STRATEGIC MANAGEMENT BMST5103

TABLE OF CONTENTS

A. IDENTIFACTION OF PROBLEM ...................................................................................... 3

B. MAIN CHANGES THAT TOOK PLACE IN CORNING GSC AFTER THE NEW
MANAGEMENT TOOK OVER ............................................................................................... 3

C. CHANGE IN STRUCTURE BENEFICIAL TO CORNING? PROS AND CONS............. 5

D. NEW DECISION MAKING PROCESS EVALUATION ................................................... 7

E. CHANGES YOU SHOULD MAKE FOR THE STRATEGIC DIRECTION OF THE

COMPANY IF YOU ARE THE CEO ...................................................................................... 9

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A. IDENTIFACTION OF PROBLEM
The worldwide telecommunications crash happened in 2002 really hit Corning at its worst
where the company had to take $5.4 billion loss. Company’s stock plunged and crashed to the
lowest from $100.00 to $1.50. And this situation brought to the lay off more than 12,000
worker.

On top of what has happened financially in 2002, Corning had issue in prioritizing business
proposals as too many business diversification has been made such as optical fiber cables in
mid-1960s, medical products/services design in 1970 and converter in auto exhaust systems in
1974. With these additional business segments they have deviated from their traditional values
and lost focus as objectives are not clear within the organization.

The concept of “patient money” is really a high risk and dangerous strategy as initial investment
will take a long time to return and profit earning is uncertain, this can be seen as Corning has
lost money for 14 years on their display business before becoming profitable in 1999.

During telecommunications crash era, senior management only realized that Corning didn’t
perform enough or optimally on risk management and strategic balance. As per Peter Volakanis
explained Corning weren’t spending enough on growth. They should invest on other business
to balance the risk and reallocate to businesses that weren’t doing well.

B. MAIN CHANGES THAT TOOK PLACE IN CORNING GSC AFTER THE NEW
MANAGEMENT TOOK OVER
When Jamie Houghton became the CEO in 1983, Corning invested heavily and focused on
medical services and optical fiber with planning of 10 years span. These two businesses
segment became the largest contributions generated 26% and 24% of revenue.

And in 1998 the Consumer Products division consists of CorningWare®, Corelle®, Pyrex®
and Revere® was sold due to these businesses had cost them $975 million but revenue was
$630 million.

In the year of 2000 after Roger Ackerman took over as CEO (in 1996), Corning completed
more than eight acquisitions spending more than $9.9 billion to deepen the company’s expertise
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in photonics and related technologies. By the end of 1999 and into 2000 Corning was
performing at its peak. The company’s market value had increased from $9 billion in 1996 to
$50 billion by 2000.

Roger Ackerman invested more in optical fiber from the surplus of selling off the Consumer
business segment. Even during the fiber prices plunge in 1998 and Corning’s stock fell two-
thirds Ackerman kept on course and increase expenses on R&D from $175 million in 1995 to
$560 million in 2000.

In 2001 Corning Incorporated established the Growth and Strategy Council (GSC) in order to
pursue its strategy of continuous innovation. The GSC is designed to speed growth, get urgency
across all the businesses, and to pace and regulate resources. The council objective is to
maintain a balanced and robust innovation portfolio through pacing investments in individual
programs and making resource allocations between Corning’s exiting and developing
businesses.

In 2008, Corning’s operations centred on different glass technologies, each of which catered to
a different market and had different cycle times. The four business segments included: Display
Technologies, Telecommunications, Environmental Technologies and Life Sciences. In the
early 2000s, technology was advancing rapidly and this required invest new technologies in
order to maintain and develop each of its four business segments.

Innovation at Corning followed what was referred to as the “Governance of Innovation

Pipeline”. The process required building a deep understand of specific technology and solving
with a unique combination of material and processes. The innovation process was overseen by
several managers who used Corning’s Governance of Innovation Pipeline to move new
business through stages of product development.

Joe Miller Corning’s CTO started the Corporate Technology Council (CTC) in 2003. CTC
determine and made decisions on whether early Stage 1 (Build Knowledge) and Stage 2
(Determine Feasibility) projects fit in with Corning and whether they were to graduate on to
the GSC or needed additional resources.

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In 2005, a centralized new business development (NBD) function was created specifically to
seek out and lead NBD with the objective of exploring new markets, new technologies, and
potential new businesses outside the strategic focus of current businesses.

C. CHANGE IN STRUCTURE BENEFICIAL TO CORNING? PROS AND CONS.

Justify using excerpts from the case.

As per excerpt from the article, “Roger Ackerman has accomplished what executives at such
companies as AT&T, Kodak and Xerox haven’t been able to: He has transformed a lagging
giant of the Old Economy into one of the bright stars of the digital age. When Ackerman took
over as CEO in 1996, Corning Incorporated was best known for its cookware. Now, as he steps
down, it’s the world leading supplier of optical fiber and other high-tech parts.”

Much of Corning’s success at that time was attributed to CEO Roger Ackerman, who joined
the company in 1962 and became CEO in 1996. Yes, he did bring glory to Corning in 2000.
Indeed change of structure did have impact to organization, whether it is profit or loss. But at
the end of 2001 Corning had disaster where they have lost a lot under the same leadership of
Ackerman.

In April 2002, Corning’s former CEO Jamie Houghton, who was then Chairman, was called
back to lead the company. According to David Morse, Corning’s head of research, on the day
his return was announced, Houghton went to Sullivan Park where he reassured scientists that,
“Corning is about research. I am counting on the R&D community to lead this company back
to prosperity. We have done it over and over again throughout our history and we need to do it
again.”

Slowly after Jamie Houghton back in charge, the Corning’s income rose gradually in year 2004
from $2.2 billion loss to hit income of $5.8 billion in 2007. This shows organization has to act
fast in rescue mission should there be any red flag might hurt and jeopardize its image, brand
and most importantly financial perspective.

Its organizational structure were combined and well defined business units run by general
managers (GMs) who reported to the COO and a large centralized research capability reporting
to Joe Miller, the CTO. GMs were responsible for new product development, manufacturing,
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sales and marketing, but all longer-term research was carried out at Sullivan Park, the
company’s large and soon-to-be-expanded R&D facility.

As CTO may manage and coordinate his units well to achieve primary objective in R&D.
Synergy can happen. Hence, it is should be looked as a beneficial thing to Corning. However,
the span of control of many units under him may seem wide and could result in ineffective
management of resources and speed of achieving the primary objective which is related to
R&D can be an issue.

Corning’s organizational structure in a business is that it can lead to an efficient exchange of

information. Departments work closely together and communicate with each other frequently
to solve issues. Efficient lines of communication enhance productivity and allow for quick
decision-making. Corning’s centralized Sullivan Park research organization enabled
businesses like LCD and optical fiber to leverage important synergies. Moving people across
department increases knowledge sharing and talent among the businesses and research groups.

With CTC and GSC aided in the management of the overall innovation pipeline: “The CTC
and GSC together prevent two common assumptions from occurring. One, GMs of businesses
that are doing well can’t assume that the company will continue to invest in all of their business
opportunities. Second, GMs whose businesses are suffering can’t just assume his/her focus is
only on getting out of the hole in the short term.” The councils provided an objective view in
both cases, as well as considering balance and long-term profitability at the corporate level

As per structured hhe CTC, which included Miller, his direct reports, the Director of Strategic
Planning, and Corning’s Chief of Strategy, made decisions on whether early Stage 1 and 2
projects fit in with Corning, and over time, when and whether they were ready to graduate on
to the GSC and whether they needed additional resources while GSC focused on what were
deemed “high-potential” Stage 2 projects and projects in Stage 3 and 4. Led by Corning’s CEO,
Wendell Weeks, COO, Peter Volanakis and CTO, Joe Miller, the GSC provided ongoing
advice and support to businesses and their innovation programs.

There were several key committees made up Corning’s governance model. At the highest level
was the Management Committee which was responsible for setting corporate strategy and
running the company. The Operating Committee was responsible for overseeing businesses’
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current year performance to plan. Then there were the two councils responsible for overseeing
the company’s innovation projects and programs: Corning’s Technology Council (CTC) and
the Growth and Strategy Council (GSC).

D. NEW DECISION MAKING PROCESS EVALUATION

How objectives were set and decisions made in a major re-engineering program that produced
dramatic results for Corning Inc., a company that has been a world leader for many years in
specialty glass materials.

The decision making in Corning involved the Governance of Innovation Pipeline, where under
it there Corporate Technology Council (CTC) and Growth & Strategy Council (GSC)
responsible in overseeing the company’s innovation projects and programs. Its purposes are to
identify and develop new pipeline opportunities, move programs into Stage II, invest in the
future portfolio and to sort, to pace and to execute.

There are sets of question as guidance being used to gauge project proposal feasibility;
1. Is the opportunity large?
2. Is it connected to a “megatrend”?
3. Is the problem significant – requiring a step change in cost or capability?
4. Is the hypothetical (quantified) value proposition compelling?
5. Is Corning’s approach unique? Is there a possibility for significant differentiation?
6. Is there a good fit with Corning skills?
7. Are the required resources available?

Corning has a long history of partnering with outside companies to drive change. Prior ventures
with Siemens and Samsung, among others, focused on leveraging Corning's core skills in
materials science to enter new markets (telecommunications and display products,
respectively). In most cases, this model has proven quite successful. Since Jamie Houghton
took over as C.E.O. in 1983, Corning's stock split three times, driven by growth in the optical
fiber business and an expansion into the fast-growing clinical testing business.

This drove management to commit to establishing a program to produce significant

improvements in performance across the company. As a result, management decided to

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undergo a structured re-engineering process to enhance Corning's competitive position, and

ultimately shareholder value. Its goal was to reduce operating costs by some $450 million over
three years while creating the right capabilities to drive profitable growth.

How Corning speeded up its decision-making, created a cost-conscious environment and

encouraged the horizontal flow of information across the organization, is carefully described
in the “phased” approach used by the joint Corning implementation teams. For a company with
a company town culture, this was indeed a breakthrough to the future.

Leaders of successful corporations are always on the lookout for ways to improve their
company's overall performance. In the past, cost-cutting and right-sizing were high on the
C.E.O.'s agenda. Today, there is intense interest in innovation and revenue growth. To achieve
the desired gains in shareholder value, corporate leaders often end up selecting from a menu of
transformation options that address both costs and capabilities, including the popular
methodologies of business process re-engineering.

The trouble is, these options, however powerful they might appear, regularly fail to deliver
results because they are implemented on a piecemeal basis. Though some elements in a
company's performance equation may show gains, the overall outcomes are less than optimal.
A common theme among companies that have re-engineered is that while costs may have come
down, there is concern about the ability to drive future growth through innovation.

This was a problem that the leadership team at Corning Incorporated did not want to encounter
as it began thinking about the need to examine the company's cost structure and competitive
capabilities in the fast-changing markets in which it participates--telecommunications, life
sciences, consumer housewares and components for original equipment manufacturers. As a
place to begin, the team refrained from looking at the company as a collection of discrete
functions. Instead, it decided to transform Corning by taking a comprehensive, integrated
approach to the company's cost structure and growth aspirations.

To achieve its goals, management recognized that Corning's culture could use its own dose of
re-engineering. In the past, visitors to the Corning valley would describe a paternalistic,
functionally driven and risk-averse environment. If Corning was to react faster to market and

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customer needs, management would have to speed decision making, create a cost-conscious
environment and encourage the horizontal flow of information across the organization.

E. CHANGES YOU SHOULD MAKE FOR THE STRATEGIC DIRECTION OF THE

COMPANY IF YOU ARE THE CEO
Justify using excerpts from the case.

As a CEO, generally my responsibility is to determine the strategic direction of the company

and ensuring that strategy is implemented through functional steps. In addition, CEO take the
helm in creating the organization's culture. One of the common practice/scenario that happened
in Corning as per excerpts below needs to be changed.

As per excerpt from the article, “While attendance varied depending on the business and
innovation program being discussed, there was a core group of members who were present at
every meeting including Weeks (CEO), Volanakis (COO), Miller (CTO), the heads of research,
development and engineering, and the head of HR. There could be as many as 18-20 people
present at a given meeting.”

First, Corning must limit the number of attendees at the GSC meetings. Corning should only
permit the key decision makers, employees who have had a long history with the company, and
employees with expertise on the business model being presented to attend. Implementing this
option would help facilitate open discussion at the meetings as less people would be involved;
and this option would be free to implement. This change, however, could create tension in the
company and anger some employees who would like to attend but would no longer be allowed
to do so.

The second changes is that Corning must screen the proposals that are scheduled to be
presented at the meetings. By reviewing the proposals prior to the meetings, by doing this the
GSC would be able to prioritize the opportunities and ensure that only the most viable prospects
are presented. This option would be free to implement as well; however, it would require a
time commitment. Additionally, screening the proposals may cause the GSC to overlook a
potentially viable business venture.

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Some of the barriers that happened in Corning are they didn’t know enough about
environmental and social issues, they weren’t able to make a clear link to why it mattered for
their business and they could understand the link, but they had competing priorities. Due to this
we need input from outsiders to gain different perspective in understanding our strategic plans.

The third changes I would implement is that Corning to hire specialists to collaborate with the
key decision makers on the GSC and to facilitate the decision making process. To implement
this decision, Corning would hire specialists with expertise on unfamiliar business segments or
models. The specialists would assist the GSC leaders with the decision making process.

Although hiring specialists would cost money, the specialists would help the decision makers
understand the proposals with which they are unfamiliar and make better informed decisions
concerning future opportunities. Each of these strategic options would help to ensure the
success of the GSC by helping the GSC run more efficiently and effectively, and allow the key
decision makers to make stronger, well-informed decisions.

I will also need to look back on how Corning’s HR manage the employee’s development and
factors relate to it. As to maintain employee’s productivity high and to retain them is indeed a
challenging process. HR heads could engage line executives in mapping their businesses’
strategic intent.

As per excerpt from the article, “No division manager had absolute control over his or her
growth portfolio.”

Using HR tools, they could evaluate human strategic resources, identify the factors
constraining Corning’s business processes and analyze how these factors would affect the
talent pool. The tools provided questions to help HR business partners get the right answers. In
effect, the tools taught them to think about the link between business strategy and human
capital.

Every organization must look on strategic workforce planning as a work in progress. Most
companies say, “We’re just getting started,” or “We’re not there yet.” Many have piloted
workforce planning in one part of the organization but have not institutionalized it company-
wide. It is not often integrated with other processes, such as business planning.
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In Corning, ongoing workforce planning was temporarily disturbed when attention shifted to
meeting new regulatory demands. Corning have to study, monitor, implement and improve on
Recruitment, Retention, Professional Development, Leadership/High-Potential Development,
Performance Management, Feedback/Measurement, Workforce Planning and Culture.

As per Corning Organizational Structure from Exhibit 5, New Business Development is under
CTO and Chief Strategy Officer has no subordinate. I would say this is a waste of talent
sourcing as Business Development has been assigned where he/she has limitation due to
working at the wrong department and environment. I will surely transfer New Business
Development to report under Chief Strategy Officer. As strategic planning has strong
relationship in creating business and to progress development to ensure business is align and
moving to the right path. With the support from Business Development, Chief strategy officer
will obtain a better idea and result from brainstorming.

WORDS COUNTED: 3010 Words

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