Louis Chênevert led one of the largest and most successful Fortune 50 companies in the United States: United Technologies Corporation (UTC). He came to UTC in 2006 as COO and director and was elected CEO in 2008 and chairman in 2010 before retiring in December 2014. Prior to that, he served in executive roles at UTC subsidiary Pratt & Whitney for more than a decade, including as president of the division from 1999-2006.
ACE Fundamentals
UTC’s success, especially in the 2000s, has been attributed to several different factors, but a major force was a program that first took shape at Pratt & Whitney and fellow UTC subsidiary Otis.
Called Achieving Competitive Excellence (ACE), the program was inspired by the work of Yuzuru Ito, VP of quality at Japanese company Matsushita, with whom Otis had formed a joint venture in the 1980s. Mr. Ito later joined UTC as lead quality officer. ACE was formally developed and implemented under the leadership of George David, CEO of UTC from 1994-2007. Mr. Chênevert also championed and helped develop ACE at Pratt & Whitney, when he became COO of UTC, and when he succeeded Mr. David as CEO.
ACE was both a philosophy and a set of practices that promoted operational excellence. It combined elements of the Japanese concept of kaizen, as well as other methodologies, including statistical control, lean manufacturing, talent development, and flexibility. Perhaps most importantly, ACE prioritized collaboration, with employees, teams, divisions, and subsidiaries learning from each other. Trainings also connected each employee to UTC’s strategic direction. The program was so successful that UTC leaders came to think of it as a cornerstone of the company’s ethos, or simply the “UTC Way.”
ACE ultimately yielded sustained growth and marked increases in productivity for UTC. Under Mr. David’s leadership, the program spread throughout the various UTC subsidiary companies, as well as in the central corporate ranks of the parent company.
In 2007, Mr. David summed up the value of ACE to a group at MIT’s Sloan Management School, saying, “ACE is repetitive, formal, disciplined—it doesn’t change. It is the basis of more than half the shareholder value increase in UTC. There is no force more powerful in modern business than productivity. You do it or die. It is what gives goodness to life. Make no mistake, it is productivity under everything.”
What Made ACE So Successful
Many companies adopt systems to promote quality and operational excellence. However, not all are able to implement them consistently throughout the organization. This is especially difficult for large, diversified manufacturers like UTC, whose holdings in the 2000s included a variety of aerospace and building systems companies. In a 2010 case study, MIT researcher George Roth identified four factors critical to ACE’s success:
Active buy-in from executives: Mr. David and Mr. Chênevert were visibly involved in ACE; they set goals through ACE, adopted its methods, and held themselves to the same standard demanded of all.
Consensus, not coercion: Councils were convened where leaders across the organization could openly discuss concerns and objections. Leaders were not forced to adopt ACE; they only did so when fully on board.
Learning from itself: Mr. Roth noted that ACE allowed UTC to “learn from itself.” The company encouraged employees to take ownership of the program, to innovate on processes and methods. Continuous communication then allowed for these changes to feed back into the program and help others.
Individual learning: UTC facilitated employee learning and helped employees use their learning in action via programs like an employee scholar initiative.
Championing ACE
Mr. Chênevert was a major supporter and implementer of ACE at Pratt & Whitney and UTC.
In 2007, as COO of UTC, Mr. Chênevert committed 70 percent of the corporation to achieving a silver or gold ACE rating within two years. At the time, only 18 percent of UTC sites had attained these ratings, which recognized operational improvement, safety, quality, employee satisfaction, and performance. These sites had worked for as many as nine years to achieve their certifications, so a two-year timeline was ambitious indeed.
Mr. Chênevert’s bold goal galvanized an increase in ACE skills training, from about 1,000 UTC associates enrolled in certification programs in 2006 to 20,000 in 2008. The 70 percent goal also led to the creation of a voluntary ACE program for UTC suppliers. By the end of 2007, 22 percent of key suppliers had met the equivalent of an ACE gold or silver rating.
Mr. Chênevert then raised the stakes again, adopting a new goal of 70 percent of suppliers achieving the two highest ACE ratings by 2011. Ultimately, UTC was able to achieve both these goals on time.
Results
UTC’s own study of ACE’s impact revealed significant, tangible benefits. Sites that improved from an ACE bronze to gold certification level saw:
- 35 percent increase in customer satisfaction
- 60 percent improvement in inventory turnover
- 24 improvement in on-time delivery
- 35 percent improvement in sales
The ACE program is widely credited with helping UTC become the top-performing Fortune 50 company from 2000 to 2014. In 2014, UTC had a total market cap of $105 billion and sales of nearly $70 billion, supported by more than 200,000 employees worldwide focused on a single vision and common language with ACE aimed at delighting customers and creating shareholder value like no other large conglomerate.
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