FT INTL MBA 2021/2022 – Politecnico di Milano

Innovation Strategy Group Assignment

30 January 2022

Students:
Giovanni Battista Aicardi, Joceli Marina Cardozo, Laura Fedullo, Luca Luciani, Stephan Bertsch

Questions for the case study: Corning Microarray Technologies

1. Do you think that the innovation process used by Corning in the development of the
DNA Microarray Technology had a role in causing the failure of the new venture? If so,
why?

Corning’s five-stage process is a typical closed innovation model, where the company
organizes its innovation projects based on internal parameters, objectives, and counting on their
own human resources. This process was very common until the late 90s, and Corning’s
innovation management approach was no exception to it.

This closed, sequential method worked really well for the company for years, where they could
explore not only sustaining innovation but internally disruptive ones, such as the development
of optic fibers which was outside of their core business and scope at the time. This process
proved to be successful in the past, and it could still be successful in certain market
environments.

On the other hand, in a very innovative and constantly changing landscape such as the one
presented by the increase in genetic experiments (and subsequently complete mapping of the
human genome), and where the innovative product has clear synergies with current portfolio
products, we believe that a more holistic, agile and ambidextrous approach to innovation
development could have generated more sustainable, positive results.

We could say that the five-stage process had several drawbacks pertaining to this specific
project, such as:

• The sequential, closed approach did not allow for the speediness needed in this project.
• The division of groups without one central, coordinated leadership, contributed to the
silo mentality that permeated the different working groups.
• By following the pre-defined pathway, the groups had more constraints to change scope
and/or direction of the project.
• With no real time connection to the market and trusting mainly in information provided
by external consultants, the research groups were not able to thoroughly understand the
market conditions and needed time-to-market.
 • The confidence in the model contributed to the disengagement of upper management,
decreasing the levels of support to the project when setbacks occurred.
• And lastly, blindly trusting in a well-known and successful process ended up hindering
Corning’s ability to look for alternative pathways and outside synergies, focusing only
on what could be developed in-house.

Additionally, the cultural differences, conflicting professional mindsets, dual leadership, and
the large number of subject matter experts involved in the process made for a difficult
environment where to find consensus. It is worth mentioning that it seems Corning did not have
a clear project discontinuation criteria. Nonetheless, the knowledge created by this venture was
surely recognized as an important asset of the project, as the small result generated was still
positively viewed by upper management and well accepted in the market.

In essence, even though the five-stage process was well known and proved to generate positive
results, we believe that it contributed to the failure of this specific venture.

2. How should Corning have organized in 1998 its DNA Microarray venture to increase
the chance of success?

The new opportunity scouted by consultants for Corning company, which means the possibility
of developing a new open solution for DNA Microarray (to compete with the closed solution
offered by the incumbents present into the market), was not properly exploited Corning with
the consequent choice to divest this innovation. The lack in recognizing the new product as a
disruptive innovation brought to mistakes in managing the innovative project, some of which
are listed below:

The inability to create a friendly environment with cohesion between the actors involved

• The lack in defining a clear governance

• The wrong macro - activities structure is given to the project
• The application of a wrong business model
• The wrong budget allocation

Corning underestimated the fact that the innovation, to be successful, must be appropriately
organized starting from the collaboration and involvement of all the organizational units which
take part in the innovation process and by means of the cohesion between people, this point
was totally neglected.
The company still suffered from the discontent by some of the employees after Costar
acquisition. The first aspect of being treated was the development of an integrated environment.
Even more considering that Costar was an active part of the innovation project and, in a certain
sense, the first believers into the genomics market. Going deeper analyzing the DNA
microarray innovation project, the cause could be identified in a wrong governance definition.

The roles of the organizational units involved in the various macro-activities were not clear,
each unit involved created their own team and worked independently without sharing
information. In addition, the reassignment of the resources was not clear: the research group
led by Fraser reported to the CTO Smith while, the development team led by Huntington,
reported to Gilbert (president of Corning Technologies) and the same for Keller, which was
part of Smith BU and which had to report to Gilbert.

The innovation leadership had to be centralized, and the reporting line had to be single instead
of dual. To achieve such a result, Corning had to create a separate business unit to deal with
the disruptive program, the ambidexterity technique had to be adopted, refer to picture 1.

Picture 1: Ambidextrous Org. Chart

With this organizational solution, the DNA microarray could use a different market approach
compared to the standard one used into the company for standard products, with a central
leadership reporting directly to the CEO, a geographical centralization of the project also
needed to be performed to have the team working side by side, facilitating interaction and
information exchange.
From here, the advantage is moving from the 5-stage process, which is a linear approach to
innovation with the involvement of the different functions into a more flexible process
application such as the one of open innovation redefining the macro-activities with a different
perspective, as shown in the following picture.

Picture 2: New macro-activity definition

On top of what before mentioned, together with the new business unit, a new business model
should be developed. The DNA microarray, being a disruptive innovation, required a new
business model modifying both the inward part of the company business model such as the
outer part.

Finally, the innovation strategy developed was wrong into the budget allocation. The huge
economic resources made available at the beginning of the project did not stimulate leaders to
structure the proper plan and did not raise the need of a lean and agile management.

So the budget allocation had to be planned to promote information and knowledge sharing and
reduce the use of so many resources. Anyway, to avoid the property spill-over, the use of
external services was not recommended, so hiring the people who could fill the gap in terms
of knowledge was necessary but to be carried on more efficiently.
3. How was the Microarray venture affected by the success and sudden decline of
Corning’s telecommunication (optical fibers) business?

Corning had a reputation for being an innovative company that was able to reinvent itself by
entering new markets, and by doing so they were able to survive much longer than the average
corporation. Some examples of these were the entry in the emerging light bulbs market,
cookware products, automotive services (purify automotive emissions), where they tend to exit
the business when the market had matured.

One example of innovation was Corning’s investment in the fiber-optic cables market in 1980,
which became the backbone of modern telecommunications and computer networks. By the
mid-1990s the sales of fibers rapidly incremented Corning's stock price, and by 2000 sales
from telecom were 73% of Corning's revenues. This success led the company to significant
organizational changes, where Corning's non-telecommunications divisions were reconstituted
as a separate sector known as Corning technologies.

This new organizational structure drifted away from the usual path followed by Corning, since
they moved the majority of resources to this specific business area, and seemingly did not pay
much attention to the possible quick maturity of the market in order to consider their exit
strategy. The shift in focus to one major business area ended up jeopardizing innovation efforts
in the company, where it appears a lack of focus and buy-in from upper management were
common ground.

The Microarray venture (CMT) was directly affected by the optical-fiber success and decline
in different ways:

• Corning’s best leaders were allocated to the Telecom initiative, decreasing their
involvement in CMT and consequently depriving the new team of their knowledge and
direction;
• Focus majorly in the Telecom market did not allow for a company sponsor, that really
believed in the CMT business and was willing to defend and fight for it at a corporate
level;
• The dual leadership process without a corporate sponsor allowed the friction between
the groups of the Microarray venture to rise. They were not sharing information in a
productive way, creating a tense environment between physical scientists and life
scientists;
• As the telecom market weakened further and revenues declined steeply, Corning upper
management decided to first reduce and then stop funding CMT entirely;
• Managers and people at a corporate level were not able to prevent the funding cut of
CMT because they were too busy trying to save the fiber section of the business.
The success of the telecommunication sector allowed for the funding and development of
CMT, but the immediate focus only on that specific area due to its revenue-generating power
jeopardized other innovation projects, such as CMT. The new venture was left to its own
demise, and when problems arose in Telecom, no leaders were available or willing to support
CMT, dedicating all their time to save their cash cow.

4. Do you think that Corning should have collaborated with external organizations in the
development of the DNA Microarray Technology? Could this improve the chances of
success of the new venture? If so, why?

The development of the technology included in DNA Microarrays was a very complex process
that involved the precise development of each of the tasks, but with an innovation mentality
that Coring failed to put into practice. We believe that different kinds of partnerships would
have been fruitful for Corning.

Corning had a strong market position, where the company's life sciences area was experienced
in developing and manufacturing different laboratory products that generated constant
revenues for the company. The success of their endeavors collaborated to the overconfidence
of the internal actors, who believed they could enter the market and quickly become leaders in
the DNA Microarray area focused mainly on sustainability innovation, that is, on the internal
development of their products. This focus ended up generating high costs in acquisitions,
setting up teams, and ended up slowing down the time-to-market.

The acquisition of Costar in 1993 could be an example. This acquisition was considered
strategic, firstly because it could revitalize growth in the life sciences division, and secondly
because Costar had a good reputation in the innovation field. Having said that, there were
cultural and organizational differences that were never properly addressed.

In the case of Costar, Corning could have worked more on integration and collaboration,
although this proved to be a difficult step due to its closed innovation culture and silo mentality.
To avoid this problem, instead of acquiring Costar, Corning could have formed a partnership
with them. This partnership would have allowed for better project development and
collaboration strategies; not forcing either team to adapt to the other's culture, reducing
disagreements, encouraging knowledge, risk sharing, and true teamwork.

Another possibility would be for Corning to invest in Affymetrix through a corporate venture
capital initiative. This way they could look for synergies for the creation of value, take
advantage of Affymetrix’s expertise in DNA management, but by being an investor they could
also make requests, where the product to be delivered had certain specifications which worked
for everyone involved. Bringing down the problem that Affymetrix presented by not being
compatible, they would also seek to minimize the legal and licensing risks that a product of
such innovation and expertise implies with this type of agreement.
A collaboration environment with external companies would have allowed Corning to apply a
vision of open innovation, focusing its efforts on its core competencies and experience, while
relying on others to complement the necessary capabilities for the proposed pathways outside
its current businesses to be successful.

Open innovation is a business management model for innovation that promotes collaboration
with people and organizations outside the company. In this sense, open innovation challenges
are a true cultural break from the company mentality associated with the corporate R&D
culture. This innovation model becomes viable when the company acknowledges that there are
many bright professionals and greater knowledge outside the organization. It is at this very
moment when the opportunity to attract those external individuals and/or companies becomes
more real. Companies implement open innovation practices in different ways such as alliances
between companies, research chairs in universities, crowdsourcing competitions, and
innovation ecosystems.

Traditionally, companies innovated only using internal resources and Corning was no
exception. Such companies prioritized the volume of resources, the number of projects, and the
investments in innovation. Consequently, organizations with closed innovation models tend to
have big research departments generating plenty of in-house knowledge, which goes hand in
hand with the need for the scientific community to protect their valuable findings and
knowledge.

Nowadays, companies that use closed innovation models usually encounter the following
challenges:

• Need to master a higher number of “distant” and “unfamiliar” technologies and

knowledge

• Increased costs for developing new products and services

• Shortening of the life cycle of product and services

• Shorter time-to-market to bring innovations to the market

On the other hand, relationships that extend beyond the boundaries of the organization are
invaluable to acquiring and distributing knowledge. Companies gain a lot from exposure to
innovators like start-ups, venture capitalists, national labs, and universities. These discussions
sometimes lead the company to bring teams from outside together with innovators inside,
which may yield co-innovation or joint-development agreements. When others truly
understand your innovations, doors to collaboration swing open, giving partners insights into
how to further develop and commercialize your technologies.
In Corning’s case, these relationships could have produced leads in emerging technologies
where there was enormous potential, where they could have helped the company to import
helpful new management practices, including better ways to evaluate innovators’ performance,
faster resource reallocation, and the design of physical work environments that encourage idea
sharing and creativity.

Implementing these collaborations would not be easy since it implies a change in mindset. To
promote these collaborations, Corning would have to start a scouting process, in which they
would consider the project they want to carry out, analyze future trends and technologies
outside of the company, and identify, evaluate, and select the best partners to work together.
This new process would allow Corning to carry out different types of joint venture agreements
and through them acquire new capabilities, including new features in its products, and have
greater access to resources, including specialized personnel and technical support.

Furthermore, having a strategic partnership agreement is directly reflected in the reduction of

the exposure of the main business since the risks of the new venture are shared in this way,
ensuring mutual benefit.