There is consensus on what constitutes a mature business: a well-established product, a stable competitor and customer base, high volume, and slowing growth rates. However, there is less agreement about the value of mature businesses and the role they play in a company’s overall portfolio. Today, Corning has mature businesses within most of our major segments, and they are critical contributors to our financial improvement, innovation efforts, and industry leadership.
Here are some of the myths that I have encountered about mature businesses that could be limiting your value creation.
Myth #1: Cash generation is the primary purpose of mature businesses.
Mature businesses are often characterized as cash cows, for good reason. Once a business reaches maturity, you get to reap the benefits of all the investments you made in the early stages. The reliable cash flow from mature businesses does more than strengthen your balance sheet; it also provides the funds for new business development. But the value of mature businesses doesn’t stop there.
One of a mature business’s most valuable contributions is expertise that you can adapt for other innovations. Corning’s Environmental Technologies segment is a great example of where we have products at different stages of maturity. Corning has been a leader in clean-air technologies since 1972, when our scientists invented the cellular ceramic substrates at the heart of catalytic converters. Today, our light-duty substrates remain core to our business and vital to our customers. And we have continually applied the knowledge and skills sets from that technology to develop new clean-air innovations, including the world’s first gasoline particulate filters. By drawing on our deep understanding of emissions control, materials science, the extrusion process, and the automotive industry, we were able to develop the technology faster than our peers, capture a significant portion of the market, and outperform our competitors.
Experienced businesses are often the most efficient ones. And as you increase efficiencies, you often free up assets that you can take advantage of for other initiatives. That was the case with Corning’s development of Gorilla® Glass. By repurposing fusion technology and manufacturing assets from our LCD glass business, we saved $1 billion in capital investments.
Mature businesses are also valuable sources of best practices and talent. In a previous piece, I described how Corning conducts comprehensive manufacturing assessments and shares best practices throughout the organization. Not surprisingly, our mature businesses are the most frequent sources for best-in-class processes. And when we need to mine talent to help with a challenge in another division, we often turn to our veterans. The products and markets may differ, but the fundamental principles of market development, customer relationships, and manufacturing excellence apply.
Additionally, mature businesses are rich pipelines for insights from customers about where their business is going. Those insights can lead to product enhancements or extensions that increase your competitive edge. In fact, sometimes they even lead to entirely new product opportunities. For example, Corning’s development of Valor® Glass resulted from discussions with long-time Life Sciences customers Merck and Pfizer about problems they were experiencing with conventional pharmaceutical glass packaging. We believe Valor Glass could become a multi-billion-dollar franchise that will power Corning’s growth well into the future.
Myth #2: You know what your customers need and can count on their business.
In a mature business, you have an established customer base, a good understanding of their requirements, and – if you’ve been doing your job right – strong relationships with key decision makers. But you may not understand your customers’ needs as well as you think you do. This is important to keep in mind as you develop new product attributes. If your product is better than your competitor’s product, it only matters if it’s a difference the customer cares about and is willing to pay for. Don’t count solely on routine customer conversations to yield those insights. To get a real handle on your customers’ needs, you need to conduct regular surveys and compare your roadmaps.
On a related note, don’t give customers a reason to try a competitor. Quality and price are important, but so is reliable supply. Your customers may be loyal, but if they can’t get what they need from you, they’ll go elsewhere. And if the competitor’s product is good enough, they might not come back.
Myth #3: There’s no room for innovation in a mature business.
As a general rule, mature businesses are not hotbeds for technology disruption. But there’s still plenty of room for innovation, particularly with regard to processes. Over Corning’s 168-year history, we have developed as many process innovations as product innovations. Not all of them are revolutionary, but sometimes even the incremental improvements and extensions can significantly increase competitive advantage.
For example, a few years ago, there was a global shortage of a key raw material that we used in the production of optical fiber. The price skyrocketed, hurting our margins. We needed to come up with an alternative material and/or an alternative process. I can’t share the details for competitive reasons, but we came up with a solution that greatly reduced the need for this raw material, lowering our materials costs and increasing our production speed.
That particular example supports the adage that “Necessity is the mother of invention.” But you shouldn’t wait for a need to arise. You can create innovation opportunities by setting stretch goals. About 10 years ago, we established bold targets for cost reduction. Some thought it couldn’t be done, but our people rose to the challenge and achieved the goal well ahead of plan. We recently set a new goal for an equally ambitious round of cost reductions, to be achieved via further manufacturing process innovation. We’re at the Define and Measure phase, but we’ve already identified areas for improvement.
If you keep asking yourself questions (How can we increase line speeds? Can we shorten set-up time? Can we reduce energy consumption?), you may be surprised where they take you.
Myth #4: It’s folly to invest capital or add capacity in a mature business.
When most businesses reach maturity, they require minimal investment to generate cash. A lot of companies choose to simply ride the wave and avoid significant investments in new technology or capacity, which are considered risky when demand is slowing. The reality is, investments in mature businesses can be less risky than investing in new growth. In a new business, you have to make a lot more make assumptions about the timing of adoption and the potential size of the market. In a mature business, you know the landscape better. And if you’re resourceful with your funding strategy, you may be able to take even more risk out of the equation, which is what Corning did with a recent expansion in our LCD glass business. In late 2015, we announced our plans to build the world’s first manufacturing plant for Gen 10.5 LCD glass – i.e., sheets of pristine glass twice as large as a king size bed and as thin as a business card. Skeptics questioned our decision to make a significant investment when LCD glass prices were declining. But we secured customer commitments and third-party funding before starting the build. The plant became fully operational last year, and we believe our Gen 10.5 capability will enable us to capture market growth because it provides the most economical path for LCD panel makers to produce TVs 65” and larger, which is where the current action is.
Myth #5: Once a business matures, it stays mature.
As I noted at the beginning of this article, one indicator of a mature business is slowing growth. But that isn’t fixed in stone. It’s possible for a mature business to experience new growth surges driven by both external and internal factors. For example, Corning’s optical fiber business, which will celebrate its 50th anniversary next year, has experienced growth plateaus and even retreats. But the need for faster, higher-bandwidth networks remains strong. By driving relentless manufacturing cost reductions and ongoing innovation, we’ve positioned ourselves to thrive in the next growth ramp. Today, the push toward 5G networks, which will require 100 times more fiber than 4G networks, has the potential to turn optical fiber back into one of our key growth drivers. In 2017, Verizon announced its plans to buy more than $1 billion worth of fiber, cable, and connectivity solutions from Corning over three years to enhance their infrastructure for next-generation networks. That didn’t happen by serendipity. We earned their trust by continually working to understand their needs and expectations, address their pain points, and enhance our product offerings and processes in meaningful ways.
It’s also possible for a new entrant to disrupt a mature market with a breakthrough way of doing things. In that scenario, you want to be the disruptor. The automotive glass market is a good example of where Corning is playing that role. Conventional glass windshields and plastic consoles would likely remain the standard if we hadn’t shown the industry what’s possible with specially engineered glass – from greater durability to lighter weight to custom shapes and intelligent displays.
In either case, you don’t want to wait for the opportunity to come to you. You want to stay close to your customers, remain vigilant about opportunities for product enhancements and extensions, and ensure you are capturing synergies across your manufacturing organization.
In sum, I’m a firm believer that mature businesses are a valuable part of an overall portfolio, delivering returns beyond conventional wisdom. Managed effectively, you’ll not only extend the quality of life for that business, but also strengthen your overall organization.
