REV: APRIL 23, 2008
H. KENT BOWEN
Corning: 156 Years of Innovation
When growing up, my brother and I were taught by our father, that investing in R&D was like a ‘religion.’ You did it on faith, in good times and bad, even if you could not see the immediate fruits of it. It was not only a way of preparing for the future, but a way of safeguarding our employees against the sudden disappearance of major businesses…. History says we’ve been very, very successful by doing this.—Jamie Houghton, former Corning CEO, 1983-1996, 2002-05
In November 2007, CEO Wendell Weeks, COO Peter Volanakis, and CTO Joe Miller emerged from a meeting of Corning’s Growth and Strategy Council. Their mood was upbeat. Five years after the telecom meltdown, which nearly took the company with it, Corning had successfully reinvented itself, as it had done so many times in the past. Its strategy was simply to invent “keystone components” which uniquely enabled other companies’ products and brought Corning high margins from its proprietary technology. They agreed that Corning urgently needed to avoid becoming overly dependent on a single business, as sales of its thin glass substrates used in liquid crystal displays (LCD) would eventually slow down. At the same time, they needed to continue to invest in developing the next generation of LCD substrates, since this product line was the “cash cow” that also funded most other RD&E activity. Second, they needed to diversify and provide future options primarily through centralized research leading to a broadened portfolio of business opportunities. Third, they recognized that some new technologies already in the development pipeline would likely become the company’s next wave of “big hit” products needed to ensure long-term independence and prosperity over the coming decades. However, despite their considerable experience in creating new businesses, they could not predict exactly which ones would become “winners.” At the meeting, they discussed funding tradeoffs: (a) allocating more resources to six new growth products being launched from existing businesses; (b) spending more to push one or more of four new technologies currently in early stage development to market sooner, realizing they would likely take at least five years to become profitable, or (c) allocating more resources for exploratory research. Weeks reminded his team that the context for these resource allocation decisions was the executive team’s commitment to double the rate of new business creation from 1-2 new businesses per decade to 2-4 businesses, while growing current businesses. Weeks summarized the questions they needed to answer: (1) “Should Corning push ahead with all four new businesses knowing some would inevitably fail, and its earnings would take a hit, or should it cut some projects before getting a true market response? (2) Should Corning re-allocate funding from exploratory research to these projects to generate revenue streams earlier at the risk of eventually depleting its ‘ideas’ pipeline? (3) Should RD&E spending be increased from 10 to 12% of revenues? How much was too much and how should ________________________________________________________________________________________________________________ Professor H. Kent Bowen and Research Associate Courtney Purrington, Ph.D., prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,...
Please join StudyMode to read the full document