9-495-011 Rev. April 14, 1995
Visionary Design Systems
Are Incentives Enough? Visionary Design Systems was a systems integrator and Computer ost Aided Design (CAD) hardware and software reseller located in Sunnyvale, California. In its first three years, Visionary Design’s revenues jumped from $1.1 million in 1990, to $5.5 million in 1991, to $9.8 million in 1992, to $17.8 million in 1993, prompting local newspapers to pronounce Visionary Design Systems a Silicon Valley success story. The founders credited much of their success to the quality of their people and to their philosophy of empowerment combined with generous rewards for performance. The company was unusual both in the degree to which employees were granted autonomy, and in the way they were rewarded. Every employee was a shareholder, and earned significant compensation through commissions and bonuses. The company’s growth record and retention rate spoke to the success of this philosophy. Most employees raved that this was the best company they had worked for: “I feel good in this environment—we laugh together, everyone is pulling toward the same goals. It’s the people here who are special, and it starts at the top.” VDS’s y or P future looked bright but for one cloud on t h e horizon. Product Data Management, one of the promising new complements to the Computer Aided Design market, was a struggling division within VDS. Product Data Management (PDM) was a critical market for the company and VDS had hired two experts in the field. Management offered significant incentives for growing the PDM business but the PDM experts would not take the reins and drive VDS forward in this industry. Things were not progressing quickly enough and top management did not know what to try next. The CAD Industry
Before CAD was available to mechanical engineers, designers stood at 3x4 foot drawing boards using rulers and compasses to design products. The limitation of working in two dimensions forced designers to create separate drawings for each dimension of every piece. Designing items such as car parts, vacuum cleaners, or dolls, required thousands of calculations and hours of drawing, measuring and erasing, before each piece fit correctly into the whole. Products designed in this way were extremely difficult to evaluate without physical prototypes since it was nearly impossible to visualize the end product and see how the pieces fit together. In addition, any changes in t h e product’s design required altering large numbers of drawings. Exhibit 1 displays a 2-D product drawing. The introduction of Computer Aided Design in the early 1970s automated the measuring of lines and angles, significantly reducing the amount of time it took to draw actual objects and making alterations easier and more timely. However the necessity of huge computers, extensive technical knowledge, and $150,000 per package, kept CAD out of all but the largest organizations. CAD usage spread to smaller companies with the proliferation of personal computers in the early to mid-1980s. But the early CAD programs did no more than computerize the manual drawing process, which continued many of the limitations of two dimensional drawing. Karin B. Monsler wrote this case under the supervision of Associate Professor George P. Baker as the basis for class Do Not Cop discussion rather than to illustrate ei ther effective or ineffective handling of an administrative situation. All names and numbers have been disguised to protect the privacy of the company. Copyright © 1994 by the President and Fellows of Harvard College. To order copies, call (617) 4956117 or write the Publishing Division, Harvard Business School, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business...