Corning Inc: Boom or Bust (Pt2: Strategy)

Corning’s Strategy and Technological Councils

Corning’s source of innovation relies on the GSC (Growth and Strategy Council) and the CTC (Corporate Technology Council).  The GSC includes the CEO, the COO and the CTO, this group meets once or twice a month to provide advice and guidance to the business segments. Important decisions like the allocation of resources for several projects are debated and decided in those meetings. With this mainframe the company seeks to launch 2 to 4 innovative business projects per each 10 year cycle, with an investment cost of 1 Billion, hoping to reach 1.5 Billion in revenue. Therefore GSC main responsibilities were to allocate capital to a portfolio of future investments and to define the framework for the execution of these projects. The big idea was to take R&D decisions out of the business units and centralize them under the GSC. This approach stems out of the dotcom bubble where Corning focused too much on the telecommunications segment (optic fiber) and when the bubble burst, the company took a heavy hit in sales. This led future managements to have a bird’s view over the whole company always directing resources to projects that, while currently unprofitable, could be the next source of growth.

On the other hand the CTC main tasks are: to identify new opportunities, chose and developing a set of projects into the pipeline and to move promising projects to the test phase. Together these two councils shape the innovation process in the company. Let us now see how the innovation process works.

Innovation Process

Each innovation process starts by developing a deep understanding of a specific technology, which should be linked to a determined value chain. There the company will look for customers’ difficulties that Corning can solve with a set of resources and competences.

The teams working in these business projects usually comprise commercial staff, technology staff, manufacturing, and engineering staff, they guarantee multiple perspectives to the development process. The interaction with each of the previously mentioned councils allows the projects to be constantly reviewed, and the multiple perspectives allow to unsuccessful ideas to be reassessed and to be applied elsewhere, like what has happened with the toughened windshield for automobiles that later was applied to the LCD market in the 2000’s. Other advantage that pops out of this organization and is reinforced by the culture and history of the company is the ability to be patient about investments. The company knows that innovative processes are uncertain and pay-off is usually well in the future despite of what the Excel tables might say (the optical fiber took 20 years to be profitable).

One important task for researchers developing the products is to have constant face to face meetings with the clients. There is no better way to bring credibility to the end market than through the direct participation of the staff responsible for the high tech engineering.

Conclusion

Basically Corning has been able to keep a fine balance. The company has been successful in creating the right process, while maintaining cooperation within the employees. This has resulted in an above average rate of innovations that really were brought to market.

The main conclusion that we take from here is that the company has a high probability of having a competitive advantage in the innovation process, which translates in good R&D results. At the same time it seems evident that the company is able to create markets for its products, which usually lie in specialized niche market, difficult to be assaulted by low-cost producers. Corning’s history also shows that the company has been nimble in leaving commoditized markets, pursuing premium opportunities created  by its R&D department.

The previous analysis tells us that Corning has a high probability of keeping creating innovations that translate into products and growth, there is no evidence that this is degrading and therefore in terms of strategy, strictly speaking, we believe Corning is a healthy company.

In the 3rd part we will dissect some financial metrics to see if the production department equals the efficiency of the research department.

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