Quantum Corporation (1991) Case Report on Business Team Management System (April 1991) Gary Cao PROBLEM STATEMENT Quantum Corporation should establish a team-management system to sustain its growth in the highly competitive and dynamic computer hardware industry. PROBLEM DEFINITION Quantum’s lack of a team-management system led to the following three potential problems: (1) team effectiveness: the business teams were less effective when products were technically more complex than previous projects; (2) human resources: Quantum was not sure how to solve the conflict between functional expertise and team-work skills; (3) process and performance evaluation: Quantum did not have an effective evaluation system to measure and reward team performance. PROBLEMS AND SITUATION ANALYSIS Adopting a highly effective team management system became necessary and important in the 1980s in the computer industry because of both external factors and internal factors. External factors Quantum was a major developer and producer of computer rigid disk drives. Its customers included OEMs (Original Equipment Manufacturers) and PC-owners (through retailers and direct-mail marketers). OEM customers were accelerating their own development cycles, and the time to evaluate a bid for hard drives for a new computer system became very short. Disk drive prices had been falling 5% per quarter. Quantum had to shorten the lead time and product cycle to meet customer needs, reduce cost, and increase efficiency. Quantum had to broaden the product line and provide follow-on generation product plans to OEMs. In this dynamic and competitive market, Quantum had to be visionary and had to become a leader in technological innovation. Quantum had to empower the business teams to achieve shorter decision-making time, to be more flexible and adaptive, to be fast and efficient. Quantum’s major supplier was Matsushita Kotobuki Electronics (MKE), which produced drives. To speed the coordination between Quantum and MKE, the business team approach was also necessary. Competition was intense. Quantum observed that its product might retain a performance edge for a period before a competitor could match and surpass the product, but this period was dramatically shortening in recent years. All these factors indicate that faster commercialization of technology in new products is the key to survival and success in the computer hardware industry. Internal factors Recent history showed that Quantum had been using the team approach since 1985: The Lightning Business Team (Cheetah Operations Team, Gazelle Product Team, and Bobcat Product Team) in 1989, the Apollo Business Team (Aerostar Operations Team and Gemini Product Team) in 1990, and the Wolverine Business Team (Wolverine Product Team and Mongoose Product Team) in 1991. Quantum experienced some ineffectiveness within its teams because of the following factors: (1) the project was extremely ambitious in technical aspects; (2) the project leader had industry experience but also had a hub-and-spoke management style; (3) the project leader was a functional engineering manager, but lacked a general manager approach; (4) the project manager had project management experience and authority but did not have the knowledge or credibility in the business; (5) team members lacked the necessary authority and team experience. Quantum also had several effective teams with the following similarities: (1) the project’s technical challenge was not excessive; (2) team members would think like general managers during the project; (3) the project used a two-tier team structure (product team and operations team), and each team shared some cross-functional core members; (4) the number of core team members was less than six; (5) team members were strongly motivated, not passive, but pro- active in dealing with difficult or unexpected situations; (6) team members had both functional expertise and managerial skills; (7) the team spent time on up-front design of the project; (8) the team obtained MKE’s input on early mechanical design; (9) the team co-located offices and development labs; (10) the team had a facilitator to ensure the good communications and effectiveness. Analysis on Quantum’s Team Management Quantum’s business teams consisted of several product teams and operations teams. Since it selected core team members mostly from within the company, the talent pool was limited to some extent. It might broaden the expertise resources of the pool by recruiting experienced managers and/or engineers in either the same or related industries. In Quantum’s performance evaluation system, the dimensions included achievement of team objectives (25%), individual contribution to team (25%), and competence in dealing with functional responsibilities (50%). This weight allocation scheme relied more on functional expertise than the whole effectiveness of team-work. Since Quantum lacked a systematic approach to facilitate the easy transition from a proceeding project to the next one, it needed to develop more standard building blocks to leverage future development projects; this was the “catalog design” method used by Japanese companies. Furthermore, Quantum did not have a comprehensive benchmarking program to motivate the team members to achieve the best practice in the industry. Communication and information flow was also a problem in Quantum. When a team was involved, functional managers tended to feel that the team would take care of any bottleneck issues. Quantum did not have much input from its customers (OEMs, PC-users, retailers, and direct-mail marketers) in its product development. RECOMMENDATIONS 1. Corporate Strategy Quantum should have a long-term vision -- an idea of how the market will look in the future to inspire their workers. Quantum should have a mission statement and a clearly defined core value to nurture its own unique corporate culture. Its objectives should include: to create new products, to meet customer needs and enhance customer satisfaction, to become an market leader in the computer rigid disk drive industry. This will lead to outstanding financial performance in revenue growth, net income growth, and growth in shareholders’ value. Quantum should also make commercialization a priority, set goals and benchmarks, help managers build cross functional skills, and promote hands-on management style to speed actions and decisions. 2. Team Structure and Process Quantum should get more input from suppliers (MKE) and customers (OEM and PC- users, retailers, and direct-mail marketers) prior to and during the new product development process. Quantum should keep the business team structure, which consisted of product teams and operations team, to institutionalize cooperation across functional and national borders. Quantum should set up programs to closely follow the computer industry trends and the best practices in the industry. Quantum should build up a network or some informational exchange channels in the rigid disk drive industry. Benchmarking against competitors is one important factor to aggressively enhance its own efficiency. In addition, Quantum should be ready to coordinate with its competitors for technically and financially more ambitious projects. Because of the further fragmentation of markets, Quantum should study the market and carefully focus on some segments, including time to market, range of market, number of products, and breadth of technologies in its new products. Quantum should carefully analyze the team management process (concept generation, design and development, manufacturing and marketing, and ongoing improvement), moving from a phased program planning (PPP) approach to an overlapping-phase approach. The process should have a built-in instability and a mechanism of strong incentives to stimulate and speed innovations; the teams should have a strong self-organizing ability; the process should encourage multilevel and multifunctional learning. The process should also set team priorities and coordinate different priorities of different functions. Quantum should allocate its resources more efficiently by doing the following: -- make better use of modeling and evaluate its software needs; -- recruit or train designers or drafts-people for CAD (computer-aided design) input and operations, and allow mechanical engineers to spend more time on testing; -- adopt the advanced product engineering by building more standard blocks for future development projects (catalog design). 3. The people factor Quantum should recruit the right people who have both solid technical knowledge and strong communication skills. In the early stages, the training should focus more on functional and technical techniques; in the following stages, Quantum should focus more on developing employees’ managerial and leadership skills. Quantum should reward good team members and promote the best to leadership positions. During this human resources development process, Quantum may nurture more and more excellent team workers and team leaders with the following characteristics: able to teach and coach, goal-oriented, with strong interpersonal skills and ability to take initiative and get results. This new breed of employees will have the combination of technical expertise and managerial skills. 4. Motivation In Quantum’s performance evaluation system, the dimensions included achievement of team objectives (40%), individual contribution to team (30%), and competence in dealing with functional responsibilities (30%). This weight allocation puts more emphasis on the whole effectiveness of team-work and have a balanced weight on functional expertise. Quantum should link the compensation of managers and team workers to the number of new products they introduce in addition to linking the compensation to the company’s overall financial performance. Besides year-end performance bonus, Quantum may use stock rewards and/or options as rewards for its team members and leaders. CONCLUSION Quantum Corporation should carefully study and implement the team management system to further build its team capabilities. The actions should include corporate strategic planning, team management process, the people factor, and the incentive mechanism. By adopting a highly effective team management system, Quantum could closely link with customers and suppliers, shorten its product development cycles, reduce its development costs, speed the commercialization of new technologies in its products, become and remain as the leader in the computer rigid disk drive industry. When Quantum develops a highly effective team management system to stimulate and speed technology and product innovations, it will be able to improve the bottom-line: financial performance and growth potential. From 1989 to 1991 when Quantum more widely used team- project method, Quantum’s total revenue increased 3.2 times, profit after tax increased 4.7 times, return of asset (ROE) increased from 8.2% to 14.9%, return on equity (ROE) increased from 12.9% to 31%. We may expect these numbers to be more impressive after Quantum’s team management system becomes more effective.