(FORTUNE Magazine) – NOT MANY MANAGERS refer to themselves as bandits -- at least not publicly. At Motorola, though, the term is an accolade. How does Motorola outhustle the Japanese on quality and price? It ''borrows'' from them. It takes the best legally available Japanese manufacturing methods, refines them, and uses them to make distinctly American products. Operation Bandit, the superfast robotic production line that makes pagers at Motorola's Boynton Beach, Florida, plant, incorporates assembly methods developed by Seiko, Honda, and others. Once in danger of being forced out of the paging business by the Japanese, the company has held firmly to its lead in the U.S. market. And the pagers are so good that they rank among the top sellers even in Japan. The Bandit program, with its sly moniker and a sleek, military-style logo, epitomizes the radical changes taking place at this 60-year-old, $8-billion-a- year producer of semiconductors and communications gear. Robert Galvin, Motorola's longtime chairman and the son of its founder, is pushing through one of corporate America's toughest, most pervasive campaigns for better quality. That doesn't mean hiring inspectors or repairmen; they may ultimately increase product quality, but they also sap productivity. Galvin's goal is to make things right the first time, every time: to work better, faster, and cheaper. Motorola's willingness to adopt Japanese-style production techniques in pursuit of that goal is an ironic twist in a turbulent relationship -- an evolution best described as first ignore 'em, then sue 'em, and, finally, learn from 'em. For years the suburban Chicago company has hurled barbs, brickbats, and lawsuits at its Asian rivals. It led the crusade against Japanese exporters of pagers and cellular telephones, prompting the U.S. to impose duties as high as 106% on companies deemed to be dumping. In 1982 Motorola persuaded Washington to pressure Japan into opening the pager market to foreigners. It also lobbied actively for the U.S.-Japan semiconductor agreement of 1986, in which the Japanese pledged to progressively buy more chips from abroad. Motorola hasn't totally transformed itself from litigator to emulator. But the degree of metamorphosis is striking -- especially at a company peopled by engineers, who do not normally take kindly to importing ideas that were't invented here. Not that Motorola's products were bad. Far from it. But the Japanese were making more things right more of the time. And they were getting them to the market faster and faster. TO MEET the Japanese challenge, Galvin and his managers have automated factories, knocked down workplace barriers, and instituted a vast retraining program covering all 102,000 employees. Motorola has even formed a technology- sharing alliance with a Japanese archrival, Toshiba. None of these solutions, Motorola admits, are so arcane they can't be copied by other manufacturers. Says quality director Richard Buetow: ''All this stuff is intuitively obvious -- after you figure it out. You find it's crystal clear that this is what you should have been doing all along.'' Is the remake working? So far, yes. Last year revenues and profits broke all records. Motorola is a major force in most markets it serves, though its performance varies from ''outstanding'' to ''needs improvement,'' depending on which business you look at. The company that invented the walkie-talkie still dominates the world market for mobile two-way radios. It is the only major American survivor in the paging business. In the rapidly growing cellular telephone industry, Motorola is now No. 1 worldwide. Its position in semiconductors, which account for 32% of revenues, is less commanding. In six years it has fallen from first place to fourth in total ( chip sales, behind NEC, Toshiba, and Hitachi, according to Dataquest, a California market research firm. In the critically important microprocessor market, it is locked in combat with Intel and pursued by a pack of aggressive startup firms. The company entered the emergent market for high-speed RISC (reduced instruction set computing) chips late, and some analysts doubt it can catch up. Motorola loses money in computers, and earnings have fallen sharply in the modems division, where the company is struggling to adjust to the needs of newly digitalized information services. Motorola doesn't look like a company on the cutting edge of change. With its base in Schaumburg, Illinois, a windswept city 30 miles west of Chicago, it remains something of an anomaly, a microelectronics company plunk in the middle of Middle America. Don't expect pin stripes and yellow ties here, or blue jeans and knapsacks. Look for guys who wear cardigans and rubber-soled shoes, carry plastic penholders in their shirt pockets, and speak with Henry Fonda accents. GALVIN, who believes that all companies should periodically renew themselves, is, in a sense, trying to steer Motorola back to its entrepreneurial roots. Bob's father, Paul, the eldest son of a Harvard, Illinois, saloonkeeper, had an uncanny sense of market timing and a gift for motivating people. Paul Galvin didn't know how to put a radio in a car, but he knew how to find the people who could; and, once they accomplished it, he knew how to sell the concept. (He dreamed up the neologism ''Motorola'' in front of his shaving mirror.) Young Bob began accompanying his father on business trips at age 7. By all accounts he is less impulsive than Paul but every bit as inspirational. ''He has courage, integrity, and vision,'' says James O'Toole, a professor of management at the University of Southern California and a longtime observer of Motorola. ''Galvin ((whose college education was aborted by World War II)) has been able to surround himself with people who are smarter technically than he is, but he has remained the heart and soul of the company.'' Now 66, Galvin is gray-haired and pensive, almost professorial, a self-described ''steward of the institution.'' He owns 6.2% of Motorola's stock -- worth $323 million at current prices -- making him the company's largest shareholder. His only son, Christopher, 38, is Motorola's youngest board member. Said by colleagues to be intelligent and engaging, Christopher has no guarantee of reaching the top. His father has already chosen his immediate successor: the earnest, cerebral, and soft-spoken George Fisher, 48, who has been CEO since early 1988. LAST YEAR, President Reagan recognized Bob Galvin's crusade for quality by giving Motorola the first annual Malcolm Baldrige National Quality Award, America's answer to Japan's prestigious Deming Prize. Named after Reagan's late Secretary of Commerce, the award recognizes companies, or divisions of companies, ''that attain preeminent quality leadership.'' (The other winners were Westinghouse's commercial nuclear-fuel division and Globe Metallurgical Inc., a small Ohio foundry.) It's easy to believe Galvin when he says, ''Quality is paramount.'' But don't just take his word for it; ask one of his suppliers. ''If we can supply Motorola,'' says Charles Gonsior of St. Paul Metalcraft, ''we can supply God.'' Motorola's goals are truly Olympian. If all goes according to plan, the pagers, radios, and semiconductors that come off the lines in 1991 will be 100 times better than they were in 1987. By 1992 Motorola wants to be humming along at Six Sigma, the statistical term for 3.4 defects per million. That's 99.9997% perfect. Sound excessive? Motorola believes some production lines in Japanese factories are already there. But surely engineering that much quality into a product is prohibitively expensive? Not if you make things right the first time, says Galvin, echoing a conviction increasingly preached by America's best manufacturers. Superior quality, he says, is actually ''the lowest-cost way of doing things.'' If that doesn't seem obvious, listen to Richard Chandler, manufacturing director at Motorola's cellular telephone equipment factory in Arlington Heights, Illinois. Pointing to a device the size of a refrigerator, he explains: ''Each piece of equipment has 17,000 parts and 144,000 opportunities for someone to make a mistake. If I ended up with only 99% quality, that would mean 1,440 mistakes per piece.'' The cost of hiring technicians to fix those mistakes, says Chandler, would very likely knock him out of business. Chandler and his fellow managers haven't stumbled onto any blinding revelations for improving quality and productivity. What distinguishes their program from those at other companies is its breadth and intensity, not its ingredients. Here are a few steps Motorola recommends taking: -- Design products that are easier to manufacture. At Motorola design and production engineers work together from day one. -- Teach employees to inspect their own work and maintain their own machines. That requires extensive training, often in basic English and math skills. Last year Motorola spent $50 million, or 2.9% of its annual payroll budget, on education. -- Reward people when they make things right. Nearly every Motorolan is eligible for a bonus, and nearly everyone's bonus is affected by the quality of what he or she does. -- Compel suppliers to meet your standards, and dump those who don't. Six years ago Motorola's communications sector bought from 5,000 suppliers. Now it uses 1,600. Eventually it will have only 400.

The quality drive caught fire ten years ago, when Galvin summoned the company's officers to a day-and-a-half-long strategy session in a Chicago hotel. For the most part, the conclave was an exercise in self-congratulation and self-exhortation. Quality wasn't even on the agenda. Then a sales executive by the name of Arthur Sundry ventured the opinion that Motorola was in danger of being buried by the Japanese on quality. His speech, Galvin recalls, ''lifted everyone intellectually up off their chairs.'' At first the company found it deceptively easy to improve quality. Simply persuading employees that top management was serious about the idea went a long way. But to boost quality exponentially, Galvin and his colleagues discovered they would have to challenge corporate truisms. For example, everyone assumed that it took three to five years to get a new electronics product off the drawing board and into the marketplace. But when Motorola's communications engineers set out in 1985 to build a new paging device in their Florida plant, they deliberately cut the best-case scenario in half. Thus was Operation Bandit born. It took no stroke of genius for the project's managers to realize their only prayer for meeting the 18-month timetable was to gather in as much ''off-the- shelf'' manufacturing technology as they could get their hands on. They traveled the world looking for ''islands of excellence,'' not among paging competitors but among the best manufacturers of cars, watches, cameras, and other technology-intensiv e products. The Bandit researchers spent the most time in Japan, where they found factory managers surprisingly receptive. ''When a company is doing something well, they like to show it off,'' says Scott Shamlin, Bandit's manufacturing director. ''We had a fairly free hand, similar to the access the U.S. gave the Japanese to our factories in the 1950s and 1960s.'' A voluble Georgian with a fits-the-part bandido mustache, Shamlin experienced his epiphany at a Hitachi plant north of Tokyo. Outside the factory a flag emblazoned with ''P200'' fluttered. Later, in a conference room so cold that the visiting Motorolans had to ask for a space heater, the plant manager explained that P200 stood for the productivity improvement, in percentage terms, that the plant hoped to achieve by the end of that year. So far, said the disappointed manager, they had reached only 160%. Thunderstruck, Shamlin drafted a memo to his bosses. First, he averred, if Motorola deliberately left its conference rooms unheated, as Hitachi did, people might waste less time in meetings. Second, and more to the point, if Motorola didn't dramatically raise its expectations -- at the time the company considered a 20% improvement in productivity hot stuff -- it risked being forced out of the paging business. BACK IN FLORIDA, Shamlin, who had previously worked for NASA, set up a mission control team. To concentrate everyone's minds, he ''scheduled inventions'' -- established immutable deadlines for the solution to all technological challenges. Just a few days shy of 18 months, the Bandit line came onstream. Today it is a fighting-fit example of computer-integrated manufacturing. Just two hours after an order is entered into Motorola's Schaumburg computers, a customized pager zips off the line in Boynton Beach. The whole procedure -- deploying the work force (i.e., the robots), marshaling the supplies, and assembling, inspecting, and packaging the final products -- is managed by computers. Their human supervisors intercede only when something goes wrong, which happens infrequently. Galvin is carrying his quality campaign to the nonmanufacturing parts of the company as well, to the folks who produce invoices, memos, manuals, and paychecks. Quality director Buetow guesses that more than 90% of the errors made by Motorola employees have nothing to do with manufacturing. A salesman filling out an order form for a customer, he points out, has dozens of chances to get it wrong. All Motorola departments now have their own plans for achieving Six Sigma by 1992. Bringing the sales and marketing people into line was no idle afterthought. In 1986 senior executives began a series of intensive, sometimes painful discussions with their customers over the quality of Motorola's service. What they heard, from companies as diverse as Apple, Ford, Federal Express, and the Department of Defense, was that while Motorola made fine products, it had trouble delivering them on time. ''Most of our customers like us,'' says CEO Fisher, ''but they said, 'Gee, if you could only deliver the product when I want it, you would get a lot more business.' '' Nowhere is this need more imperative than in semiconductors, where technology develops so quickly that, as computer analyst Richard Shaffer puts it, ''everybody is the front-runner for about 15 minutes.'' Two young companies, Sun Microsystems and MIPS Computer Systems, beat Motorola to the market with RISC, a new technology that dramatically speeds up the time it takes a chip to process information. Last year Roger Ross, Motorola's RISC project manager, quit to form his own firm, claiming that Motorola hadn't committed enough capital to developing the new chip. Motorola acknowledges its tardiness but says it is making up for lost time. Its RISC chip, the 88000, has just gone into commercial production -- three months behind schedule -- and no fewer than 50 manufacturers have pledged to build it into their computers. Apple, whose Macintosh line is powered by Motorola microprocessors, also is likely to choose the 88000 when it develops RISC-based products. IT WAS MOTOROLA'S ZEAL to satisfy customer demands for quality and variety that led the company to form a partnership with Toshiba. Like most American chipmakers, Motorola got knocked out of the DRAM (dynamic random access memory) market in the mid-1980s by Japanese dumping. Under the terms of the Motorola-Toshiba joint venture, signed in 1986, Toshiba is sharing its DRAM production technology and Motorola is licensing some of its prized microprocessor designs to Toshiba. Motorola loaded the contract with safeguards. Each bit of technology it gives Toshiba is keyed to Motorola's winning a bigger share of the Japanese chip market. So far the pact appears to be making both parties happy, though it still causes some heartburn at Motorola. Says William George, who oversees Motorola's new DRAM factory in Mesa, Arizona: ''There are those of us who are scared to death we're going to get killed on this thing. The biggest risk is that Toshiba will take all our technology, then come back and take all our business away.'' For all its trepidation, Motorola has become a leading proselytizer of Japanese-inspired quality and productivity techniques. One condition of accepting the Baldrige award is that the winner be willing to share the secrets of its success with all comers. Motorola eagerly lets it be known that a little banditry goes a long way.

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