Failing in a One-Screen World

Posted by Leonard Fuld on Aug 26, 2015 12:25:00 PM

An interview and discussion with Ken Freeman, former CEO at Corning

LeonardFuld

This is a story of Corning, a company that was once (invented the glass for cathode ray tubes), and still is (invented the glass used in liquid crystal displays), the king of screens. It is also a story of a king that almost lost his crown were it not for one very intuitive and brave young CEO. The lessons he learned are valuable today.

Today we live in a world filled with every type of video screen. Laptops. Flat panels. Smartphones. Tablets. Smartwatches. Sitting, standing or on the go, we watch these screens opportunistically, according to a recent Deloitte survey. Whichever screen is available at the moment is the one we pull out of our pocket or purse. It could be Apple, Samsung, HTC or Amazon. Today, Corning is a leading global supplier of liquid crystal glass for screens large and small.

When Corning Made the Tubes

Just a couple of decades ago video entertainment was defined in the home only by sitting in front of a television. They were very heavy and by no means portable. From the 60’s all the way through the millennium only a few companies produced all the world’s color TV picture tube glass. One of them was America’s Corning, who by the early 1990s had joint ventured its North America operations with Japanese manufacturer Asahi.

The Corning Asahi Video Products factories produced picture tube glass for the leading TV set manufacturers of the day, including RCA/Thomson, Sony, Hitachi, Toshiba and Philips. A big problem: Corning had not made any real profits from color television glass since the mid-1970s.

“While you are busy trying to get by with poor quality, I am busy trying to get by without you.”

In 1991, Ken Freeman was sent in by Corning to fix the ailing TV glass business in North America. On his first day as CEO, Ken started fact finding by calling and introducing himself to all of the major customers. He saved the biggest customer – Philips – for last. Dr. Iva Wilson was the Philips executive in charge of the cathode ray tube business.

The Depth of the Problem

Just as Freeman began to thank Wilson for the Philips relationship (the company bought as much as two-thirds of the glass Corning produced), she stopped Freeman dead in his tracks.

“Because of the incompetence of your company,” she said according to Freeman, “I had to shut my biggest tube business down last week and send my workers home! And furthermore, while you are busy trying to get by with poor quality, I am busy trying to get by without you.”

That was Freeman’s dramatic wakeup call. The question facing him was how to solve the problem. Typically he would have called a senior management meeting to come up with answers, which he did. But this was not enough – technology solutions would not carry the day in part because they would take too long to implement.

In this instance, he decided to also consult with Mr. Michio Nakata, Asahi’s representative assigned to work closely with the joint venture. Nakata’s advice: Turn to your employees, the ones on the plant floor. Listen to them. They can help identify the solutions and solve the problem.

Nakata recommended using Toyota’s hoshin planning process that establishes clear goals and objectives and organizes and authorizes the product line employees and others to resolve production challenges with a goal of making their organization “best in the field.”

Implementing a Solution

Easier said than done. Freeman’s rank and file in Corning’s plants scoffed at this new CEO’s suggestion. In effect they said to him, “You are the third CEO in the last five years. We have outlived the others, and will outlive you. We make the best glass in the world.”

In addition Freeman faced other political voices inside Corning management that saw Mr. Nakata as representing only Asahi’s interests and not the interests of the joint venture.

Freeman needed to unfreeze the employees, get them to listen and then buy in to the need to change for the plants to survive. He made a momentous decision – he invited the major customers to come to the largest facility and share their concerns about Corning Asahi Video directly in front of the manufacturing workers. He decided to shut the plant down for nine days, something unheard of in a complex glass factory which has high fixed costs and is a continuous manufacturing process at a cost of $ 1 million a day.

This new CEO held three sets of three-day sessions with 800 employees at each session. He asked the customers to share their concerns honestly and openly with the employees.

Freeman trotted out leaders from Sony, Hitachi, RCA/Thomson, Zenith and by now the extremely forthright Iva Wilson from Philips. He told each of them, “Improvement will only begin to happen if you say to our employees what you told me.”

According to Freeman, “Starting from a highly disengaged beginning with employees at the beginning of day one, the remarks by our customers changed the game – our employees began to listen and most important, by the time we got to the third day, our employees were liberally sharing suggestions for fixing the business that they could personally implement.”

The end result? Within less than three years the business had turned around and become solidly profitable – which remained the case until Corning helped lead the industry transformation from cathode ray tubes to liquid crystal displays as the product of choice in the middle of the last decade.*

Ken Freeman, as the irreverent strategist and CEO, achieved this business around because he trusted his partner, Mr. Nakata and in turn Asahi, and put the power of the people throughout the organization to work to make change happen. (Side note: I have seen too many joint ventures that are anything but trusting relationships. Instead of working towards a common goal, the two sides often seek to protect assets and hide key pieces of the business from one another). He also had the guts to break one rule (Make the big decisions at the top with limited interaction with your employees that aren’t in senior management) and ignore another (Never disturb a very sensitive and somewhat fragile manufacturing process).

Postscript: In addition to regaining its cathode ray tube industry leadership through the turnaround of Corning Asahi Video Products in North America, Corning brought liquid crystal glass to the world and has moved its way into the world of smartphones by supplying smartphone and tablet companies with its famous Gorilla Glass and other products.

Kenneth W. Freeman joined Boston University as the Allen Questrom Professor and Dean of Boston University School of Management in 2010. Ken began his career at Corning Incorporated in 1972, progressing through the financial function before leading several businesses.  He joined Corning Clinical Laboratories in 1995, and the company was spun off from Corning as Quest Diagnostics Incorporated soon thereafter.  He led the dramatic turnaround of Quest Diagnostics as chairman and chief executive officer through 2004.  Exceptional value was created for shareholders by executing a dramatic financial turnaround, establishing industry leadership, demonstrating effective growth through acquisition, and driving organic growth.  Quest Diagnostics provided the third highest five-year shareholder returns among the Fortune 500 (1999-2003) and in 2004 was named to the Business Week 50.  Market capitalization increased from approximately $350 million at the time of the spin-off to more than $9 billion.

Topics: Competitive Intelligence, Consumer Goods, Brand Insights, Fuld + Company, Innovation, Fuld, Leonard, Competitive Strategy

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