Boldflash: Cross-Functional Challenges in the Mobile Division

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On January 16, 2012, Dr. Roger Cahill walked into his office in BoldFlash’s Waltham, Massachusetts headquarters at 7 a. m. , less than a year into his new role as Vice President of the company’s Mobile Division. His predecessor’s personal photos and mementos had been packed up months ago, but they still sat in a corner, patiently waiting for someone to collect them. Cahill didn’t have the heart to move them because Jim Harrison had died unexpectedly after more than a decade in the position.

Jack Young, the company’s CEO, immediately replaced Harrison with Cahill, a 24year employee and highly respected research scientist who previously had led Research in the Consumer Division. Cahill had faced a big challenge since assuming his new role. BoldFlash, a producer of flash memory components for electronic devices, had fallen behind its competitors on several fronts. It was experiencing pressure on both prices and the ability to get new products to market quickly.

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Shortly before Harrison’s death, the Mobile team had developed redundant customized chips for mobile phone market customers while completely missing a critical market in storage devices used for tablets, thus handing its competitors an advantage in a critical growth market. A brilliant entrepreneur whose vision drove the growth of the Mobile Division, Harrison was perceived as an autocrat who fostered a compliant culture in which people protected themselves and their territory from his strong top-down directives.

Cahill wondered if his predecessor’s leadership style contributed to the conflicts he was observing. More generally, he had been unsure what to expect from the groups in the division—–Product Development, Marketing and Sales, and Manufacturing—-and he did not want to judge based on anything other than personal experience and observation. After a few months on the job, Cahill felt that he had sized up the situation. There was a lot of unproductive conflict between the functional departments, particularly around the product development process.

Manufacturing was the dominant function and seemed to be pulling its weight, but overall he saw a division that was underperforming and struggled with communication and teamwork. The product development process seemed dysfunctional. The division’s quarterly product development meeting was also dysfunctional. ‘‘The product development meeting should be the primary opportunity to plan the creation of new products. So I was surprised when I found out that Jim Harrison usually didn’t attend and instead left leadership of the meeting up to Marketing,’’ he observed.

Cahill had broken with tradition and attended the most recent meeting two months ago. ________________________________________________________________________________________________________________ HBS Professor Michael Beer and writer Rachel Shelton prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration.

Copyright © 2012 Harvard Business School Publishing. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to http://www. hbsp. harvard. edu. 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 Publishing. Harvard Business Publishing is an affiliate of Harvard Business School.

4438 | BoldFlash: Cross-Functional Challenges in the Mobile Division ‘‘I did not see the strong leadership that I would expect from a team with this much talent,’’ he observed. ‘‘The meeting lasted two days, yet I had a hard time summarizing what we had accomplished. ’’ With the next two-day product development meeting coming up in less than a month, Cahill wondered what changes he would have to make to the meeting, the organization, and the product development process to develop truly innovative, market-leading products that anticipated customer needs. Company History and the Flash Memory Market

Two computer science professors founded BoldDisk in Waltham, Massachusetts in 1982. Initially, it manufactured computer storage media, primarily floppy disks, at a plant in Waltham. The company continued to focus on storage devices as technology evolved (with the exception of an illfated foray into MP3 players in the early 1990s), although its product mix evolved with the market. By 2012, the company—–now re-named BoldFlash—–focused on flash memory and had a significant customer base in both OEM (original equipment manufacturer) and direct-to-consumer markets.

Flash memory is a solid-state drive (SSD) that maintains data storage without moving parts, even when disconnected from power. It is commonly used in consumer devices such as digital cameras, mobile phones, USB drives, MP3 players, DVD players, GPS systems, tablet computers, and notebook computers. Although some flash memory is embedded into the product, consumers can also purchase flash memory devices to increase the device’s storage capacity. Industry production is spread among a number of manufacturers that run the gamut from small specialty manufacturers to global technology powerhouses.

Purchasing power is concentrated, with one customer alone consuming one-third of the market for the newer, high-density NAND-type flash memory. In 2011, smartphones accounted for 40% of the overall market. Industry revenues, $20 billion in 2010, were expected to increase to $44 billion by 2014. The sector was highly competitive. Although demand was consistently strong and expected to grow 22% in 2012, margins were constantly squeezed due to pricing pressure (prices were expected to decline 30% in 2012) and manufacturers sought to reduce costs wherever possible.

This environment led BoldFlash to move most of its manufacturing outside the U. S. By 2012 the Mobile Division’s largest plant was in Shanghai; its remaining U. S. plant was in Austin, Texas, and it also had a smaller plant in Hamilton, Ontario, Canada. Unlike some of its competitors, BoldFlash operated its own plants; it did not subcontract or have any joint venture agreements with competitors. The industry was sometimes prone to supply shortages, so fast, flexible manufacturing practices were critical in meeting customer demand. In 2011, overall revenues at BoldFlash were $3.

9B, with approximately half of sales to OEMs and half directly to consumers through warehouses, big box retailers, and electronics stores. Mobile Division revenues were $1. 5B (see Exhibits 1A and 1B for detailed financial statements); smartphone manufacturers were its largest customer group. The company focused solely on organic growth and had never made an acquisition. Competitors and customers respected BoldFlash’s reputation for quality. Consistently headed by a PhD-level scientist, the company maintained a strong commitment to ongoing research.

It placed a premium on intellectual property, and employees receiving patents were richly rewarded and recognized. The company held more than 600 patents in the U. S. alone; however, it had not always successfully commercialized the technology it developed, and its developments did not always align with market needs. Analysts sometimes criticized the firm as doing research for its own sake rather 2 BRIEFCASES | HARVARD BUSINESS PUBLISHING BoldFlash: Cross-Functional Challenges in the Mobile Division | 4438

than to improve products or meet new customer needs and faulted a corporate culture that was not always focused on results. Because of rapid changes in customer preferences, the Mobile Division had to identify customer needs and respond more swiftly than in the past with new products that adapted its technology to the needs of Marketing and Sales. The number of new products developed by Mobile in the past few years had slowed considerably, however, accounting for its lack of growth. Because of cost pressures, new products had to be designed with cost of manufacturing in mind, not just technical elegance.

Leadership of BoldFlash Mobile Roger Cahill had spent his career working in R&D at Waltham headquarters. He joined in 1984 as a co-op student while he completed his degree in Electrical Engineering, and although he left for four years in the early 1990s to finish his doctorate in the same field, he rejoined the week after graduation. He himself held fifteen patents, the most of anyone in the company at his level. Cahill reported to CEO Jack Young (see Exhibits 2A and 2B for organization charts), and everyone on the Mobile Division leadership team was a long-term BoldFlash employee.

Except for the Vice President and plant-based manufacturing employees in China and Canada, most of the rest of Mobile’s 650 employees had been based in Austin since 1995, when corporate leadership spun the Mobile Division out of the OEM group and moved the plant from Waltham. The central Texas location offered lower cost of manufacturing and benefited from proximity to the other high-tech firms in the area. Because of the tablet miss, Cahill was under pressure from Young to get Mobile back on track quickly. Cahill said, ‘‘I’m not a naturally quick decision-maker. I’m a scientist.

I like to analyze all the options and make sure I’m doing the right thing. But in this case, Jack told me in no uncertain terms that ‘time’ was something I didn’t have. So I moved quickly,’’ said Cahill. ‘‘I’m still not sure if what I did was right, but I had to do something. ’’ Within his first six months in Mobile, he had made several big changes. Two months into his tenure, Cahill had separated Marketing and Sales, which had previously operated together under Director Chip Bryant. ‘‘The two are essentially different functions and were separate units in the Consumer Division.

Marketing is a strategic function while Sales’ role is to knock on doors and sell,’’ Cahill said. As part of this re-organization, Cahill appointed Kavita Patel, a colleague from the Consumer division, as Director of Marketing and retained Bryant as head of Sales. Another high-profile move was consolidating the division’s non-manufacturing employees by relocating all Austin-based corporate staff and the Shanghai-based Director of Manufacturing to Waltham headquarters. ‘‘I needed all my leaders in the same time zone,’’ said Cahill. ‘‘I didn’t like isolating manufacturing leadership halfway around the world.

I’d even move the plants to Waltham if that wouldn’t kill my margins. ’’ He also decided to hold Manufacturing, not Sales, accountable for meeting delivery dates. These changes were not without controversy. He lost some key staff members, including the incumbent Manufacturing Director, who refused to relocate from his native China; Cahill named Kevin Cheng, previously the Shanghai plant manager, to this position. Cahill’s reports perceived clear differences between their new boss’s leadership style and that of predecessor Jim Harrison.

‘‘Jim could be kind of overpowering, and people became more protective and political because they felt intimidated and unable to disagree. But you always knew where he HARVARD BUSINESS PUBLISHING | BRIEFCASES 3 4438 | BoldFlash: Cross-Functional Challenges in the Mobile Division stood. ’’ said Karl Melzer, Director of Product Development. ’’Roger, on the other hand, is a great guy. He is much more open and generates trust and involvement, but I think he’s a scientist at heart, not yet a general manager. I’m not sure why he’s making all these changes.

’’ Cahill’s vast technical knowledge sometimes overwhelmed his colleagues. Kavita Pavel said, ‘‘When Roger gets rolling, watch out. I had a meeting with him to review our 2012 forecasts and he spent the entire hour talking about a new design technique that would increase NAND capacity. His expertise is incredible, but it didn’t help me with my forecasts. ’’ Mobile Division Units Manufacturing Each of the division’s three manufacturing plants operated as its own profit center and was evaluated on gross margin and manufacturing-specific metrics such as quality, on-time delivery, and inventory management.

New Manufacturing Director Kevin Cheng, promoted from Shanghai plant manager, was an American who joined BoldFlash in 1995 as a quality control engineer after receiving a dual graduate degree in business and engineering. ‘‘Like my old boss, I didn’t want to move from China and thought about leaving the company,’’ he said, ‘‘but I like working in an environment that challenges me intellectually. I don’t always agree with my colleagues, but for the most part I respect their intelligence—–especially Roger’s. ’’

The managers of the plants in Austin and Ontario were Americans and BoldFlash lifers; the new Shanghai plant manager was a native Chinese who had attended a top engineering school in the U. S. The three managers were a competitive group and often compared their results during their monthly conference calls. Managers at the plant with the lowest margins were subject to sometimes goodnatured ridicule from their peers, but results were serious business. ‘‘I want to encourage a highperforming culture,’’ said Cheng.

‘‘Knowing we’ll be held accountable makes everyone work harder. ’’ Because BoldFlash no longer manufactured anything at corporate headquarters, employees at the plants could feel isolated. ‘‘I can’t tell you the last time we saw anyone from corporate up here,’’ said the Ontario plant manager. ‘‘The top people in the States don’t ask us for much input. They mainly tell us what to make and how much by when. ’’ Likewise, Product Development also caused headaches for the plant by making frequent special requests to run trials of new products on the manufacturing lines.

This lowered efficiency and margins and jeopardized delivery dates. ‘‘Product Development doesn’t consider the line set-up when they design the new chips, and that leads to costs that are wrecking our margins,’’ said the manager of the Austin plant. ‘‘It’s very frustrating. All they have to do is ask and we’d tell them exactly what we think and what they should do. But they rarely ask. Their actions send us down the wrong track with products that we could have told them cannot be manufactured at the cost required to make a profit.

’’ Manufacturing also frequently butted heads with Sales, which they saw as selling products at any price they could in order to meet their revenue goals regardless of the impact on margins. Cheng recalled when they were trying to rush a chip for a new phone model to the market: ‘‘Sales promised one of our best customers a high level of product at a low price in a short timeframe. To avoid disappointing the customer, my Ontario plant had to deliver as promised. We lost money on that deal. Sales got credit for a fifty-million dollar sale. We were mad and let Sales know about it in no uncertain terms. ’’ 4

BRIEFCASES | HARVARD BUSINESS PUBLISHING BoldFlash: Cross-Functional Challenges in the Mobile Division | 4438 Marketing The Marketing group’s responsibilities included sales projections, long-range market planning, and exploiting new markets. The group’s most important activity was market development—-identifying and managing the development of new product opportunities. Marketing Specialists were currently were working on a dozen new products they were responsible for introducing. They found they had to coordinate the activities of the other functions in order to move the product development process along.

Marketing Specialists were recent graduates of business schools, and although they were smart and analytical, they lacked experience in the activities they were trying to coordinate. Moreover, the role and authority of Marketing Specialists, who were in effect operating as new product development project leaders, had never been clearly defined. Consequently they found it difficult to get people in Product Development, Sales, and particularly the manufacturing plants to adhere to commitments that the heads of their functional units had made in the quarterly product development meetings.

There were other problems as well. Patel said ‘‘We’re supposed to suggest new products, but PD does that too. We’re supposed to make projections, but so is Sales. We’re a new group, but I wish our role had been better defined before we were spun out. ’’ Because new mobile devices were constantly coming to market, each requiring more storage at a better price, the flash memory market was highly volatile, which made it difficult to predict longrange revenues and profits of new products under development. Revenue and profit projections for new products did not always materialize, which reduced the credibility of

Marketing Specialists and the Marketing Department as a whole. The group sometimes felt that their colleagues failed to appreciate the difficulty of their mission and had unreasonable expectations. ‘‘We take a very rigorous approach to our projections, but this is not an exact science. There is no ‘right answer’ to the equation, and it can be difficult to explain that to an engineer or operations manager,’’ said Patel. Other division leaders also struggled to understand Marketing’s mission. Manufacturing’s Kevin Cheng said, ‘‘They should be listening to customers instead of writing so many reports—–I don’t even read them half the time.

’’ Karl Melzer, head of Product Development, agreed: ‘‘Last year we developed at least 15 product variations and Marketing couldn’t find buyers for the majority of them. They just don’t understand the technology and how it can benefit customers. ’’ Sales Chip Bryant had spent three years at FlashForce, a larger competitor, before joining BoldFlash in 1999. Like Marketing, Sales had a substantial number of new employees. Because entry-level sales positions in this group were seen as stepping stones to other internal roles and to other technology companies, new college graduates actively sought them out.

Competition for entry-level roles was fierce, and expectations of rapid upward mobility led to high turnover in the group. ‘‘It’s hard to keep a cohesive team when your top producers keep leaving because they didn’t get promoted fast enough,’’ said Bryant. The group developed sales projections for individual customers largely by applying ‘‘educated instinct’’ to information it gleaned from existing customers. This approach faced frequent criticism from colleagues in other departments, such as this observation by Marketing’s Patel: ‘‘Sales basically has tunnel vision.

I saw it when I went to our industry’s big trade show last year. Our salespeople stayed in our booth, when they could have done some good ‘walking around’ research by visiting our competitors. They missed a great opportunity. ’’ Each of BoldFlash’s three manufacturing plants had at least one on-site sales representative to facilitate on-time delivery and customer service. However, although Chip Bryant and Kevin Cheng were close friends outside of work, that goodwill did not always extend to lower-level staffers. The HARVARD BUSINESS PUBLISHING | BRIEFCASES 5

4438 | BoldFlash: Cross-Functional Challenges in the Mobile Division manager of the Austin plant said, ‘‘Our sales team rarely consults with us before sending out proposals, even though we have someone on-site. Even worse, they don’t listen when we try to tell them they’re wrong. Last year, I tried to tell Sales there was no way we could make as many chips as they had promised in just two weeks. Jim Harrison ordered us to ‘do it anyway,’ so we did. Well, the system overload crashed the software that runs the line and we had to shut down for almost a day while we waited for someone in engineering to fix it.

’’ This Sales group’s performance metric was very straightforward—–revenues. Incentives, not offered to all groups, were based on performance against revenue targets. Product Development This science-oriented department developed advances in technology leading to new products as well as extensions to existing product lines. Inside the Mobile Division, they were known as the ‘‘geeks. ’’ Many were lifelong BoldFlash employees. All had scientific backgrounds, and over twothirds of managerial-level staffers held PhDs. All of the division’s patents came from the Product Development team. Led by Dr.

Karl Melzer, a native Austrian who joined BoldFlash in 1985 after finishing his doctorate, the group tended to keep to itself. ‘‘I’ve been trying to meet with Karl to talk about a new product launch, but he’s always off presenting at some conference,’’ said Sales Director Bryant. ‘‘I know he’s a legend in the field, but sometimes he stays up in the clouds. ’’ Product Development likewise sometimes experienced trouble communicating with both Sales and Marketing about product development initiatives. ‘‘Anytime I ask Chip for anything, he says ‘Ask Kavita. ’ When I ask Kavita, she tells me to see Chip,’’ said Melzer.

‘‘At this point I have stopped asking. I just talk to Kevin Cheng or one of the plant managers and somehow we make it work. Kevin can really get things done when he needs to. ’’ Product Development was evaluated on a number of mostly academic criteria, including the number of new patents approved, presentations made at industry conferences, and academic papers published in peer-reviewed journals. These criteria hailed back to the Jim Harrison days. ‘‘When Jim was here, our big successes came from research driven by technological curiosity, not a business mandate.

He didn’t want us worrying about day-to-day business concerns and always kept them away from us so we could focus on our research,’’ said Melzer. The Current Product Development Process Mobile’s product development process mirrored practices in other BoldFlash divisions whose markets did not change quite as rapidly as that of the Mobile Division. On paper, the process appeared fairly structured. Four times a year, about 20 division leaders met off-site for two days to review financial results, set sales projections, and make plans for new product releases. The head of Market Development presided.

Attendance had grown to accommodate the next level of managers because the heads of functional departments lacked the information they needed on each new product development to make decisions. With the mandate from his CEO entrenched in his thinking, Cahill felt his presence would be critical to improving his division’s results. When he attended his first meeting in November 2011, he said little, observing and assessing instead. He later followed up with his four functional leaders and was surprised at what he learned. Cahill said, ‘‘It turned out that the meetings were not very effective.

When a functional department missed its objective with regard to a given product development the underlying reasons were never confronted. Participants often met afterwards in small groups to talk about problems that had not been resolved. Meeting progress was slowed 6 BRIEFCASES | HARVARD BUSINESS PUBLISHING BoldFlash: Cross-Functional Challenges in the Mobile Division | 4438 because people who were up top speed on a given new product development project had to be called by phone for the latest information about progress in developing the new product — this despite the fact that the meeting had grown to include the next level managers.

Karl told me that in 2009 the team had a critical discussion centered around the next generation of NAND chips, yet the Product Development scientist in charge of that product wasn’t even invited and was actually on vacation during the meeting. ’’ The lack of structure around the product development process bothered others on the leadership team. ‘‘This process lacks discipline and focus,’’ said Karl Melzer. ‘‘I get very frustrated every time I have to sit in one of those meetings when I could be working on my research.

I hope that Roger will hold us to our goals instead of moving the finish line if we don’t make them. ’’ The head of Market Development, who chaired the product development meetings, confided to Cahill that he often had sleepless nights before meetings because of the difficulties in resolving issues. To address some of these concerns, Cahill had decided to chair the next meeting himself. However, he was unsure how to balance the need for discipline with maintaining positive relationships with his leadership team.

‘‘I guess I should just go in and take control, but I can’t take the chance of alienating people,’’ he said. ‘‘I’m still not sure if I’m doing the right thing—–I know that I’m a competent scientist, but many aspects of leadership are new to me. I’m going on instinct here. ’’ Conclusion Cahill looked back at Harrison’s boxes in the corner of his office and wondered what his predecessor would have done. ‘‘I put together a great team, so this shouldn’t be happening,’’ he thought. ‘‘Why can’t these smart people all work together?

’’ The miss in the tablet market had really devastated the group. Morale was low, margins were squeezed, and tempers were starting to fray. If Cahill’s group didn’t introduce successful new products quickly, the division’s future would be on the line. It might not survive its next miss. He wondered whether the changes he had already made and his decision to chair the next quarterly product development meeting would solve the coordination and collaboration problems undermining the product development process. If not, what additional organizational changes would be needed?

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