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Published: August 27, 2013
 / Autumn 2013 / Issue 72

 
 

An Uncommonly Cohesive Conglomerate

It was a major milestone when, in late 1997, almost 12 years after that pivotal phone call with Matsushita, George David invited the vice president of quality from each division to attend the next Presidents Council meeting and answer a question. How could the things they had all learned from Ito be instilled throughout UTC? David wanted these lessons to be remembered forever. The quality VPs, who ordinarily met monthly in their own council, gathered four times that month to prepare. At the Presidents Council session, they presented separate plans for their own divisions. David listened, and then replied that separate approaches would never sustain what Ito had taught them. The episode convinced him to create a new position: UTC vice president of quality. This decision was difficult because it contradicted UTC’s usual practice of keeping the corporate role minimal in division operations.

The job of institutionalizing quality across UTC was given to Pratt & Whitney’s quality vice president, Tesfaye Aklilu. He had been instrumental in establishing the division’s ACE program since joining from Xerox two years before. Aklilu proposed a conglomerate-wide approach similar to Pratt & Whitney’s ACE program with requisite training. The division presidents and their quality VPs all agreed in concept. Each division, however, wanted the program tailored to its own business priorities, meaning that there would be little consistency in curriculum or training methods. David did not agree, and it took three months of further discussion before they all reached consensus on the overall idea, came to agreement on the details, and adopted a common program for all of UTC.

Despite—or because of—the time it took to reach a common understanding, ACE was then implemented with remarkable speed across the conglomerate. The five-day training class was dubbed Ito University; it has since been attended by thousands of UTC’s managers. George David attended the first session himself, along with several corporate presidents. The instructors were engineers, team leaders, and hourly workers who had used ACE. They did more than teach and demonstrate the use of tools—they shared their experiences and described how they lived ACE’s philosophy. A special Ito University session, taught by hourly workers, was held for UTC’s board.

To run this new corporate program on a day-to-day basis, Aklilu hired Tony Black, a service program manager from Otis’s field operations (it was important for internal cohesion that he come from a unit other than Pratt & Whitney). Black chaired the new ACE Council, made up of managers from each division; they developed promotional materials, the training curriculum, and the criteria by which they certified cells as bronze, silver, or gold. By now, the certification criteria had expanded to a broad and comprehensive group of measures, extending beyond productivity and performance improvement to include employees’ enthusiasm and skill, customers’ engagement and satisfaction, and the maturity of the cell’s processes.

The Business Operating System

By the early 2000s, the rollout of ACE through the UTC system was well under way, accelerated by several measures. For example, when analyzing the factors that promoted the improvement of the initial ACE gold cells, the ACE Council identified characteristics of the local leaders. The role of local leadership soon became part of the training and criteria for ACE certification.

The ACE Council continually looked for collective solutions to their shared problems. A few customers had told Aklilu that they had heard a lot of talk about ACE, but hadn’t yet seen any impact. In 2002, Aklilu brought those remarks to the council. This opened a discussion about the difficulties of implementation; some division leaders were still not fully on board. To better understand this reluctance, the ACE Council adopted the same diagnostic methods they were teaching others. They visited facilities, conducted interviews, commissioned a survey, and analyzed the results. Their investigation found that although ACE efforts often identified unnecessary operations and eliminated waste, there was indeed little direct benefit for customers. For example, customers heard about UTC lowering its costs, but those savings did not translate into price drops. Analysis of those few cases where customers did benefit showed that it typically did not happen until all the cells that worked on a particular product improved. The investigation also found that a number of facility leaders saw ACE as being limited to tactical value; that is, many leaders sent people to training and promoted ACE, as long as it did not really constrain the way they operated.

 
 
 
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Resources

  1. Ann Graham, “Too Good to Fail,” s+b, Spring 2010: Profile of India’s Tata Group, another successful conglomerate with a very different strategic orientation.
  2. George Roth, “United Technologies Corporation: Achieving Competitive Excellence (ACE) Operating System Case Study,” (PDF) LAI Case Study (Nov. 30, 2010, released Mar. 7, 2011): The in-depth case study, representing three years of observation and interviews, on which this article is based.
  3. Robert E. Spekman, “United Technologies Corporation: Supplier Development Initiative,” Darden School of Business, July 19, 2001: More detail on the supplier initiative, capstone to the ACE program.
  4. James P. Womack and Daniel T. Jones, Lean Thinking (Simon & Schuster, 1996): Describes many of the threads of theory and method underlying UTC’s quality work. Chapter 8 discusses Pratt & Whitney’s advances in the early 1990s.
  5. For more thought leadership on this topic, see the s+b website at: strategy-business.com/strategy_and_leadership.