The Six Sigma encore.

'The company that does something different for every customer is going to win,' says Motorola CEO George Fisher. Mass customization, pioneered by the company's pager division, is one step in the transformation process.

Four years ago, Robert W. Galvin, then CEO of Motorola, told a leading auto company chief, "You'll know you're really in the quality ball game when you order your people to close down your repair department and eliminate positions for inspectors. Then you'll have a high-expectation-level quality and design program."

The auto CEO replied, "But what do we do with the car that needs repair?"

"Scrap it," Galvin shot back. "We scrap radios that theoretically need repair, but we don't scrap very many, because defective radios don't get made in the first place."

Motorola is a role model for modern manufacturers. The Schaumburg, IL-based maker of wireless communications products, semiconductors, and electronic equipment enjoys a stellar reputation for high-tech, high-quality products, an image burnished by its winning the Malcolm Baldrige National Quality Award in 1988 (the first to be awarded) and the Nikkei Award for manufacturing from Japan in 1989. This is not to say technical excellence alone ensures success. World-class manufacturing couldn't overcome new product delays two years ago in the all-important microprocessor market. And despite impressive gains against Japanese chip makers, Motorola still trails the market leader, Intel.

But quality manufacturing has its rewards. The reliability of Motorola's radio pagers has won the company the biggest share of the fiercely competitive Japanese market. This is partly due to its ability to move rapidly along the learning curve. Motorola's tiny MicroTAC foldable cellular phone has only one-fourth the number of parts contained in its original 1978 portable telephone. Components snap together instead of being joined by screws. But even if the company's mobile phones are easier and quicker to assemble, this would be pointless if customers valued something other than defect-free equipment.

"Quality," observes George Fisher, 53, Motorola's intensely focused chairman and CEO, "is in the eyes of the customer."

The world's leading cellular phone vender with over 30 percent of the world market (Finland's Nokia is second with 20 percent), Motorola reckons that such attributes as terminal weight ("wearability") and designer shape may be just as important to users as reliability. Consequently, Fisher is moving the $16 billion manufacturer's emphasis beyond the shop floor to all the organization's processes, such as customer satisfaction and employee involvement.

A venture capital spirit also pervades the organization. (Motorola moved from two-way radios to cellular radios and into paging.) Pushing the envelope of wireless communications, Motorola conceived an ambitious project, called Iridium, to build a mobile telephone system capable of handling telecommunications traffic anywhere in the world.

The scheme, of which Motorola has put in $270 million of the initial $800 million tranche, involves putting 66 orbit satellites in a stationary constellation around the Earth. The first satellites are scheduled to be launched over a two-year period beginning in 1996, with commercial service commencing in 1998. The service will be too expensive initially to compete with wired telecommunications, but Fisher is not alone in thinking the world is going wireless. (AT&T recently paid $12.6 billion for McCaw Cellular.)

The company also has backdoor access to state-of-the-art wireless technology in taking equity pieces of start-ups. One is Radiomail, an E-mail connectivity network; another is Telular, which has developed a patented "magic box" that allows users of regular phones to bypass the local monopoly and talk over wireless networks.

An engineer with degrees from the University of Illinois and Brown, Fisher joined Motorola after 10 years in R&D with Bell Labs, serving under then-President Ian Ross, Fisher's friend and mentor. After running manufacturing systems for Motorola's communications products unit, be moved into senior management, becoming president and CEO in 1988 and chairman in 1990. Fisher declined an invitation to succeed John Akers earlier this year at IBM, disappointing some Big Blue executives. CE's J.P. Donlon recently caught up with him at Motorola's Schaumburg headquarters.

BEYOND SIX SIGMA 

Quality manufacturing is a core issue for Motorola. Have you reached your targets?

We measure quality based on the number of defects in our products. Our target is called Six Sigma, which is equivalent to 3.4 defects per 1 million parts. We've reached the Six Sigma target in many areas, but not as a company. Right now, manufacturing is probably around Five Sigma. We've launched a "beyond Six Sigma" program so that those businesses that have exceeded Six Sigma keep going and aim to improve our defect level 10 times every two years.

Do you have to redouble your efforts and investment to get further incremental increases?

As we improve the quality, we save money, because if we had maintained the same quality levels we had about five or six years ago, we probably would have spent about $3.9 billion more.

In the personnel areas, as we have started to measure quality by the defects in the processes we use, we're entering some strange, new ground that we've never measured before. We now quantify how our employees feel they're treated.

We formulated a generic set of questions that can be answered with either a "yes" or a "no." These are simple questions such as, "Do you feel you have adequate feedback from your supervisor?" "Do you feel you have adequate career plans?" A "no" answer is a defect in the system.

Which product in your mix is the closest to perfection?

Some of our pagers and semiconductors, and many of our semiconductor processes.

What have you learned about quality manufacturing in terms of products and processes?

We view quality as a competitive advantage. Our reputation opens markets.

We feel this makes a difference for us, particularly in global markets. Motorola is growing at a healthy pace in Europe. In Asia, we're competing toe-to-toe with the big Japanese manufacturers. Ten to 20 years ago, that wouldn't have been possible. Successfully competing in the Japanese market is the acid test.

A couple of years ago, internal restrictions kept you out of the Tokyo-Nagoya area. Have you overcome that obstacle?

We have worked with a company called Idou Tsushin Corp. to introduce our cellular infrastructure equipment into the Tokyo-Nagoya corridor with limited success. Unfortunately, because the system doesn't have the coverage or the build-out of the NTT systems in Tokyo, the distribution and sale of our products in the corridor has been disappointing.

CLOSING RANKS

You have said U.S. manufacturers have improved, but not come close to reaching quality and time-to-market goals. How would you rank manufacturers today?

The best companies in the U.S. are as good as any in the world today. Significant progress has been made in the last five years. Companies that are restructuring often eliminate cost by improving quality and cycle time.

In addition, as the dollar continues to slide against the yen, there is a much greater parity today relative to competing in some of those markets with exports. The No. 1 thing to do is put in place the fundamentals: quality, cost, cycle time, and product functionality. They are simple, but a lot of companies--not only in the U.S., but around the world--haven't gotten that straight.

What's the distance between what you say is the best of the U.S. and the rest of what's out there?

A lot of our suppliers are now world-class. In many cases, we learn from them. A wave goes through the industry: As we improve quality, it ripples through our suppliers and customers; and as suppliers and customers improve quality, it ripples through us. Many of our customers--including Ford Motor Co., IBM, and NTT--have helped us to get better over time. Likewise, at Motorola, we are driving many of our suppliers to improve.

You had a policy a few years ago, that by a certain time, all of your suppliers should be on the same quality footing as Motorola, otherwise, you would no longer use that company as a supplier. Is this still true?

We expect all of our suppliers to apply for the Malcolm Baldrige Award, and therefore, to have in place the quality processes that are considered in the Baldrige judging. We also expect all our suppliers to work on things that will lead them to implement a process geared toward attaining Six Sigma quality, but we never put a hard-and-fast goal on the timing.

CUSTOMIZING VALUE

Let's talk about mass customization--providing precisely what a customer wants without losing money or pricing yourself out of a market.

Mass customization is essential to the future of any good manufacturer. Your ability to give customers what they want at a total cost in your system that is comparable to making millions of the same unit gives you an advantage.

Thanks to the interlinking of information systems with robotic-type factories, we're more or less able to do that in our equipment businesses within the confines of product families. We haven't gotten to the point where we can make a cellular phone on the same line as a semiconductor. But within families of pagers or cellular phones, it is possible to have one unit on the line be different in its functionality and appearance from the next unit coming off the line.

Our first big mass customization experiment was in our paging operation, which we called Bandit. We took an order and completed it in two hours rather than 30 days. Our system allowed the customer to place an order for a particular pager. The quantity could be one or 1,000. As the circuit boards entered the line, they were bar coded with all the information of that order. That bar code was read at each robotic station as the board progressed, telling that robot what to do to make that pager--what frequency to tune, how to package it, and how it's supposed to look.

How does mass customization work today?

Most of the change today has to do with broadening the sets of products you can manufacture on a single line. In the Bandit days, there was a narrow selection of what those differences could be.

Another significant change is inserting quality determinators in the line so you can anticipate when your process might be leading up to creating a defect--instead of creating the defect, identifying it, and stopping the line to correct it. If you're going to achieve Six Sigma, or better, you must be able to predict when defects will occur, especially on a high-speed line.

How can you do that?

You watch the distributions of the product as it's built, or of the components as they're going in.

What sort of internal infrastructure do you need to broaden mass customization throughout your processes?

You need to make the transition from a hardware company to a largely software orientation--an information-based manufacturing system. Most of our products today are software-intensive, and most of the systems that you need to implement mass customization are software information-intensive.

What type of information systems or technologies does a manufacturer have to employ?

It's a mix of all the conventional information systems you could imagine--data bases, cell controllers, or cell controllers within a master control set tying into your information systems for your ordering, billing, and communication between the engineers designing the products and the manufacturers making them. It's an integrated information system, not a manufacturing information system.

What is your ideal information system?

A portable one that has instant access to all the data and an E-mail communication system. However, I think my ability to communicate with people in the company through portable communications is most important.

We need to discover what the customers want ahead of anybody else, and that comes from interacting with other people.

What are some of the non-technology implications of customization schemes?

As the world heads toward mass customization, we have to answer the questions: How do you deal with marketing and distribution? And how does a salesperson deal with that? Mass customization provides a competitive advantage. But the big challenge of the next decade is to master custom marketing.

What advice would you give to another CEO who is seeking to mass customize?

If your production process is flawed, automation will kill you.

IRIDIUM MILLENNIUM

Besides mass customization, Motorola's latest endeavor is the Iridium Project. Does AT&T's acquisition of McCaw change anything about that prospective market?

Iridium is intended to provide worldwide seamless communications via 66 satellites. The McCaw acquisition by AT&T was a smart thing to do, because it tells the world that somebody's willing to put up $12 billion for a company that is part of the new U.S. market.

McCaw, AT&T, and others have tried and will continue to try to provide seamless U.S. communications. We don't choose to compete with our customers, so we decided to put an overlay around the world instead.

The system should be up and running in 1998. We'll put up five experimental satellites around 1996. Eventually, there will be about 1 million subscribers around the world. Calls would run about $3 per minute.

What will be the subscriber fee to get into this system, $3,000 to $3,500?

Hopefully, nowhere near that expensive. Basically, all you'd need for access would be something similar to a cellular telephone.

What kind of problems will you face?

Providing seamless communications across Europe has been difficult. If I wanted to go out of a European country into the Soviet Union or China or the Pacific Rim, I had to carry five or six telephones--one for every country I planned to go to. I always had to worry if the system in Japan had a different standard than the system in the U.S. or that there were two different systems in the U.S.

With Iridium, if I bought a phone unit in a given location, through the local service provider, that telephone would work first on the local cellular system. If I had a strong signal that worked on that system, that's the way my call would be routed, because it's the low-cost route for the subscriber. The satellite comes in when the signal isn't strong enough.

Iridium will be a small but important factor of Motorola's business. But to keep growing this company, we're going to have to come up with lots of Iridium-like projects.

What do manufacturers most need to get right as we approach the millennium?

They're going to have to spend a lot more time focused on their employees and how they enable people to contribute. Many manufacturing companies still have a hierarchy structured around job descriptions and commands from supervisors.

Manufacturers still have to zero in on quality and cycle time and integrating everything they do with a world-class information system, but it all starts with people.