Chapter 15

Speedy: In a New Era of Perishability

Charlie Feld is a highly respected figure in information technology circles. As an executive and a consultant, he has shaped the technology direction at Frito Lay (the snacks subsidiary of PepsiCo, Inc.) and Delta Airlines, among others. As he talks even about today's trends, you can see the influence the time at Frito Lay three decades ago had on him.

He describes conversations with a long retired Herman Lay, one of the founders. Lay described the business in very basic terms: “No matter how big or complicated the company gets, we still buy potatoes, cook them, put them in bags, sell them to our customers and collect the money.”¹

Feld also describes periodic “field trips” with route drivers who stocked Frito Lay snacks at various outlets. There were constant reminders that their product was perishable and no amount of sophisticated industrial engineering or computing could ignore those basic principles of nature.

Charlie Fine, an MIT professor, wrote a seminal book in 1999 where he introduced the concepts of “clockspeeds” and “temporary advantage.”² He also suggested businesses learn from fast-paced industries as geneticists do from the short life span of a fruit fly.

A studio executive is discussing the challenges of demand forecasting in the business. How many BluRay versus traditional DVD copies of a new movie to ship to each city? How soon before we can plan for streaming video even for new releases? Then he confides that with the speed at which his industry is moving, he has considered recruiting candidates from the poultry farming industry.

“They are much more sensitive to short lifecycles.”

Potatoes, fruit flies, poultry, and technology—welcome to the new world of perishability.

Time Really Hurries Faster These Days

The Flip camera went on sale in 2007 and quickly became a dominant camcorder brand. Cisco bought the company in 2009 and by then it had sold over 2 million units. Just as quickly, it shuttered the unit in 2011. Commented the New York Times, “Even in the life cycle of the tech world, this is fast.”³

If that is fast, how about the fact that Apple gets about two-thirds of its revenue from iOS devices, a platform that didn't exist four years ago?⁴ But analyze that a bit further and see how many generations of iPods and iPhones and iPads were launched (and predecessors deemphasized) in that time frame.

Or that the first billion applications downloaded on Google Android phones took 20 months, the second billion installs took another five months, and the third billion took only two months. Again, analyze how many Android devices have been introduced and deemphasized since the HTC Dream, the first commercially released Android smartphone in October 2008.

Rapid Product Iterations

Just look at how quickly navigation apps and devices have evolved. We were thrilled when basic GPS and maps arrived in our cars with GM OnStar. They evolved to allow for emergency services. The economics and portability of standalone GPS devices led us to Garmins and Tom Toms. Then we started to see GPS devices that could recognize voices and work even in tunnels.⁵ Still others allowed Bluetooth calling and live traffic updates and rerouting. Then just as quickly, many of us moved away from dedicated GPS devices to Google Maps and other navigation apps on our smartphones.

Today Google has “self-driving” cars:

Soon, with the coming of electric cars and the need to charge them on a regular basis, we will need apps that not only monitor the battery level, but also allow us to make reservations at a charging station on the way.

All this has transpired within a decade, and we have rapidly gone from GM to Garmin to Google—and maybe back to GM? As we mentioned in Chapter 1, GM now sells OnStar FMV on a rearview mirror with many of its features to work even with non-GM cars. Toyota is working with Microsoft on a joint telematics offering for its upcoming electric and plug-in hybrid cars.⁷

Rapid Change in Competitive Landscapes

James Politeski, a Senior Vice-President at Samsung Electronics America, says in an interview, “As fridges and other home appliances get smarter and become more like computers that can connect wirelessly to smartphones, tablets, and other devices, Samsung is harnessing this transition to take business from appliance leader Whirlpool and other manufacturers,”⁸ Whirlpool is used to competition from GE and Kenmore and globally from Electrolux and Haier—but a phone and electronics company like Samsung?

Jeff Brown, vice president of business intelligence for UBM TechInsights, wonders, “The question for traditional medical device companies is whether their designers, marketers, and IP staff have factored the smartphone platform into their thinking.” He continues:

Volatile Demand Forecasting

Demand forecasting has always been about working around peaks and valleys. So technology companies have learned to factor seasonal adjustments for back-to-school campaigns, “Black Friday,” home entertainment around major sporting events, and so on. Now, try estimating demand for a brand-new product category for which there is no history to go by. Planning for sales of 25 million iPads in little over a year¹⁰ or 2.5 million Kinects sold in the first 25 days¹¹ requires juggling between being stuck with too much inventory of perishable product and disappointing customers and opening their doors to competitive alternatives.

E-book readers have repeatedly had shortage issues. In the 2008 Christmas season, the New York Times wrote, “Now it is out of stock and unavailable until February. Analysts credit Oprah Winfrey, who praised the Kindle on her show in October, and blame Amazon for poor holiday planning.”¹² In 2009, Barnes & Noble announced:

In summer of 2010, the Wall Street Journal wrote:

Nintendo is another company that has similarly had a tough time anticipating demand for its Wii and other game consoles.

Indeed, CIO magazine asked:

By the end of 2008, however, Nintendo of America president Reggie Fils-Aime was hedging, “The video game industry has weathered recessionary times fairly well … (but) if we get into unchartered territories with stocks coming severely down and unemployment spikes, then all bets are off.”¹⁶

Amazon and Nintendo undershot. HP spectacularly overshot with its TouchPad and killed the product within a few weeks of announcing it. Both extremes are common in a world of volatile high-tech demand forecasting.

Moving from Physical to Digital Supply Chains

To get away from the vagaries and volatilities of the physical supply chain, Amazon has aggressively promoted software—its Kindle reader app that runs on PCs, Macs, iPhones, iPads, BlackBerries, and Android phones. While that may cannibalize sales of its Kindle device or Fire tablet, it still benefits from not having to deal with the even hairier physical logistics of printed books. Amazon has cheerily announced its “ebook sales now outnumber physical paperback and hardback sales, the digital platform overtaking print in just four years.” Since April 1, Amazon says it has sold 105 Kindle eBooks for every 100 print books on its U.S. site. That's not just limited to cases where both formats are available, either; it takes into account print titles where no Kindle equivalent is on offer.”¹⁷

In ancient times, the Library of Alexandria was the greatest single archive of human knowledge. It has been estimated “that at one time the Library of Alexandria held over half a million documents from Assyria, Greece, Persia, Egypt, India, and many other nations. Over 100 scholars lived at the Museum full time to perform research, write, lecture, or translate and copy documents.”¹⁸

The nonprofit Internet Archive is trying to recreate a modern-day Library of Alexandria with a collection that “includes texts, audio, moving images, and software as well as archived web pages in our collections.”¹⁹ That is quite an undertaking as “Many early movies were recycled to recover the silver in the film.”

Devices like the Kindle are making it easier to access documents from the Archive. Amazon provides instructions to access “over 2.5 million free e-books to read, download, and enjoy,” many of them out-of-copyright, pre-1923 books. With the Fire tablet it introduced in late 2011, it is positioned to provide similar access to videos, games, and other content.

Then there is the Google Library, which is meandering its way through courts around the world. Google has scanned roughly 12 million books from some of the country's finest libraries, in what it has said was an effort to provide easier access to the world's knowledge.²⁰

Impact on Operations

With products evolving so quickly, can the back office—accounting, human resources, procurement—continue at its old pace? Can ERP global rollouts take years?

Look at Groupon, one of the fastest-growing companies in the world, which has added on average one new country to its operations every three weeks. Not surprisingly, it is in a hurry in every aspect of its business. In three months, 26 international markets went live on the ERP software, NetSuite, replacing hundreds of spreadsheets. Zach Nelson, NetSuite's CEO, explains, “The power and flexibility of the NetSuite cloud made it possible for Groupon to deploy global ERP in all those countries in three months instead of the three years a company of their size and trajectory would have faced with conventional, on-premise software.” Nelson continues, “And the fact that the cloud was the only viable solution for the fastest-growing company of the millennium has not been lost on other enterprise customers. The world's biggest companies are going to the cloud, and quickly.”

CEO and President Mark Symonds of Plex, another ERP vendor, talks about one of his customer projects:

Conclusion

A key trait of the new technology elite is speed in product innovation, in anticipating changes in competitive landscapes, in managing volatility in demand forecasting and supply chains, and even in the back office. In the next section, let's look at the Corning Gorilla Glass product, which defines the new clockspeed—it has been adopted by more than 400 electronic products in less than three years.

Case Study: Corning—The Gorilla® Glass Rocket Ride

Dr. Nagaraja Shashidhar (who goes as “Shashi”), business development manager at Corning, is describing a few of the demanding dimensions of one of the most successful product launches the 160-year-old specialty glass and ceramics company has ever had. In 2011, Gorilla in its third full year is on track to reach $800 million in revenue.

“Specialty Glass and Ceramics” may be a misnomer. Corning has repeatedly influenced technology markets. The Generations of Corning,²¹ a book written in 2001 to celebrate the company's 150th birthday, says, “Very few companies have made inventions that have affected humankind profoundly. Corning has been involved with at least three: electric lighting, television, and fiber-optic communications. Glass is the hidden but essential material that makes all three work.”

Now Corning can claim a fourth. Corning explains the functionality and the fashion appeal of Gorilla Glass as “Scrapes, bumps, and drops are a fact of life, but Gorilla Glass enables your device to resist damage from the abuses that come with everyday use. Gorilla Glass also has strong aesthetic appeal. It's thin, lightweight, and cool to the touch—enabling the sleekest designs.”²²

American Tourister made a name for its hard-shelled luggage with commercials that showed a gorilla throwing around its products. Corning is bringing out the gentle, protective side of the gorilla.

Continues Shashi: “We keep getting customer stories like the one whose device got run over by a truck. The device was a write-off but our glass survived intact!”

That magic calls for a chemistry lesson. Ion exchange is a chemical strengthening process where large ions are “stuffed” into the glass surface, creating a state of compression. Gorilla Glass is specially designed to maximize this behavior. The glass is placed in a hot bath of molten salt at a temperature of approximately 400°C. Smaller sodium ions leave the glass, and larger potassium ions from the salt bath replace them. These larger ions take up more room and are pressed together when the glass cools, producing a layer of compressive stress on the surface of the glass. Gorilla Glass's special composition enables the potassium ions to diffuse far into the surface, creating high compressive stress deep into the glass. This layer of compression creates a surface that is more resistant to damage from everyday use.²³

It also calls for a legal lesson. “We have device-specific NDAs (nondisclosure agreements) with many of our customers,” says Shashi, which means that Corning employees wouldn't be able to confirm all brands that use Gorilla Glass.

Market analysts speculated after the tsunami whether many popular handheld and tablet devices were made at Corning's Shizuoka, Japan, plant or came from a Japanese competitor, Asahi Glass. In Walter Isaacson's biography of Steve Jobs, he describes a meeting between Jobs and Corning CEO Wendell Weeks about Gorilla Glass for the iPhone. Corning, presumably due to a nondisclosure with Apple, would not confirm whether iPhone or other Apple products use that glass.

On the other hand, just as Intel had its successful “Intel Inside” branding, Corning has moved to a “Gorilla Outside”-type branding campaign, and products like the Samsung Galaxy tablet and the Sony Bravia HDTVs proudly market their Gorilla Glass feature in their ads.

Corning—An Impressive Institutional Memory

Corning's website says “it is strengthened by history.” Many of us grew up with Corning's consumer products including brands such as Pyrex, Corningware, Corelle, and Revere. The Generations of Corning documents well much of the company's rich innovation history.

Corning spun off its consumer goods division in 1998. Today, it mostly focuses on industrial markets such as:

• Ceramic substrates and filters for mobile emission control systems.
• Optical fiber, cable, and hardware and equipment for telecommunications.
• Optical biosensors for drug discovery.
• Advanced optics and specialty glass solutions for a number of industries.

Corning has not, however, forgotten its consumer roots. Today Corning makes glass substrates for LCD flat panel televisions, computer monitors, laptops, and other consumer electronics.

Corning has repeatedly shown an impressive memory and ability to go back into its decades-old vaults and pull out technology to create products as markets mature. An example: Dr. J. Franklin Hyde, a Corning chemist, invented a process in the 1930s for making an almost-pure glass used today in fiber-optic technology. A market for that product only took off in the 1990s as telecoms internationally started moving away from copper in their networks.

Gorilla Glass has its own story of such institutional memory. In the 1960s, Corning launched “Project Muscle.” According to company lore, then-President Bill Decker told the Research Director, Dr. Bill Armistead, “Glass breaks…. Why don't you fix that?”

Project Muscle led to a new ultra strong glass material called Chemcor, designed to stand 100,000 pounds of pressure per square inch. There are films of it being bombarded with frozen chickens and it would not chip, let alone crack and break.

The Generations of Corning documents that there was plenty of excitement about Chemcor prospects. It showed up as the windshield in Ford Mustangs, in spacecrafts, and even as unbreakable tableware. While the glass did well in specific markets like aircraft cockpit windows (to survive bird strikes, among other threats) and windows for jails, it was too strong for many applications and never truly took off as expected in the 1960s. Variations of this glass family continue to be manufactured in a small scale for ophthalmic applications.

In 2006, a Corning New Business Development team saw that cell-phone covers offered a new opportunity for toughened glass.

This is not the old Chemcor. As Shashi points out. “We drew on the company's prior expertise with strengthened glass. However, Gorilla Glass is a different product and glass composition than Chemcor.”

Gorilla Glass draws on Corning's proprietary “fusion-draw” manufacturing process. Molten glass is fed into a trough called an “isopipe,” overfilling until the glass flows evenly over both sides. It then rejoins, or fuses, at the bottom, where it is drawn down to form a continuous sheet of flat glass.

In order to get to that combination of high-volume scale, unique attributes required for cover glass applications, and exceptional thinness and sheet quality, the R&D team had to develop a new glass formula that would allow them to do the fusion-draw production in the Harrodsburg, Kentucky, plant instead of the slot-draw production the project had started with in the Danville, Virginia, plant. The Harrodsburg facility has excelled in its role as Corning's glass-melting technology center, where engineers work closely with scientists at the company's Sullivan Park (Corning, New York) R&D Center to develop advanced fusion-formed glass for display, photovoltaic, and other emerging applications. From February through May of 2007, the Corning R&D and manufacturing teams raced through trials and research to develop the new composition and manufacturing process that, amazingly, worked on the first try.

The Missionary Selling and the Ramp-Up

Even though Corning knew it had a winner, it took plenty of customer coaching to think about glass, instead of plastic, in their product design in the 2007 and 2008 time frame. Shashi talks about several customer visits where Corning taught the basics of strength of glass and how to design components with glass, affectionately called Glass 101. Part of the education also involved visits to the famous Corning Museum of Glass, where industrial designers could get inspiration to design products with glass. The Corning Museum of Glass is an entity legally separate from the company and does not specially feature Gorilla Glass or related products.

Glass is supposed to be brittle (as President Decker had expressed much earlier), so one of the most impressive sales techniques to combat that image is the ball-drop test—an industry standard test for glass durability. A 1.18-pound iron ball is dropped from 1.9 meters. The Gorilla Glass gives and then returns to its original position—still in one piece. At trade shows attendees were invited to scratch, pierce, and otherwise torture a piece of Gorilla Glass. It survived just fine.

The social buzz started growing as YouTube videos of the ball drop and the trade show tortures started circulating. Corning also put out its own “A Day Made of Glass” video, which shows futuristic architectural, automotive, 3D TV, and large-panel displays such as highway signs, all made from glass. That is one of the most-watched corporate videos ever produced.

Consumers started asking manufacturers whether their displays were made from Gorilla Glass. Manufacturers also saw the payback. Dr. Donnell Walton, worldwide applications engineering manager for Gorilla Glass at Corning, said,

In 2009, 14 devices used Gorilla Glass. By 2010, over 350 used the product!

That, of course, has had significant manufacturing implications. Corning has significantly expanded its plants in Harrodsburg, Kentucky, and Taichung, Taiwan. It has retrofitted portions of a liquid-crystal display (LCD) plant in Shizuoka, Japan, to produce Gorilla Glass. Loading, securing, tarping, and transporting glass poses logistical challenges. The Asian plant decisions were made easier by that logistical reality and the need to be closer to many of the device manufacturers in Asia.

At the Annual Shareholder Meeting in April 2011, Jim Steiner, senior vice president, Corning Specialty Materials, told the audience that Corning had improved the glass composition three times since launch and that it had applied advanced finishing technology to improve product performance.²⁴

Such continuous improvement is key, as Corning chases newer markets with the additional manufacturing capacity.

Gorilla Glass in TVs and Applications Beyond

The biggest short-term opportunity is in next-generation, frameless, no-bezel TVs with edge-to-edge glass surfaces. There would be other advantages beyond the sleek look. A 55″ LCD TV using Gorilla Glass “is 8.5 lbs. lighter”²⁵ and “its exceptional durability provides damage resistance against bumps.”²⁶

“The sleek and sophisticated look of edge-to-edge TV designs is made possible by using a thin, durable, crystal-clear glass cover. Gorilla Glass provides the perfect solution,” says David Loeber, business director, TV Cover Glass. “It's an outstanding cover glass—lightweight and sophisticated, while protecting against everyday wear.”

Next there are automobile applications. Hyundai incorporated Gorilla Glass in its next-generation electric concept car, the Blue2.²⁷ There are opportunities in the “kitchen of the future” as appliances incorporate larger displays. CollinsWoerman, a Seattle architect firm, envisions a role for Gorilla in its vision of a pre-fab high-rise building.²⁸

The glass itself keeps evolving. At the January 2012 Consumer Electronics Show, Corning announced version 2, which is 20 percent thinner and allows for even more sleek devices and brighter images. Corning is accustomed to boom-bust cycles when it comes to technology markets. The 2001–2003 technology meltdown slowed down fiber optic demand. More recently, growth in demand for LCD TVs, another big Corning market, has slowed. Even if the newer TV, auto, and other applications do not materialize, what Corning has already done with Gorilla Glass in a short time frame is impressive.

Prof. Charlie Fine at MIT says we can learn from fruit flies as we evaluate technology clockspeeds. Corning shows we can also learn from Gorillas.