For more than 160 years, Corning has been a center of invention--a place where scientists are urged to discover new materials, technologies and manufacturing processes. The resulting innovations have included a manufacturing process for mass production of light bulbs, cellular ceramic substrates for catalytic converters, glass optical fiber for telecommunication applications, and liquid crystal display glass for consumer electronics.
By the end of the twentieth century, this way of doing business seemed to have paid off handsomely. The company enjoyed sustained growth from 1984 to 2000, with net profits soaring from $100 million to $900 million. Through the late twentieth century, the company had become dependent on its highly successful optical-fiber business and had invested heavily in fiber-related acquisitions. Then, in 2001, the telecom bubble burst. Demand for optical fiber, which at that point contributed a majority of Corning's revenue, plummeted. Sales fell by $1 billion in 2001 and another $3 billion in 2002. This crisis, which seemed to have materialized overnight, shed doubt on Corning's survival and raised the question of whether Corning would thrive in the new millennium.
But Corning survived, adopting a strategy focused on consolidating and strengthening R&D. Corning pulled itself back from the brink, and its bold actions helped the company weather the global economic crisis of 2009 and 2010--and emerge even stronger. The Corning experience offers important lessons for any company seeking to focus on organic growth in this volatile economic climate.
2002: The Strategic Innovator Fights Back
With its fiber business decimated, Corning had so few resources that it seemed almost impossible to fend off disaster. The company's share price had dropped from $130 per share to $1.20 per share. Revenues were down to $3 billion, with $4 billion in debt and $2 billion in cash. The management team had to slash costs, prioritize short-term revenues, and reestablish stability and stakeholder trust. But the company's long-term health would depend on organic growth through innovation, and that meant continuing to invest in research and new business development. To address both of these imperatives, the management committee made several bold strategic decisions. They consolidated and centralized R&D, refocused the corporation on its core competencies, improved and expanded its innovation processes, and formulated an "innovation recipe" to help identify new opportunities.
Centralizing Corning's R&D activities and consolidating facilities was a brave step in an era when many companies were globalizing and decentralizing. The company shut down or downsized facilities in Asia, the United States, and Europe. Eliminating these satellite laboratories reduced RD&E spending by nearly half, from $620 to $320 million. Most RD&E activities were relocated and centralized within the Sullivan Park research facility in Corning, New York. That facility, which comprises more than a million and a half square feet, now houses more than 2,200 people, 600 of them principal investigator PhDs and more than 30 percent of them born outside the United States.
The downsizing was carefully managed to preserve the fundamental capabilities required for invention, innovation, and new-business development. Several key facilities important to maintaining critical capabilities were retained, including a traditional glass lab in Fontainebleau, France, a facility long associated with major glass-manufacturing facilities in Bagneaux. Technical centers have also been added in the Silicon Valley and Taipei; these are focused on providing technical support to customers and their supply chains.
Consolidating did more than simply reduce costs. It made it easier to identify and involve people with the right skills, from multiple disciplines, for each project. …