Corning Corporation was founded in 1851 by Amory Houghton in Somerville, Massachusetts. Now it is the world leader in specialty glass and ceramics. By having more than 160 years of materials science and process engineering knowledge, Corning creates keystone components that enable “high-technology systems for consumer electronics, mobile emissions control, telecommunications and life sciences”. Corning maintained its strong stance on innovation as they continued investing huge amount of money on optical fiber research. Corning strives to maintain a perfect balance and dependency between existing technologies and upcoming inventions while being ‘diversified’.
Keywords: Corning’s Technology Council(CTC); Growth and Strategy Council (GSC); “reinvent itself”; Research and Development (R); Location Advantage;
This case synopsis is about Corning Incorporated being the most prominent innovators around the world. How assertive the organization take risk in emerging new possibilities in unusual products and unmarked business. Also, this case exhibits the techniques of Corning Incorporation’s organization development and their ability to anticipate progressive expansion, while gaining capital, in four distinctive business categories, that is Display Technologies, Telecommunication, Environmental Technologies and Life Sciences (Henderson and Reavis, 2009, pg. 7). Based on the unyielding research and development, Corning Incorporated are considered the trendsetters of new ideas, techniques, and approach to organizational expansion. Corning embraces the philosophy of “The old techniques are stagnating and discarded.” (Brown, Chapter 16, p 427).
The case study was written to provide a student insight into the below processes followed by Corning to “reinvent itself” successfully to become a world leader in specialty glass and ceramics.
· a best practice of investing more on R&D to bring more innovations during up and down times
· having diversified portfolios
· a best practice in the way well-functioning leadership teams with appropriate governance mechanisms (GSC) can make informed tradeoffs about the balance between long-term and short-term investments.
· having strong opportunity evaluation processes (by CTC) to identify and develop new pipeline opportunities, move programs into Stage 2 (determine feasibility), invest in the future portfolio and “to sort, pace and execute”.
· having a centralized R&D to facilitate creative interactions among scientists for better decision making.
Q1. Why has Corning been able to “reinvent itself” so successfully?
A1. Organization Development is “an effort that is planned, organization-wide, managed from the top, increase organization effectiveness and health, and through planned interventions in the organization’s processes using behavioral-science knowledge” (ODNetwork.com). It revitalizes the firm in line with the vision of its leaders and environmental constraints. Following are the major organization developments done by Corning to “reinvent itself” successfully.
Innovation in its DNA: From the day one when Corning was founded, innovation is part of its DNA. Its businesses were built around diverse glass technologies that served different markets. Corning’s effective organization development cultivates innovative approach to reinvent itself through research as well. The routine drill (business model) at Corning is, invent a component that enables a complex system, protect it with Intellectual Property(IP), and develop world class manufacturing processes to make it. It has an ability to convert their inventions into successful products and services.
Exceptional Human Resources, Leadership and R&D: The case study emphasizes Corning’s competency to “recreate itself” through the leadership of the GSC committee. GSC tremendously immersed in identifying what projects to promote and subsidize e.g. R&D spending. The strength of Corning is, effective use of diverse/cross-functional teams and keen to invest on R&D during good times and slower times (Stage Gate, 2013). Corning has outstanding leaders, engineers, scientists who has helped it to reinvent itself so successfully. Every year, by average 10% of Corning’s revenue goes to R&D expenses (Henderson and Reavis, 2009, Exhibit 7). Many of the competitors’ R&D were not close to Corning’s Research and Development because of Corning’s extravagant endowment (Henderson and Reavis, 2009, pg. 9).
Cope Up with Market: Corning be aware of that market is continually evolving as consumers’ tastes are shifting, so Corning has been continually reinvented itself to cope up with consumer current necessity and buyers’ future demands, and become one of the world’s leading materials companies.
Diversified Portfolio: Diversification is a relevant strategic option for Corning, since it adheres one or more of qualities mentioned in Appendix. Corning hold a profound portfolio proving itself a changing organization and an innovator. Corning have constantly reinvented itself since 1851. (Henderson and Reavis, 2009, pg. 2). The target groups are, Consumer electronics, mobile emissions control, telecommunications and life sciences. They are renown for being the originators of the railroad signal lenses, glass envelopes for the electric light bulbs, heat resistance glass baking dishes, color television bulbs, optic fibers for cable, liquid crystal display (LCD), motor vehicle emissions control systems, thermometer tubes for medical providers and apothecary tubes. (Henderson and Reavis, 2009, pg. 7-8). This diversified portfolio helped Corning Incorporated to become a world leader in specialty glass and ceramics.
Merger, Acquisition and Alliance: Joint ventures among B2change organizations must be beneficial to each other when they combine right level of their competency and proficiency (Lawler, p 109). Corning approached, American based, AT&T regarding a joint venture in developing fiber optics. (Henderson and Reavis, 2009, pg. 4). Needless to say, AT&T decline the challenge. In 1973, Corning reached out to the European company, Siemens to find out if they had any interest in the developing fiber optics for cable. Siemens was willing to pursue the risk of taking on the project in creating fiber optics for cables. (Henderson and Reavis, 2009, pg. 4). This was a vast investment for Corning. Thereafter, the company began to acquire other business and launch other joint ventures to gain quick access to new technologies or complementary resources and capabilities. Corning Incorporated was classified as a “leading company who envision an endlessly changing organization”. They were an effective organization that was continuously adapting to change in a domestic and global environment. (Brown, pg. 420). Not long, after the global fiber optic joint venture, Corning sold off the consumer business and decided to concentrate on fiber optic. Then, the Asian financial disaster caused the fiber optic market to spiraled downward. (Henderson and Reavis, 2009, pg. 4). Corning had to revamp after losing revenue on their prior business decision. The corporation took heed to its past fate. The senior management made modifications on handling its growth development. (Henderson and Reavis, 2009, pg. 6). The leaders acknowledged it was crucial to enhance risk management and strategic balance. Corning was in a recovery mode. But an analyst found it problematic to comprehend Corning’s corporate proprieties. This is what set Corning apart from other entities.
The centralized R&D facility located in Corning, NY, facilitates to have lots of creative interactions among the scientists and to allocate appropriate/vital resources to focus on important innovation programs. Since the R&D team at the corporate level located in the R&D facility, it helped to either market the innovative ideas swiftly or stop them in the most efficient manner (Stage Gate, 2013).
Q2. What role is the Leadership Council designed in the play to this process.
A2. Key stakeholders are designated to render decisions on what new innovations need to be implemented as a product/service from the innovated catalogue. The Corning Corporate Governance of Innovation Pipeline discusses neoteric inventions and how to ingratiate its products to clients and consumers. (Henderson and Reavis, 2009, pg. 9). The group members consist of a governing committees: Management Committee and Operating Committee and two councils: Corning’s Technology Council(CTC) and Growth and Strategy Council (GSC) (Henderson and Reavis, 2009, pg. 9). The premier constituent is the Management Committee who are liable for setting corporate strategy and company operation. Handling, the business plan for current year is the Operating Committee. Thereafter, are the two councils who are accountable for the entities innovation agenda and endeavors. (Henderson and Reavis, 2009, pg. 9)
The CTC which is under the direction of the CTO renders directives in Stage 1 (gather info and build knowledge) and 2 (determine feasibility). Subsequently, the GSC regulates the entities innovations and growth plans i.e. long-term and short-term. This council is under the guidance of the CEO, COO, and the CTO. (Henderson and Reavis, 2009, pg. 9-11). The two council would recurrently convene about business and innovations, which also consist of showcasing new concept and the decision- making process of innovation itself. Should this new idea demonstrate a market demand and a capacity to produce a profit, it is transferred the GSC. (Henderson and Reavis, 2009, pg. 9-11)
It is essential for Corning Governance of Innovation Pipeline to be unwavering about the process for growth. It is vital for the company to have the leadership council that is docile enough to authorize for strategy-driven changes. Leadership Council provides advice and support to ongoing innovation and growth programs. It provides an objective of exploring new market, technology, and potential new business outside of the strategic focus of current businesses. It helps in maintain balance and robust innovation portfolio through pacing investment in individual program.
Q3: What are its major strengths? What are its potential weaknesses?
· Innovation is part of Company’s DNA.
· Employee welfare company e.g. better compensation and benefits, and attention on employee affiliation (Henderson and Reavis, 2009, pg. 11).
· Strong Y-to-Y positive growth in net revenue, net income, working capital, total assets, shareholder’s equity and Y-to-Y decline in long-term debt from year 2004 to 2007 (Please refer Table 1 in Appendix)
· Consistent growth in Net Income and constant R&D expenses.
· Diversified portfolio. Product and industry diversification bodes well for the company (Henderson and Reavis, 2009, Exhibit 3b)
· World leading supplier of medical, optical fiber and high-tech parts (Henderson and Reavis, 2009, pg. 3, 5 and 17)
· Fervent M&A plans and remarkable success (Henderson and Reavis, 2009, pg. 4 & 5).
· Strong industry recognition in the fields of Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences (Henderson and Reavis, 2009, pg. 7)
· Solid strategic and capital allocation framework
· Maintaining global leadership position in glass for liquid crystal displays (Henderson and Reavis, 2009, pg. 2)
· Environment friendly products (Alter, 2008)
· Flexible and responsive organization
· Global presence and well established robust R&D department
· Healthy Supplier Chain (Corning Earnings Call, 2007)
· Due to intense competition sluggish growth in market share.
· Other than Display Technologies segment, other segments are bringing low income margin with high R&D cost ((Henderson and Reavis, 2009, Exhibit 4b)
· Comparatively, brand awareness is lesser than other global leaders
· Growing SG&A expenses every year (Henderson and Reavis, 2009, Exhibit 4a)
· Growth is depending on few customers
Q4. If you were Peter Volanakis, would you change the way in which the Council or Corning operates to increase their innovative process? Would you change the way in which resources are allocated at Corning? Why or Why not?
A4. Final accountability of seeing that strategy is executed successfully primarily falls upon the shoulders of a Corning’s chief executive officer, its chief operating officer, and the heads of major units (business divisions, functional departments, and key operating units). Hence, I would not change the policy which is being used to form Council members to come up with better decisions for potential upcoming opportunities. But I would limit the number of attendees by allowing only the key decision makers e.g. executives, Subject Matter Experts(SMEs) at the GSC meeting to get maximum potential benefit out of GSC meetings. This would help facilitate more useful open discussions with legitimate/limited resources, even though it would aggravate despondency on few resources who can’t attend the meeting. But by communicating the outcome of the meeting transparently to those resources immediately after the meeting might help to reduce the tension.
The second change I would recommend is that Corning must screen the proposals that are scheduled to be presented at the meetings. By reviewing the proposals prior to the meetings, the GSC would be able to prioritize the list of projects to review and ensure that only the most viable prospects are presented. Even though this option is easy to implement, it would require additional time commitment from the GSC members amidst their busy schedule. Additionally, screening the proposals may cause the GSC fail to notice a potentially viable business venture. The council has to understand environmental and social issues to make clear cut decisions, thus, it is advisable to bring input from outsiders to gain different perspective in understanding the strategic plans.
When the company plan to enter into an unfamiliar business segments or models, it has to hire specialists to assist and collaborate with the key decision makers on the GSC to make better decisions concerning future opportunities. It would make key decision makers stronger on decision making process.
As mentioned in the case study, “No division manager had absolute control over his or her growth portfolio”. Hence HR managers should use HR tools to evaluate required human resources, identify the factors constraining firm’s business processes, analyze how these factors affect the talent pool and how to nullify the effect by managing employee’s development e.g. training and incentives.
Usually workforce planning is not often integrated with business planning. But, it is important to look on strategic workforce planning as if the work is in progress. Also, Corning has to study and improve on “recruitment, retention, professional development, leadership development, performance management and review, workforce planning and culture”, since council’s new regulatory demands disturbing ongoing workforce planning momentarily.
As strategic planning has strong relationship with creating business and is part of ensuring business alignment with the development, I would recommend to move “New Business Development” under CSO in Corning Organization Structure shown in Exhibit 5.
Through a continuous investment in R&D and their unique collaborative culture, Corning has developed a deep knowledge of materials science and process engineering that they continue to leverage as they innovate for the future. This investment will make Corning to grow stronger in coming years.
The procedure for evaluating the pros and cons of a diversified company’s strategy includes “assessing the attractiveness of the industries the company has diversified into, assessing the competitive strength of each business the company has diversified into to see which ones are the strongest/weakest contenders in their respective industries, ranking the performance prospects of the various businesses from best to worst and determining the priorities for resource allocation, and checking the competitive advantage potential of cross-business strategic fits and also checking whether the firm’s resources fit the needs of its present business lineup” (Thompson et al, 2017, Ch. 18). Corning’s leadership understood this procedure very well and following it as described by having Management committee, Operating committee, GSC and CTC.
The basic strategy options for local companies in competing against global challengers include utilizing keen understanding of local customer needs and preferences to create customized products or services, developing business models to exploit shortcoming in local infrastructure, and using acquisitions and rapid growth to defend against expansion-minded multinationals. I strongly believe Corning’s councils understand this principle and consider local customer needs and preferences in their decision making process, since they are developing their businesses globally.
A key approach for a company to grow sales and profits in several country markets is to transfer its valuable competencies and resource strengths among these markets to aid in the development of broader competencies and capabilities. I have no doubt that Corning has been progressively transferring its valuable competencies and resource strengths among global markets.
Perfection is not achieved completely by any company in the world. But if Corning keeps chasing perfection, somewhere on the way it may catch excellence…!