Houghton Shifted Corning from Cookware to Fiber Optics

(p. A13) When Amory Houghton became chief executive of Corning Glass Works in 1964, the company founded by his great-great grandfather was thriving. Known to the general public for Pyrex measuring cups and Corning Ware casseroles, it dominated the U.S. market for the glass used to encase TV tubes.

But the company, now known as Corning Inc., proved too reliant on those tubes, which accounted for as much as 75% of profit. In the mid-1970s, the company faced a recession and the loss of TV-related business as Japanese imports captured the U.S. market. Profits collapsed, and Mr. Houghton had to chop costs, including at the headquarters in Corning, N.Y. The global workforce dropped by more than one-third.

. . .

“It was tough making these cuts,” he said, “particularly when you lived in a small town where you knew a lot of these people.”

Corning bounced back, unlike many other U.S. manufacturing giants. That was partly because Mr. Houghton made a long-term commitment to development of fiber optics. He correctly saw that hair-thin strands of glass would replace copper wire in transmissions of voice and data. “It’s our turf, with our patents,” he said.

By the late 1990s, optical fiber and related telecommunications products accounted for more than half of Corning’s operating profits.

For the full obituary, see:

James R. Hagerty. “Executive Lifted Corning With Bet on Fiber Optics.” The Wall Street Journal (Saturday, March 14, 2020): A13.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date March 13, 2020, and the title “Amory Houghton’s Bet on Fiber Optics Helped Save Corning.”)

Clayton Christensen Wrote Well on Innovation

Clayton Christensen’s The Innovator’s Solution (co-authored with Michael Raynor) was packed with insights and examples on how entrepreneurs and incumbent firms innovate. He wrote several other thought-provoking and useful books, starting with his now-famous The Innovator’s Dilemma. Just a few days ago, I told one of my students from Africa that he should read Christensen’s latest book, which gives wonderful examples of how entrepreneurial innovation in developing countries can help them prosper.

This evening (Thurs., Jan. 24, 2020) I was discouraged to receive an email alert from the Wall Street Journal saying that Christensen died today.

A year or so ago, I sent him a late draft of my Openness to Creative Destruction, which references his work several times. He never responded. Maybe he already was too ill to look at it, or maybe he didn’t like it. I’ll never know. But either way, I thank him for all that his books taught me about innovation.

Christensen’s best book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Christensen’s best-known book is:

Christensen, Clayton M. The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business. New York: Harper Books, 2000.

Christensen’s most recent book is:

Christensen, Clayton M., Efosa Ojomo, and Karen Dillon. The Prosperity Paradox: How Innovation Can Lift Nations out of Poverty. New York: HarperBusiness Press, 2019.

Founding Entrepreneur Still Runs FedEx

Clayton Christensen plausibly argues that in the rare cases where an incumbent firm has been able to disrupt itself, it is almost always a firm where the founding entrepreneur is still running the firm.

(p. A1) MEMPHIS, Tenn.— Fred Smith bristles at any hint that FedEx Corp., the global delivery giant he built over four decades, could be disrupted by a player such as Amazon.com Inc.

. . .

FedEx’s 75-year-old chairman and chief executive, the man who pioneered the business of moving packages around the world at lightning speed, is confronting some of the greatest threats to the company he founded.

Global trade is slowing and tariff (p. A9) fights have companies rethinking supply chains. A key partner, the U.S. Postal Service, is struggling. Amazon has morphed from a customer into a competitor.

. . .

Mr. Smith, a former Marine officer and decorated Vietnam War veteran, started FedEx in 1971 and has been CEO for nearly its whole history. The billionaire was preparing to hand over the reins, but he extended his stay after two top executives, including his heir apparent, abruptly left.

That has left Mr. Smith, who remains one of FedEx’s biggest shareholders, to revamp the business. He started with divorcing Amazon.

For years, Amazon has been building up its logistics operations to handle more deliveries itself. The online retailing giant added tractor-trailers, hundreds of sorting centers and dozens of cargo planes to carry millions of its packages. It now delivers nearly half its orders, compared with less than 15% in 2017, according to estimates from research firm Rakuten Intelligence.

In February [2019], Amazon noted in its annual report that it views companies in “transportation and logistics services” among its rivals.

“They had never done that before that day,” Mr. Smith said. “So we took it seriously.”

For the full story, see:

Paul Ziobro. “FedEx Chief Reinvents Firm He Founded.” The Wall Street Journal (Friday, October 18, 2019): A1 & A9.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story has the date Oct. 17, 2019, and has the title “Fred Smith Created FedEx. Now He Has to Reinvent It.”)

Clayton Christensen Wrongly Predicted Bombardier Would Disrupt Boeing

Clayton Christensen and co-authors predicted in Seeing What’s Next that Bombardier was well-positioned to use disruptive innovation to leapfrog Boeing and Airbus.

(p. B8) Mitsubishi Heavy Industries Ltd. said it would acquire Bombardier Inc.’s regional-jet business for $550 million in a transaction that puts the companies on different paths in the aviation sector.

The deal unveiled Tuesday [June 25, 2019] marks the Canadian company’s exit from the commercial passenger-aircraft business following failed bets that it could compete with Airbus SE and Boeing Co. in the 100-seat single-aisle plane category.

Bombardier has restructured its aviation division over the past two years, highlighted by its joint venture with Airbus that put the European plane maker in charge of the production and sales of the 110- to 130-seat planes that the Montreal company had originally conceived as the CSeries. Those jets are now rebranded as the Airbus A220.

For the full story, see:

Vieira, Paul. “Bombardier to Sell Jet Unit.” The Wall Street Journal (Wednesday, June 26, 2019): B8.

(Note: bracketed date added.)

(Note: the online version of the story has the same date June 25, 2019, and has the title “Mitsubishi to Acquire Bombardier’s Regional Jet Unit for $550 Million.”)

The Christensen book mentioned above, is:

Christensen, Clayton M., Scott D. Anthony, and Erik A. Roth. Seeing What’s Next: Using Theories of Innovation to Predict Industry Change. Boston, MA: Harvard Business School Press, 2004.

iPhone Made Internet “Almost Ubiquitous”

(p. B3) By essentially compressing a powerful, networked computer into a pocket-size device and making it easy to use, Steve Jobs made the internet almost ubiquitous and fundamentally altered decades-old consumer habits in areas like music and books. What’s more, the functionality packed into the iPhone made it a digital Swiss Army knife, supplanting existing tools from email to calendar to maps to calculators.

. . .

Along the way, smartphones disrupted communication. By offering faster, easier ways to communicate—text, photo, video and social networks—“the iPhone destroyed the phone call,” says Joshua Gans, professor at the University of Toronto and author of the book, “The Disruption Dilemma.” “It’s funny we even call it a phone.”

For the full story, see:

Betsy Morris. “What the iPhone Wrought.” The Wall Street Journal (Saturday, June 24, 2017): B3.

(Note: ellipsis added.)

(Note: the online version of the story has the date June 23, 2017, and the title “From Music to Maps, How Apple’s iPhone Changed Business.”)

The Gans book mentioned above, is:

Gans, Joshua. The Disruption Dilemma. Cambridge, MA: The MIT Press, 2016.

Venture Capital Can Force Startups to Grow Too Fast

(p. 8) . . . for every unicorn, there are countless other start-ups that grew too fast, burned through investors’ money and died — possibly unnecessarily. Start-up business plans are designed for the rosiest possible outcome, and the money intensifies both successes and failures. Social media is littered with tales of companies that withered under the pressure of hypergrowth, were crushed by so-called “toxic V.C.s” or were forced to raise too much venture capital — something known as the “foie gras effect.”

Now a counter movement, led by entrepreneurs who are jaded by the traditional playbook, is rejecting that model. While still a small part of the start-up community, these founders have become more vocal in the last year as they connect venture capitalists’ insatiable appetite for growth to the tech industry’s myriad crises.

. . .

. . . founders have decided the expectations that come with accepting venture capital aren’t worth it. Venture investing is a high-stakes game in which companies are typically either wild successes or near total failures.

“Big problems have occurred when you have founders who have unwillingly or unknowingly signed on for an outcome they didn’t know they were signing on for,” said Josh Kopelman, a venture investor at First Round Capital, an early backer of Uber, Warby Parker and Ring.

. . .

But people like Sandra Oh Lin, the chief executive of KiwiCo, a seller of children’s activity kits, say that more money isn’t necessary. Ms. Oh Lin raised a little over $10 million in venture funding between 2012 and 2014, but she is now rebuffing offers of more just as her company has hit on a product people want — the very moment when investors would love to pour more gas on the fire. KiwiCo is profitable and had nearly $100 million in sales in 2018, a 65 percent increase over the prior year, Ms. Oh Lin said.

“We are aggressive about growth, but we are not a company that chases growth at all costs,” Ms. Oh Lin said. “We want to build a company that lasts.” Continue reading “Venture Capital Can Force Startups to Grow Too Fast”

Innovative Entrepreneurs Bring Prosperity to the Poor

(p. A17) As the economist Joseph Schumpeter observed: “The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses.”

For Schumpeter, entrepreneurs and the companies they found are the engines of wealth creation. This is what distinguishes capitalism from all previous forms of economic society and turned Marxism on its head, the parasitic capitalist becoming the innovative and beneficent entrepreneur. Since the 2008 crash, Schumpeter’s lessons have been overshadowed by Keynesian macroeconomics, in which the entrepreneurial function is reduced to a ghostly presence. As Schumpeter commented on John Maynard Keynes’s “General Theory” (1936), change–the outstanding feature of capitalism–was, in Keynes’s analysis, “assumed away.”

Progressive, ameliorative change is what poor people in poor countries need most of all. In “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty,” Harvard Business School’s Clayton Christensen and co-authors Efosa Ojomo and Karen Dillon return the entrepreneur and innovation to the center stage of economic development and prosperity. The authors overturn the current foreign-aid development paradigm of externally imposed, predominantly government funded capital- and institution-building programs and replace it with a model of entrepreneur-led innovation. “It may sound counterintuitive,” the authors write, but “enduring prosperity for many countries will not come from fixing poverty. It will come from investing in innovations that create new markets within these countries.” This is the paradox of the book’s title.

Continue reading “Innovative Entrepreneurs Bring Prosperity to the Poor”

Mitch Daniels Attempts Disruptive Innovation in Higher Ed

(p. A17) Last month’s announcement that Indiana’s Purdue University would acquire the for-profit Kaplan University shocked the world of higher education. The Purdue faculty are up in arms. The merger faces a series of regulatory obstacles. And it’s unclear whether the “New U,” as the entity is temporarily named, can be operationally viable or financially successful.
But Purdue’s president, Mitch Daniels, is willing to give it a shot.
The venture is unexpected, unconventional and smart. The nature of the partnership–in which Kaplan will transfer its assets to Purdue, a public university–is unprecedented. It’s also a rare instance of attempted self-disruption.
There are lessons here from the business world. In the seminal 1997 book, “The Innovator’s Dilemma,” Harvard professor Clayton Christensen describes how leading companies can do everything “right” and still be thwarted by disruptive competitors. In an effort to appease stakeholders, leaders focus resources on activities that target current customers, promise higher profits, build prestige, and help them play in substantial markets. As Mr. Christensen observes, they play the game the way it’s supposed to be played. Meanwhile, a disruptive innovation is changing all the rules.
. . .
The higher-education industry, full of brilliant and competent leaders, is ripe for disruption. Despite mounting political pressure–not to mention the struggles of indebted alumni–most college presidents believe that their institutions are providing students with good value. By and large, they remain comfortable making small, marginal tweaks to their business models. In the meantime, college becomes ever more expensive.
In contrast, Mr. Daniels has a long history of bold, innovative moves.
. . .
Mr. Daniels is setting Purdue on the right course, for good reasons, and he deserves a great deal of credit. As the saying goes, a journey of a thousand miles begins with a single step. For Purdue, the next thousand miles will consist of navigating regulatory approvals, winning the support of stakeholders, and, not least, the hard work of building New U. We can be hopeful, on behalf of those left behind by today’s higher education system, that Purdue treads a path that others can follow.

For the full commentary, see:
Alana Dunagan. “The Innovator’s Dilemma Hits Higher Ed; Purdue’s acquisition of Kaplan University is risky, unconventional, unexpected–and smart.” The Wall Street Journal (Tues., May 16, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date May 15, 2017.)

Christensen books relevant to the passages quoted above, are:
Christensen, Clayton M. The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business. New York: NY: Harper Books, 2000.
Christensen, Clayton M., and Henry J. Eyring. The Innovative University: Changing the DNA of Higher Education from the inside Out. San Francisco, CA: Jossey-Bass, 2011.
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Spreadsheets and Committees Are Enemies of Innovation

(p. B4) “As we became more sophisticated in quantifying things we became less and less willing to take risks,” says Horace Dediu, a technology analyst and fellow at the Clayton Christensen Institute for Disruptive Innovation, a think tank. “The spreadsheet is the weapon of mass destruction against creative power.”
The same could be said of university research, says Dr. Prabhakar. Research priorities are often decided by peer review, that is, a committee.
“It drives research to more incrementalism,” she says. “Committees are a great way to reduce risk, but not to take risk.”

For the full commentary, see:
CHRISTOPHER MIMS. “KEYWORDS; Engine of Innovation Loses Some Spark.” The Wall Street Journal (Mon., Nov. 21, 2016): B1 & B4.
(Note: the online version of the article has the date Nov. 20, 2016, and has the title “KEYWORDS; Is Engine of Innovation in Danger of Stalling?”)

Intuit Tries to Disrupt Itself

(p. B1) MOUNTAIN VIEW, Calif. — Three decades ago, at the dawn of the personal computer age, Intuit shook up the financial software world with its first product, Quicken. The program, which was centered on the simple notion of a virtual checkbook, suddenly made the PC a very useful tool for people to manage the chores of paying bills and tracking personal finances.
Last month, Intuit said goodbye to that heritage and sold Quicken, which still has loyal fans but weak growth prospects, to a private equity firm.
Intuit, a Silicon Valley company, is now focusing on its TurboTax software, which tens of millions of Americans use to file their tax returns, and on QuickBooks Online, an Internet-based version of the company’s flagship bookkeeping software for small businesses and their accounting firms.
Giving up Quicken was difficult, said Brad D. Smith, Intuit’s chief executive, during an interview at the company’s lush green campus here. The kitchen table where the founders designed the product in 1983 still sits in the cafeteria to inspire employees.
But Intuit decided to shed its PC roots and become a cloud software company. “We try to live up to being a 33-year-old start-up,” Mr. Smith said. So the company faced a hard choice: “Do we have this beautiful child that we’ve had for 33 years that we know we’re not going to feed, or do we find it a new home?”

For the full story, see:
VINDU GOEL. “Intuit Sheds PC Roots to Rise as Cloud Service.” The New York Times (Mon., APRIL 11, 2016): B1 & B5.
(Note: ellipses added.)
(Note: the online version of the story has the date APRIL 10, 2016, and has the title “Intuit Sheds Its PC Roots and Rises as a Cloud Software Company.”)

Startup Entry and Scaling Are Easier and Faster Due to Internet

(p. B1) The world might be a mess, but look on the bright side: Men’s shaving products are much better than they used to be.
. . .
The same forces that drove Dollar Shave’s rise are altering a wide variety of consumer product categories. Together, they add up to something huge — a new slate of companies that are exploring novel ways of making and marketing some of the most lucrative (p. B7) products we buy today. These firms have become so common that they have acquired a jargony label: the digitally native vertical brand.
These kinds of online brands aren’t new. Dollar Shave is five years old, and Warby Parker, the online eyewear company, began selling glasses over the web in 2010. But over the last few years there’s been a proliferation of such companies — into underwear, children’s clothing, cosmetics and more — and the Dollar Shave deal suggests their growing importance. These firms could become an emerging problem for consumer products conglomerates like Procter & Gamble, and they might also spell trouble for television, which relies heavily on brand advertising for its revenue.
. . .
“We think it’s a unique moment in history where you can create brands that can be scaled quickly thanks to technology, but you can still maintain a one-to-one connection that delivers an elevated level of customer experience,” said Philip Krim, chief executive of Casper, which sells mattresses online.
Mr. Krim and four friends started Casper two years ago after studying the traditional mattress industry. They discovered it was plagued by inefficiencies and annoying gimmicks. Customers had to trudge to a mattress store and awkwardly prostrate themselves on numerous surfaces before choosing one to use for a decade. There were too many choices and brands, and mattresses were expensive.
With Casper, you simply buy the mattress online and it’s shipped to you in a comically small box (the compressed foam expands into a full-sized mattress, like a magic trick). You have three months to try it out, and if you don’t like it, the company will come pick it up free.
Casper’s business model offers a break from the annoyance of offline mattress shopping. It also works out for the company. Casper advertises on social networks, on Google, podcasts and a variety of other places online; the ads are creative, convincing, targeted and cheap. By selling directly rather than through retail middlemen, the company also creates a connection with customers that allows it to test and develop new products — it now sells sheets and pillows, too.
After two years in business, Casper is on track to book $200 million in sales over the next year, but its success isn’t ensured. Precisely because the internet has lowered barriers to entry, Casper is facing a surge of new mattress start-ups like Helix Sleep, Tuft & Needle and Leesa, among others.

For the full commentary, see:
Manjoo, Farhad. “STATE OF THE ART; How Companies Like Dollar Shave Club Are Reshaping the Retail.” The New York Times (Thurs., JULY 28, 2016): B1 & B7.
(Note: ellipses added.)
(Note: the online version of the commentary has the date JULY 27, 2016, and has the title “STATE OF THE ART; How Companies Like Dollar Shave Club Are Reshaping the Retail.”)