of that obligation is to "provide an environment in which each

individual has the opportunity to develop and contribute up to their

full potential." Only managers can make that happen. "Control

Data — the people company" — goal No. 4 — a goal we have come

closer to achieving than any other. It is our obligation to drive

forward from the foundation we have laid.

That's an obligation I share. My expectations of you—and of the

whole company—are expressed in our new mission statement.

Now, you can look on a mission statement as an exercise in

irrelevance, or you can take it as a declaration of what we are

going to do and how we are going to do it.

From my point of view, this is the bedrock foundation of everything

we do or ever hope to do. I'm sure you've already seen it, but

let's go through it once again, so that there's no mistake about the

direction of Control Data:

(Slide—Mission statement)

"The mission of the corporation is to provide its customers with

products and services based on computer technologies."

That's a corporate mission that can be clearly understood by every

person in the company, by our customers, by our competitors and by

anyone who wants to know what Control Data is all about.


- 13 -

And there are four commitments that we as a corporation have made in

support of this mission:

To its customers, for innovation and technological leadership

yielding high quality, cost-effective products and services.

To its stockholders, by providing consistent and increasing profits.

To its employees, for an environment of fairness, concern for

personal quality of work life, and opportunity to pursue their full

potential.

And, to society, where its technologies can be profitably and

productively applied to addressing unmet needs.

There it is.

If you need to know what Control Data must do, it's all right

there. A clear mission and four irrevocable commitments.

And with those commitments come obligations, and those obligations

then become objectives; and the objectives become the targets for

strategic planning.


- 14 -

The mission statement is only a series of words..good ones, but

still only words. The thoughts and actions that will make that

mission a reality are expressed in a current strategic plan.

George Troy is going to talk to you about that strategic plan in a

few minutes. He's going to tell you what our objectives are—for

this year and for the next five years. He'll give you an overview

of the strategies we are going to use to reach those objectives.

I don't want to get into the subject too deeply, but you should know

that we have developed these strategic plans around four major

elements of the business—five counting Commercial Credit.

Those four major business elements comprise 10 Strategic Business

Units that focus on particular areas of endeavor...For example,

Government Systems, or Financial Information Services, or Technical

Support Services.

George will explain it to you more fully. My point here is simply

to tell you that 1986, in a strategic sense, the most critical year

we have ever faced as a corporation.

We have pledged to pay off the bank debt by the end of the year. We

have stockholders who expect and deserve a return on their

investment before their patience wears down. And at the same time


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we must restructure this company to be an effective competitive

force for the long-term and we must do it within the short-term

constraints of limited resources.

And we're going to do all of that this year.

We're going to do it by taking each component part of the company,

scrutinizing it for its potential profitability, and then

reassembling Control Data into a company that we can all be proud of,

We are going to think markets and marketing — we are going to

strive for market leadership. You can't have quality, profits, and

employee pride by dabbling in this and that. We will decide and

decide this year what we can manage — manager with integrity,

quality and leadership. That is the crucial purpose of this year's

strategic plan process. This is a pivotal year for us — not

because we must go from a $500M loss to a profit, but because we

must make those strategic decisions, upon which will rest our

ability to go to a $500M profit.

We still have too many businesses—and not enough of them contribute

an acceptable profit. Some of these have existed well beyond the

time necessary to become self-sustaining. Others are in shrinking

markets. Still others are in markets to which we do not bring a

competitive advantage.


- 16 -

This is obviously a very sensitive area. It is extremely hard to

separate personalities and egos from the business units themselves.

But it is a process we absolutely must go through...now. We must

look as dispassionately as we can at all our businesses and evaluate

the market position of each. The closer we look at these

businesses, the more we will find that we must either invest or

liquidate or fold into other operations. Life is just too hard to

go along year after year pursuing half measures.

In an operational sense, the Control Data of five years ago—even a

year ago—is gone. What we are talking about today is the company

we want to create in its place. What do we want it to look like?

How do we finance it?

In a sense, we are almost back to the position of start-up. We have

to get very far very fast within our ability to finance the

necessary resources and our ability to manage them.

Business as usual won't get us there. Accepting mediocrity won't

get us there. What will get us there is making good the connection

between what we believe, what we say and what we actually do.

To the extent that this kind of corporate integrity can be defined

as management quality, then it is management quality that best

describes Control Data's new direction...our new day. And it

involves every one of us in this room.


- 17 -

Remember, we have four goals:

1) Control Data means quality

2) Control Data means people with initiative — who always ask Is

there a better way?"

3) Control Data — the marketing company

4) Control Data — the people company.

Our mission, four goals, and the determination to carry out a

financially sound plan for achieving them. Believe me, we'll all

enjoy the new modifiers the media folks will find for our name.


troubled, which has become a jj&eg jerk association with ... · 3/10/1986 · 6515y - draft...

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