MIT Sloan Management Review

Corporate Strategy, Leadership and Organizational Studies

Organizational Learning — The Key to Management Innovation

By Ray Stata

April 15, 1989

RAY STATA, CHAIRMAN OF ANALOG DEVICES, makes a strong argument that U.S. industry's most serious competitive problem lies in a declining rate of innovation — and that this decline can be traced more to a lack of management innovation than to weak product or technology innovation. As a member of MIT's New Management Style Project, Mr. Stata has been applying innovative ideas and systems thinking to improve the performance and competitiveness of his company. His description of that process is unusually interesting in the way that it blends theoretical thinking with real-time problem solving. Ed.

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FOR MORE THAN fifteen years, Analog Devices grew consistently at a rate of about 25 percent per year. Then for the first time, between 1982 and 1987, we missed our five-year goals — and by a country mile. True enough, like other semiconductor companies we were affected by the malaise in the U.S. electronics industry and by the strong dollar. But the external environment was only part of the problem: something was also wrong internally, and it had to be fixed.

But what was the problem? We had the largest share of our niche market in high-performance linear integrated circuits. We had the best designers and technologists in our business. We had excellent relations with a highly motivated workforce. We were not guilty of underinvestment, nor of managing for short-term profits. The only conclusion was that there was something about the way we were managing the company that was not good enough. So I set about to understand what was wrong and how to make it better.

In the 1980s, our plight was not uncommon in corporate America. Companies that for decades enjoyed world leadership in their markets were being brought to their knees. Of course, there are many purported reasons for the loss of U.S. competitiveness. The high cost of capital, an overvalued dollar, a deteriorating education system, overconsumption at the expense of investment, government... To read the complete article, login or sign-up using the form below.

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