Analog Devices Inc. (ADI) was a leading manufacturer of integrated circuits that convert between analog and digital data. From 1981 through 1996, ADI experienced periods of growth and stagnation, both achieving record profits and sales a experiencing its first loss ever. To meet the needs of the changing market, management at ADI introduced a number of different management tools to implement change. One such tool was its corporate scorecard. ADI's corporate scorecard was recognized as a management best practice in a survey the NolanNorton Group conducted in 1991. Despite this accolade, ADI's management was wondering in 1996 how to change the scorecard to best fit the needs of management, specifically, how fast to change it and how best to use it to focus management attention in the future.
Analog Devices was founded in 1965 in Cambridge, Massachusetts, by Ray Stata and Matthew Lorber. Stata had a B.S.E.E. and an M.S.E.E., both from MIT. In 1996 the company operated predominantly in one industry segment: the design, manufacture and marketing of a broad line of high-performance linear, mixed-signal, and digital integrated circuits ("ICs") that addressed a wide range of real-world signal processing applications. The company's principal products were divided among four classifications: general-purpose, standard-function linear, and mixed-signal ICs ("SLICs"); special-purpose linear and mixed-signal ICs ("SPLICs"); digital signal processing ICs ("DSP ICs"); and assembled products. SLICS were the largest product segment for the company, accounting for 65 percent of total sales. Nearly all the company products were components that typically were incorporated by original equipment manufacturers (OEMs) in a wide range of equipment and systems for use in communications, computer, industrial instrumentation, military/aerospace, and high-performance consumer electronics applications. The company sold products worldwide; in 1996 one-half the sales came from outside the U.S. This case was prepared by Kirk Hendrickson [Tuck ’97] under the supervision of Professor Vijay Govindarajan Copyright © Govindarajan.
Analog Devices, Inc. (A) INDUSTRY BACKGROUND Real-world phenomena—temperature, pressure, sound, images, speed, acceleration, position, and rotation angle—are inherently analog in nature, consisting of continuously varying information. Analog sensors can detect and measure this information. The signals are usually converted to digital form for input to a microprocessor, which is used to manipulate, store, or display the information. In many cases, the signals are further processed using a technology called digital signal processing. In addition, digital signals frequently are converted to analog form to provide signals for analog display, sound, or control functions. Collectively, these manipulations and transformations are known as real-world signal processing. Significant advances in semiconductor technology have led to substantial increases in the performance and functionality of ICs used for signal processing applications. These advances include the ability to create very large scale integration (VLSI) mixed-signal ICs that contain both high-performance analog circuitry and large amounts of high-density digital circuitry. The analog circuitry portion of the IC is used to manipulate real-world signals while still in analog form and to convert analog signals into digital form (or vice versa). The digital portion is used to further process analog signals after they have been converted to digital form. COMPANY STRATEGY In 1996 Analog Devices' strategy was technological leadership. The company wanted to be firstto-market with new products that had superior performance features. Analog Devices was one of the world's largest suppliers of SLIC products. During 1990–1996, Analog sought to balance its traditionally stable SLIC business with growth opportunities for SPLICs and DSP ICs. The...