AT&T acquired Paradyne Corporation which developed and manufactured data communication equipment and provided sales and service. Paradyne’s management team shortly after the acquisition wanted to be recognized as a leader for quality and in customer satisfaction. All the team members would carry Values cards which exhibited the customer focus and quality. It had become an integrated part of the business and part of their daily work. The company started focusing on continuous improvements practices and rolled out programs that was a model of cooperative Customer-Supplier relations. The goal of this program was customer satisfaction. The company started a Customer Satisfaction Predictors as indicators of critical business process. These charts were displayed on the walls in their world wide facility showing monthly results, along with target and future goals. CSP was also tied to an annual bonus incentive plan for all team members.

AT&T Paradyne's manufacturing cost system in 1990 was still based on the traditional approach of assigning materials and production overhead to products as percentage markups over materials cost and direct labor. The cost per part number of about $1,000 led to very high reported costs for low volume products with many unique components. Managers and engineers concurred that the $1,000 per part number cost was too simplistic and grossly over-costed products that had several minor variations. The enormous shifts in product costs were highly visible since the company had eliminated entirely its direct-labor based standard cost system. Thus, the simple ABC system was being used not only for internal product costing but also for inventory valuation for external reporting. AT&T PARADYNE, Harvard Business School, April 21, 1998. The company developed a different ABC model structure where the factory expenses were split into three categories