PM - Teradyne Corporation the Jaguar Project

CIS 550 Team 1 –  1 – Simon Simon Chan, Mike Cook, Tim Hollabaugh, Maggie Jones

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Teradyne Corporation: The Jaguar Project As Jack O‟Brien, project lead of Teradyne‟s Jaguar p roject, sat in traffic on his way to work he  pondered his team‟s efforts over the past eight years. Teradyne, a manufacturer of semiconductor  test machines, had long been awaiting the arrival of their new full-range testing equipment. Th e  project marked a number of firsts for Teradyne including up-front project planning, formalized formalized tools for project tracking, and a structured development process. Despite the learning curve all new methodologies impose, O‟Brien‟s project had become a success in the hardware department, department, yet the software group struggled through much o f the implementation, and was still working on deliverables. Had the new tools and techniques hindered the development processes? This paper  will analyze Teradyne‟s traditional project execution strategies in contrast to those of the Jaguar   project, will describe how the new project management tools made an impact on the project, and  present the lessons learned throughout the experience. Company History Teradyne, a 45 year veteran of the semiconductor industry, specializes in testing equipment for  transistors and other electrical components. The compan y was founded in 1960 by two MIT graduates with a vision to bring a line of reliable, fast testing equipment to the industry. As the complexity and volume of components componen ts manufactured by their customers increased, so did Teradyne‟s investment in research and development. By 2004 Teradyne had five business units, including semiconductor test, assembly test, broadband test, connection systems, and diagnostic solutions. Semiconductor test remained the largest business operation for the c ompany,  producing just under two thirds of annual revenue in 2004. The company had six major  engineering operations across the United States, with three o f those facilities housing manufacturing operations. Teradyne had also disp ersed across the globe with smaller engineering operations set up in Japan, China, and Germany. The Semiconductor Industry Semiconductors span a very broad range of devices which can typically be classified by 2 broad categories: memory, and system on chip. Each type of device performs a specific job. For  example, a graphics card possesses po ssesses a processor, as does the motherboard inside a single computer. A computer may have any of 10 different types and sizes of memory for its various components such as CPU, Cache, RAM, persistent storage, etc. Consequently, each type of  device has its own set of complex manipulations that it performs on the electrical signals that come as inputs. As semiconductors grew over the years to become smaller and more powerful, minor flaws in the production process could preven t an entire device from functioning correctly. correctl y. This resulted in a high demand for testing equipment that could determine if a compon ent was functional or not. This simple idea is quite a complex device, as devices often have a very wide range of operations. This is where Teradyne Terad yne comes in. Teradyne‟s product performs the testing of components to ensure that their behavior lies within the specifications outlined by their  manufactures, essentially telling them if a component is good or bad before it leaves the factory.

By 2004 Teradyne had become the world‟s leader in semiconductor testing equipment with over  6000 employees worldwide. Their biggest competition came from Aligent, Advantest, and Credence, who held considerably smaller shares of the market. Customers tended to be

CIS 550 – Teradyne Corporation: The Jaguar Project Team 1 – Simon Chan, Mike Cook, Tim Hollabaugh, Maggie Jones

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manufacturers like Intel, IBM, Hitachi, and Samsung who were actively creating new products and were willing to spend nearly 3 million dollars on a machine. Over the years, the production  process of Teradyne‟s customers had dramatically changed. Since production volumes were going up, and prices coming down, it was imperative that the testing process not slow down  production operations. Reliability was of great concern as testing was often considered a  bottleneck in the production process and any downtime would be extremely costly. Therefore, customer service was a major selling point as well. As technology progressed, so did the need for more testing equipment, as each new device often required purchasing a new specifically built piece of testing equipment. Therefore it was very common for customers to rely on Teradyne‟s past experience with their products in developing new equipment. Furthermore, it was very common that once a company was chosen to develop testing equipment for a particular device, no other company would compete in that area. The rapid development of new semiconductors required equally rapidly development of testing machines, which proved to be a difficult task. It was becoming more important that testing companies come up with equipment that was no longer limited to testing a single device, but rather could be configured to test multiple devices. This would in short provide equipment that was considerably more difficult to develop, but w ould prove much more cost effective for the customer. Culture Teradyne‟s background was strongly focused on engineering as many of the senior managers came from an engineering background. Technical competence was strongly focused, and projects were driven mostly by performance. Engineers were encou raged to dive in to tasks, and encouraged to prove themselves. The company emphasized the individual. The office environment was mostly cubicles even for executives, and the dress was casual. Many employees considered themselves at Teradyne for the long haul. Long hours were normal.

In the early 1990‟s Teradyne experienced a major change in leadership with the arrival of CEO Alex D‟Arbeloff. Alex grew interested in the risk of losing Te radyne‟s competitive edge due to quality and reliability concerns. Although D‟Arbeloff believed the team was exceedingly competent, he believed there were fundamental operating problems including reporting and  performance measurements. To combat these problems, D‟Arbeloff embraced total quality management (TQM). After 5 years of intensive effort, TQM principles were embedded into most aspects of work at the company and resulted in dramatic improvement in manufacturing quality and customer service. However, the engineering organization continued to resist TQM as evidenced by continuing late and over budget projects.

Project Execution Strategy Throughout the 1990s, Teradyne focused on developing different test systems for each type of  semiconductor device. In 2001, Teradyne made a fundamental change in strategy and transitioned to development of a single flexible, consolidated tester platform. The project, codenamed Jaguar, was critical to the company‟s competitive strategy. It is noted that, “from the i outset, it was recognized that the project had to execute flawlessly.” In addition to the change in strategic direction and technology, the Jaguar project represented a significant departure from

CIS 550 – Teradyne Corporation: The Jaguar Project Team 1 – Simon Chan, Mike Cook, Tim Hollabaugh, Maggie Jones

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Teradyne‟s traditional project execution strategy including increased emphasis on up-front  planning and design, reorganization of project team structure, the introduction of prescriptive  project management processes, and use of formalized project management tools. These changes were more than simply process changes; they req uired changes to core cultural values. Project Teams In order to support the Jaguar project, Teradyne abolished the market-segment-focused platform engineering organizations and folded them into a single platform engineering group. The reorganization required merging engineering organizations in Boston and Agoura Hills that had  been working independently on flexible tester projects using different approaches. This represented a major change to a company whose teams had traditionally operated with autonomy reinforced by statements such as telling new recruits that “no one would tell them what to do” ii and “it was their responsibility to „dive in‟ and „ask the right questions‟.”

Historically, projects had been handled by individ ual engineering functions and there was no one individual responsible for the entire project. In contrast to this past approach, Teradyne appointed Jack O‟Brien as project leader of Jaguar. A core team was formed from the leaders of  subsystem teams in Boston, Agoura Hills, San Jose, Minneapolis and Portland to coordinate  progress and make critical organizational and technical decisions across teams. Design and Planning Another element of the Jaguar project that requi red a change to existing cultural norms was the emphasis on up-front design and planning. In the past, projects at Teradyne were poorly  planned. Goals, scope, and milestones were not clearly defined, schedules were slapdash, and there was no systematic method for tacking project progress. Because of its strategic importance and critical mid-2004 delivery date, Jaguar required rigorous planning and a clearly defined scope. While Teradyne traditionally tended “to go „all in‟ on front-end sizing” and reduce the scope over the course of the project, Jaguar required a required early commitment to key product specifications. As such, O‟Brien and his team spent more time than usual on the concept development and product planning processes.

The company had implemented a “phase-gate” model for development projects in order to  provide well-defined milestones and review points. Senior management signed off on the Phase II “Project and Product Planning” gate only after the Jaguar team compiled a 75-page  presentation detailing the proposed system architecture, design, and functional specifications, target performance specifications, and the project execution plan. This resulted in some discomfort and frustration among team members who preferred less detailed planning to allow for more flexibility and experimentation during Phase III, “Detailed Design and Development”. Project Management Processes and Tools One of the most critical elements of the Jaguar project execution strategy was the introduction of  formalized project management tools including work breakdown structure, 3-point estimation, critical path analysis, earned value analysis and the Primavera project scheduling program. O‟Brien was a strong believer in these tools and their ability “to force discipline in the iii development process.” These tools enabled the team to execute project management practices including up-front project planning, project tracking, and a more structured development process.

CIS 550 – Teradyne Corporation: The Jaguar Project Team 1 – Simon Chan, Mike Cook, Tim Hollabaugh, Maggie Jones

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Furthermore, they enabled O‟Brien to communicate the project status to management and to identify critical issues that required senior management‟s action or support. O‟Brien and the team committed themselves to June 30 as the first customer-ship date. As such, it was important to identify, mitigate, and address delays of individual tasks through the course of the project. The team‟s ability to adapt a nd mitigate delays was further amplified as AlphaTech, a huge potential customer, was about to commit to Teradyne‟s competitor‟s system. The project management tools enabled the project team to be flexible in responding to delays and management could decide if resources should be reallocated to project parts that had encountered delay. The tools also provided visibility into project which allowed Teradyne to respond to AlphaTech and remain confident to hit all milestones. Impact of Project Management Tools There were mixed reactions to the project management tools. Some team members believed in the value of project tools while others saw them as a distraction from the work. People were afraid of the tools as they forced a commitment to milestones. As such, people might be spending more time managing the metric rather than the project. Certain behaviors were not changed even though the tools were used. Specifically, the software team was in denial with their schedule. The management team did not pay enough attention to the data as a result of skepticism around the metric. The team did not respond to the data which indicated a delay in schedule through the earned value tool. Some members allowed the data to lie to them. As a result, the software component of the program was behind schedule. The software challenge faced on the Jaguar   program extended beyond the program itself. The volume production for Ultra Flex system, a separate program from Jaguar, was pushed out six months as a result of delay in getting the software online.

Lessons Learned Cultural Change The Jaguar project was not as successful as it could have been – not because of incapable people or poor processes, but because top management failed to provide the training necessary to effectively implement the substantive cultural changes required to suppo rt the new project management processes. The new tools and methodologies could be very useful but required “buy in” from users in order to achieve their potential. Unlike the TQM initiative of the earl y 1990s, there was no management support to establish that buy in. The TQM changes necessitated a large training effort and cultural change throughout the company that took the better part of five years to fully develop and be incorporated into the everyday functions of the company. At least for most of the company, there were still portions of the enterprise that hadn‟t fully embraced or  integrated the TQM concept – specifically the software development division. The fundamental change in the methodology of managing projects would have been better implemented had Teradyne spent the same or more cultural change processes as was done with the TQM introduction. Adoption of Project Management Tools Throughout the project there were instances of problems with the use of the new project management tools. At one point it was noted that occasionally the focus of status meetings was

CIS 550 – Teradyne Corporation: The Jaguar Project Team 1 – Simon Chan, Mike Cook, Tim Hollabaugh, Maggie Jones

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less on project status and more on the tools and data that were being used to manage the project. Project tools such as Primavera were cumbersome and use was inconsistent. There was little confidence in the tool as an efficient method of entering data. The addition of project management staff assisted in this and would be advantageous in the future. In addition to the shortcomings of the project man agement tools, the individuals using them were not sufficiently trained to recognize “red flags”. In one instance, the software development  performance was consistently reported as behind schedule. However, Teradyne didn‟t respond to the software development schedule slippage until well into the project resulting in increased cost for the company and increased stress for managers and engineers. The tools used for software development did no t take into account the extreme variability of  software. The hardware portion of the project had well defined milestones and physical objects to be used as benchmarks; the software side had not developed these milestones to such a degree nor did the work breakdown structure for the software development detailed enough. The entire  process for development of software was not well thought through nor was it planned for. The software development cycle is just that – a cycle and as such the project management would be well served to entertain a different method of tracking progress. With this in mind, the confidence in the data and reports might be higher, enabling management to react earlier in the development of the project. Risk Analysis and Scope Creep Although there seemed to be a large portion of time spent in Phase II on schedules and detailed work structures, there did not seem to be a thorough investigation into risks, both inside the company and outside. The software engineers were working on a different product when the development began. This was a major effort for Teradyne and it did not seem to have been considered when development of resource needs.

The customer who became the most important piece of the project was not even mentioned in the early stages, nor were there any indications that the overall schedule might be changed due to outside forces. The company would be well served for a more up-front detailed risk analysis coupled with the appropriate contingencies. In addressing the above customer importance, the scope of the project changed significantly in the middle of the project, this necessitated a compl ete change in the direction of the project essentially throwing the entire team into crisis mode. Although they were successful, the scope change was critical to the success of the project. i

Gino, Francesca and Pisano, Gary. Teradyne Corporation: The Jaguar Project , (Harvard Business School Publishing, Boston, MA 2005), p. 6. ii

iii

Ibid., p. 3. Ibid., p. 1.