* The large integrated companies were no better off, as highly centralized management structures too often left companies out of touch with customers and technological change.
* Managers of large American businesses found themselves on the defensive regarding the issue of quality in the face of competition and new technologies.
* Big businesses, particularly those in high technology, found themselves losing droves of key people as the venture capital and new-issues markets began to heat up.
Meanwhile, small entrepreneurial startups in all areas were stealing markets away from the big boys, capturing the soul of technological innovation, the affections of consumers and the stock market, and the imagination of academia. IBM saw Apple Computer Inc. create a market that hadn't existed, and then grow to the point at which $1 million invested in the company in 1978 swelled to $350 million this past summer. Not that IBM was alone Every other major computer manufacturer missed that opportunity, and countless others,as well.
Small wonder, then, that a number of major corporations began to look at themselves and at their relationship to small companies. Few took this reexamination more seriously than NCR.
NCR: SMALLNESS WITH BIGNESS
NCR (formerly National Cash Register Co.) is a Dayton based multinational electronics and computer manufacturing corporation, with 1983 revenues of about $3.7 billion. The 100-year-old company was the dominant concern in office equipment and cash registers during the 1920s. Thomas J. Watson Sr. was NCR's star salesman before he joined Computing-Tabulating-Recording Co., which was to become IBM, and which ultimately wrested dominance in office machinery from NCR. (It is reputed that when Watson went to CTR he was offered a salary of $50,000 a year plus 6% of the profits over $1 million a year. Incentive packages are not a new invention.)
Back in 1979, NCR was a troubled company. Examining its recent problems, management began to wonder whether its very structure was inhibiting its ability tn innovate and adapt. "The first step was to realize that the product-development process was not yielding products that hit the market as squarely as desired or as timely as the market required," recalls William F. Buster, one of NCR's executive vice-presidents and a member of the office of the chief executive.
As part of this reevaluation process, NCR commissioned the McKinsey & Co. consulting group to study the attributes of a number of highly successful companies. The researchers looked at such corporations as Sperry, IBM, and Hewlett-Packard, to determine what they had done that might be applied to NCR. (The study was similar to the type Peters and Waterman used as the foundation of In Search of Excellence, the book that has helped spread the gospel of large company entrepreneurism through corporate America.)
Using this study as background, NCR developed a plan for restructuring itself. Analyzing the path of a product from idea to implementation, it discovered some obvious impediments. The development, production, and marketing of a new product involved three separate divisions. This cumbersome system "created opportunities for false starts and misinterpreting what the market really was . . .," says Buster. "It took a long time to get a product through this entire process, and sometimes products got lost in translation." In a nutshell, NCR discovered that you cannot manage innovation. Or, as Peters puts it, "Most invention comes from the 'wrong' person in the 'wrong' place in the wrong industry at the 'wrong' time, in conjunction with the 'wrong' user." A far cry from Galbraith's "perfect instrument for inducing technical change. "
So NCR proceeded to break up its product-management organization and move the parts to units that would develop, manufacture, and market products. In consulting jargon, this is called shifting from a "functional" to a "divisional" organization, and it has been done many times before in other industries.
NCR adapted the concept to its own needs, retaining functional organization in some divisions, while pushing the entrepreneurial aspects considerably further in others. Responsibility for planning was turned over to those most in touch with the customer, thereby weakening the hold on operations from the top.
These changes transformed NCR Corp. from a highly centralized operation into a series of stand-alone units. Today there is no requirement that one unit buy components from another NCR unit if it can find better or cheaper products outside the company. Moreover, based upon the nature of their products, the different divisions make their own decisions about how they want to structure themselves with regard to such activities as marketing.
The change was a wrenching intellectual experience for many NCR managers, and they didn't all adapt well to their heady new freedoms and frightening responsibilities. During the 18-month transition period, a number of them could not believe that it was real. They continually double-checked decisions with senior management, and waited for business-as-usual to return. Others, however, including Donald E. Coleman, NCR's vice-presdent in charge of the Data Entry Systems Division, thrived in the new environment. A tall, energetic, straight-talking mid-westerner, Coleman has been at NCR his entire career. Starting out as a computer operator, he worked his way up to general manager of a plant before being tapped to head the restructured division. Coleman is almost evangelical on the benefits of the restructuring. When asked whether, in the past two years, he had discovered anyone with hidden entrepreneurial talents, he responded without hesitation "Me!"
In the old days, he says, "I was doing what the collective wisdom judged to be right. . . I didn't put ideas forward as an individual. I did think things could be improved, though, and now I find myself in a position where I have been told to put up or shut up. Now nobody is going to help me make decisions. Now if you screw up, they know it's you, and if you win, they know it's you."
