The Wisdom of Chairman Ko

To do all that, Solectron has fashioned a fast, customer-centric system of communication and reward that melds traditional management values culled from IBM -- the former employer of many Solectron top executives -- with technology-savvy manufacturing and supply-chain-management practices. The impressive result is a company that has fast become better at building electronics than some of the world's most renowned high-tech manufacturers -- an increasing number of which have, in fact, turned over their production lines to Solectron.

Since Nishimura joined the company, about 11 years ago, a buying binge of 16 plants has brought Solectron's total number of factories to 23 throughout the world. With its growth, Solectron has assumed responsibility for manufacturing a remarkable array of high-tech products for some of the world's best-known, most-respected companies: producing motherboards for IBM laptops, electronic cash registers as well as all retail and computer products for NCR Corp., and cell-phones for Mitsubishi Corp. -- marking perhaps the first time that a Japanese electronics manufacturer has hired an American company to assemble its products.

Solectron's continuously improving processes have created a win-win strategy that lets both Solectron and its customer-partners concentrate on what each does best. And Solectron has implemented a set of efficient, innovative business practices that are capable of returning America's electronics companies to the forefront of the world's manufacturing sector.

"The supply chain had to be shortened. It was the only way to revive the competitiveness of the American electronics industry."

Not long ago, U.S. electronics manufacturers were struggling to keep pace with their overseas rivals. With computer prices spiraling downward amid improving technology and increasing competition, the only way to make money was to get new products to market as cheaply and as quickly as possible. Unfortunately, the strategy of choice seemed to pit cost against speed. U.S. companies could export the assembling of PCs or ink-jet printers to third-world workers who earned $2 a day, thereby lowering costs. But the move overseas did little to speed up the delivery process of finished goods to customers. And with product life cycles shrinking by the day, even a few weeks on a slow boat from Asia could mean the difference between a successful launch and an outright failure of cutting-edge products.

"The supply chain had to be shortened," Nishimura says of the situation he encountered in 1988, when he left IBM after 23 years to become Solectron's coo. "It was the only way to revive competitiveness in the U.S. electronics industry."

Solectron was in the perfect position to do that. Although it had started out as a California-based manufacturer of solar-energy products during the energy crisis of the 1970s, the struggling startup soon began contracting itself out to Silicon Valley's burgeoning electronics industry. "We hopped on the outsourcing bandwagon," says Winston Chen, 58, a former IBM engineer who was part of the team that bought Solectron in 1978 and who later convinced Nishimura -- Chen's former boss -- to help run the fast-growing company. "We were right in our customers' backyards, so we could respond faster and turn around orders more quickly."

Taking a lesson from IBM's first president, Thomas Watson Sr., Chen ran the company using two guidelines: "superior customer service" and "respect for individual workers." Both those precepts could be carried out, he figured, by establishing a system of fast feedback that gave Solectron workers the information they needed to respond quickly to customer needs and market conditions, coupled with the freedom to act in the best way they knew how.

Proclaiming a "customer first" guideline, Chen established a system for assessing customer satisfaction not on a yearly or quarterly basis, but every week. Solectron's customers rank the company on five criteria: quality, responsiveness, communication, service, and technical support. The survey results are posted weekly at the front of every Solectron production line. "We don't tell people, 'You're good,' or 'You're bad,' " says Chen. "We say, 'Here's what customers say.' That's a very powerful tool."

The second piece of the feedback loop is a weekly profit-and-loss statement for each production line that's distributed to all line managers. "We just told them, 'You can't lose money,' " Chen says. 'This is your scorecard. You have to decide what to do.' "

That was another lesson taken from his IBM experience. "At IBM, the majority of people didn't know the profit for their division for months," says Chen. "They worked hard, but they just didn't get feedback. If you really want to respect individuals, you've got to let them know how they're doing -- and let them know soon enough so they can do something about it. Ultimately, the measures that matter are customer satisfaction and profit and loss."