Oral-History:Engineers as Executives

Engineers as Executives was an Oral History project conducted by William Aspray initially published in 1995.

Introduction

Managers of technological businesses face great challenges. They must not only be able to make difficult decisions faced by any business leader operating in a highly competitive international market, but also handle technologies that are often arcane, expensive, and rapidly changing. What qualifications prepare someone for this kind of executive position, and what kinds of challenges are faced every day? What impact does an engineering background have on their management philosophy and practice? Are these experiences universal, or do they vary from continent to continent, and from country to country?

To gain insight into these questions, the IEEE-Rutgers Center for the History of Electrical Engineering conducted oral histories with thirteen senior executives from the computer, electrical, and electronics industries. Through an examination of their personal histories, we investigated general issues about the challenges and styles of managing technological businesses.

We attempted to obtain as wide a cross section of views as possible within our limited project. We chose one country to represent each of the world regions most active in technological business today: Japan representing Asia, Germany representing Europe, and the United States representing the Americas. All of the executives we interviewed held senior positions in successful technological businesses, but in many respects their companies varied widely. Companies ranged in size from small entrepreneurial start-ups to large corporations employing more than one hundred thousand employees. Their products ranged from software to components to finished systems. Some worked in commercial markets; others primarily in military markets.

A standard set of questions was prepared in advance of the interviews (with slight modifications to the question set for executives in the software business). Questions pertained to very general (not companyspecific) issues:

• the importance of a technical background in managing the company
• qualifications needed to be a top manager
• procedures and methodologies employed within the company
• importance of quality, reliability, and maintainability issues to the company's well-being
• knowledge needed about customers' needs and operations in order to run their business successfully
• the role of service in their business
• methods for achieving economies of scale
• relations to other industries
• role of the government in their business
• recruitment and training of managers
• importance and means of continuing education
• how to deal with the rapid pace of innovation
• general management lessons

The questions were shared with most of the executives prior to the taped interview. In some cases the interview focused primarily on answers to these questions, but in other cases the overall structure for the interview was based on the person's career. In every case, however, a number of these issues was raised and at least two or three were discussed at length. (In one case, Dr. Sugiyama wrote answers to these questions in advance of the interview, so the interview amplified on his answers and focused on other issues. His written answers precede his interview transcript.)

The transcripts that appear in this volume have been edited by both the Center's staff and the executives themselves. As an aid to the reader, each transcript is preceded by a brief history ofthe principal company under discussion in the interview. Most of the interviews also include a portrait photograph ofthe executive.

The first section of the book includes interviews with four German executives, beginning with Herbert Bruch, a member of the Management Committee that runs the Grundig Company. Grundig AG is a worldwide producer of consumer electronics, such as televisions, compact disc players, video recorders, upmarket hifi components, world band radios, car radios, and telephones, as well as industrial electronics, office electronics, and information technologies. Bruch discusses the way in which research and development, manufacturing engineering, and product development are organized within Grundig. Other topics include the strong position of European companies in logistics and customer service, the value of joint ventures, the relations between Grundig and its parent company, Philips, the importance of continuing education, and the difficulty of training engineers to be managers. He gives special emphasis to the importance of maintaining engineering capability within Grundig and the need for senior operations managers to keep track of what is happening on the factory floor.

The second interview is with Ernst Denert, managing director and one of the co-founders of sd&m, a leading custom software design and consulting firm with a distinguished client list that includes Lufthansa, AEG, Siemens, Thyssen, TUI, BMW, and the Deutsches Bundesbahn (national railway). One of the most interesting topics discussed in this interview is how Denert's participation in the Berlin student protests of 1968 shaped his career and the culture ofthe company he founded. Denert also discusses how his philosophy of software design and management have shaped his company's operating practices. He considers the "software crisis," the tools and methods developed to overcome it, and why universities have difficulty providing adequate training in software engineering. Other topics include the lack of risk in custom software entrepreneurship experienced by Denert, the ethical responsibilities of spinoff companies to their parent organizations, the strengths and limitations of being a small company, and strategic reasons for opening a small business to new partners.

The next interview is with Kurt Schips, a member of the Management Committee that runs Robert Bosch GmbH, an international company with more than 180,000 employees that has been a leader in the automotive components industry since the nineteenth century and today produces mechanical automotive equipment, communications technology, power tools, household appliances, thermal technology, plastic products, packaging machinery, industrial equipment, and hydraulic and pneumatic machinery. Schips discusses competition among Japan, Germany, and the United States and some of the factors that affect the outcome, such as the tension between short-term return on investment and market share, and the effect on research and development of the comparatively longer Japanese work year. He considers at length the organization of research and development, manufacturing engineering, and product development.

Other topics include decentralization, the importance of building new market areas on existing expertise, the value in early market entry, training engineers to be managers, and the importance of technical training for senior managers.

The final German interview is with Arno Treptow, a member of the Management Committee of AEG. AEG has more than a century of experience in the electric power business and today, as one of the Daimler Benz companies, has international businesses in power transmission, automation, railroad systems and components, domestic appliances, and microelectronics. The first part of the interview discusses the structure of the international market in electric power, the shakeout in that industry over the past forty years, and the particular importance of customer-supplier relationships in this market. Treptow considers the changes that occurred in management philosophy when Daimler acquired AEG and the ways in which various functions are centralized or vested in the divisions today. Other topics include the effect of the breakdown of the Iron Curtain on European business, the training programs at AEG for teaching engineers to manage, and the backgrounds found among senior managers.

The first interview in the second section is with Katsutaro Kataoka, a highly individualistic corporate leader who, as a World War II veteran, built up a small firm manufacturing variable capacitors into Alps Electric, one of the world's leading, horizontally-diversified secondary components manufacturers. Alps built many of the television tuners that enabled the Japanese to dominate the television manufacturing industry, developed a major car stereo business (Alpine) out of a supply relationship with Honda Motors, and today supplies floppy disk drives for Apple, IBM, and other companies. Much of the interview concerns how Kataoka was able to build his small postwar venture into a major, independent supplier of electronic components, especially in the face of the stronghold that the large Japanese systems manufacturers have over their suppliers. Of particular interest is Kataoka's explanation of how he learned his operating principles and his commitment to quality manufacturing in the 1950s and 1960s from American companies, which themselves later abandoned these principles. Other topics include the value in situating factories in rural areas, managing rapid growth, the move from customized to standardized products in order to remain competitive, the Vietnam War as a watershed in Japanese-American business relations, and the future importance of China as market and producer.

The next interview is with Koji Kobayashi, Chairman Emeritus of NEC Corporation, which during his tenure as company leader became the world's largest producer of computing and telecommunication technologies. NEC's activities were shaped by Dr. Kobayashi's vision of the integration of computer and communications technologies into what he has called C&C. In the interview Dr. Kobayashi discusses the importance of this integrated approach to technology, the problems of building up a business after the Second World War, the difference between a technical and a financial mindset in the leadership oftechnological businesses, and how to operate a multinational company in countries other than that of the home office.

The third Japanese interview is with Kazuhiko Nishi, the inventor of the first laptop computer and the joystick used in millions of Nintendo video games. His company, the Ascii Corporation, today has a well-integrated and future-oriented group of business activities in personal computing, entertainment, business workstations, semiconductor design, and on-line services. In this wide-ranging interview, Nishi discusses many aspects of his business philosophy: communication between senior and middle level managers, decentralization and optimal size of profit centers, importance of research and development to long-term growth, joint ventures as a way to overcome lack of mobility of Japanese engineers, integrating business areas intelligently for long-term growth, rating an engineer's skills, recruitment of software designers, the importance of constant product enhancement when product cycles are short, difficulties of fast-tracking employees in Japan, and the importance of dominating one's market niche.

The final two Japanese interviews are with executives from the Yokogawa family of companies. One is with Takashi Sugiyama, now the chairman of the board of Y okogawa Research Institute Corporation. He was the first president ofYokogawa Medical Systems, a joint venture between Yokogawa Electric and General Electric to manufacture medical diagnostic systems such as computer-aided tomography, nuclear medical imaging, and ultrasound systems. He discusses how the company was formed as a marketing arm for General Electric, but through strong production engineering and an emphasis on service became a leading worldwide producer in this market area. Other topics include organization of R&D, the research planning process, just-in-time and total quality control manufacturing systems, academic-industry alliances, and continuing education.

The other interview is with Takashi Yamanaka, the president of Yokogawa Electric Corporation, the parent company, which is a leading international supplier of measurement and control instrumentation and information management systems. Mr. Yamanaka discusses how to achieve successful joint ventures, such as Yokogawa Electric has attained with Hewlett-Packard and General Electric. He also considers strategies for managing overseas subsidiaries, the growing market in China, Japanese-American business relations, American strength in innovation versus Japanese strength in production engineering, and the "boomerang effect" that occurs when developing nations begin to export technology they had previously imported.

The third section comprises four interviews with American executives. The first is with Robert Galvin, the chairman ofthe Executive Committee at Motorola, one of the leading worldwide manufacturers of semiconductors and a major supplier of information systems, communications technologies, and automotive, industrial, and defense electronics. Galvin discusses such topics as the importance of integrated management and engineering, the role of quality as a principal organizing force within a technological business, the importance of the Malcolm Baldrige Award, and international competition, especially with the Japanese. Mitchell Kapor, one of the founders of Lotus Corporation, is the second American executive interviewed. Lotus is one of the largest and fastest growing software companies in the world, known for its integrated products for microcomputers. Kapor's main topic of discussion is the problems of managing hypergrowth when a small start-up firm is wildly successful. In this context he discusses the particular difficulties with scaling up marketing and development, the kinds of technical, people, and communication skills desirable in the chief executive officer, and the problems of corporate culture clash that can occur when people with different backgrounds are thrust together so rapidly. Other topics include the differences of operating in an emerging versus a mature industry, how to design a successful product, the importance of timing in market entry and product delivery, the differences in managing small-scale and large-scale organizations, and the classic mistakes made by entrepreneurs when they start their second company.

The next interview is with Arthur Stern, who was president of Magnavox Advanced Products and Systems Division and who held senior positions prior to that in General Electric, Martin-Marietta, and BunkerRamo Corporation. Magnavox, now owned by North American Philips Corporation, is a major consumer electronics manufacturer, the world's leading supplier of handheld radios, and a major producer of military and commercial products in communications, antisubmarine warfare, infrared systems, satellite navigation, and tactical information systems. Stern discusses the relationship of the parent company to its subsidiaries, the need for and problems in technological forecasting, assessing customer needs to improve product acceptance, customer lock-in and bidding practices in the defense electronics industry, and the difficulties of converting defense operations to commercial activities.

The final interview is with Erwin Tomash, founder of Dataproducts Corporation, one of the world's leading manufacturers of computer printers. Prior to founding Dataproducts, he held senior management positions at Telemeter Magnetics and Ampex. The interview considers issues confronted by small engineering firms in new technology areas, such as transforming a project team into a business with marketing and financial capabilities; establishing methods to achieve performance, uniformity, and reliability in new products; moving from innovative design to volume manufacturing; the problems in obtaining effective middle managers to run projects; and the need for senior managers to have good technical training until the technical area matures. Other topics include establishing budgets and product pricing, relations between suppliers and systems purveyors, tension between capital investment and short-term return in publicly held companies, differences between manufacturing engineering and development engineering approaches to product development, shortcomings of the venture capital system in America, and the role of the government in American high technology.

Many people have generously assisted with this project. When I became ill unexpectedly, my colleague Andrew Goldstein kindly stepped in to conduct the interview with Mitchell Kapor. James Gover, an IEEE Congressional Fellow, helped to formulate the basic question sets. My research assistant, Jill Cooper, prepared the company histories that precede each interview and edited most of the transcripts. Oskar Blumtritt of the Deutsches Museum spent many hours identifying executives and arranging my interviews in Germany; and Yuzo Takahashi of Tokyo University of Agriculture and Technology played a similar role in Japan. Eiju Matsumoto ofYokogawa Electric, Kiyoshi Yamauchi and Michiyuki Uenohara of NEC, Noriko Kase of Ascii, and Hirotoshi Okamura of Alps Electric all provided valuable assistance within their companies. Thanks also to Liz Roach and Colleen O'Neill for their outstanding job with transcription and to Michael Ann Ellis for her work on editing and administration. I am most grateful to these thirteen executives for making time in their busy schedules to be interviewed. Finally, let me thank the IEEE Foundation and the AT&T Foundation, which generously provided the funding for this project.

Interviews

Germany

• Bruch, Herbert
• Denert, Ernst
• Schips, Kurt
• Treptow, Arno

Japan

• Kataoka, Katsutaro
• Kobayashi, Koji
• Nishi, Kazuhiko
• Sugiyama, Takashi
• Yamanaka, Takashi

United States

• Galvin, Robert
• Kapor, Mitchell
• Stern, Arthur
• Tomash, Erwin