micro array business team

Stephen woodbury, who has been involved in other product development efforts and at the time was a plant manager, was selected to manage the microarray business, reporting to Mr.huntington. Catherine hamel, a long-time corning engineer, was appointed to head up the development effort, reporting to Mr.keller.
Dr.Mark fraser led the research group working on microarray technology, and reported to Ronald Smith, Corning’s Chief Technology officer. Dr.fraser had built a career in scientific research at allied signal and corning. He had spent most of his career working on advanced materials, and despite being uninvolved with life sciences for many years, he had more knowledge of biology than others at his level on the research staff.
In turn, mr.woodbury, ms.hamel. and dr.fraser, all of whom worked out of corning, NY, began assembling the necessary ataff. To make the venture successful, the leaders needed skills and resources from several existing groups at corning, including FRC, the life sciences teams in the Boston area that evolved from the costar acquisition (they now managed the microplates product line), and the massive, muliti-business-line research and development facility in Corning, NY. In addition, each of the three recognized that they would soon to hire experts in molecular biology.
Dr. fraser built a molecular biology research group, starting by hiring Dr.Ralph Hansen, a veteran of the field in both academia and industry who had already worked on printing microarrays. Dr.hansen was well known around the world, had contacts in several major re-search sites, and routinely spoke at genomics conferences. Dr.fraser described how he and Mr.smith formulated an early hiring plan:
“we needed experts in everything from the chemistry of the substrate to the handling of DNA materials, a total of five or six different technical areas. We needed a critical mass, at least five people, in each. It was important, since we felt that we were behind, to spend the money and get the people on board. We could afford to do it, so we did.”
Ultimately, Dr.fraser hired a staff of approximately twenty five, counting both external hires and internal transfers. Dr.Brain chase, a veteran in corning’s research organization who had been involved in the initial evaluation of the venture, identified and assembled the team of experts in corning’s traditional scientific fields. Ms.Hamel and Mr.woodbury also built staffs of similar magnitude for the development and commercialization teams, also hiring outsiders with molecular biology expertise.
Expectations were high, and because they had been validated by the outside consulting study, they were rigid. In staffing the venture, the senior management team bypassed people who suggested thet the projection were unrealistic. They wanted to involve people who be-lived in the project.revenues of $100M were expected within five years. And in the excite-ment of the telecommunications boom, expectations rose to $250M in the following planning cycle. Mr. Lewis recalled the environment:
“Expectations felt aggressively, but not terriby aggressive. The excitement around fiber made it seem as though everything was growing at 70% per year. So if you didn’t project $250M in five years, you heard ‘Guys . . . not enough Zeros.’ It hadn’t always been that way – just in the past four of five years.”
Mr.woodbury felt that it was critical to get to market quickly. The market was evolving and there were rumors that other corporations such as Aligent and Motorola were pursuing the same opportunity.
The research and development teams began working on a proprietary system for manufacturing microarrays. Because developing such a system was expected to take two years, the management team decided to pursue a quicker path using existing printing robots available commercially – i.e., the same printing robots that corning’s potential customers were using in their own laboratories. The logic for doing so was twofold: (1) corning’s could still do a better job than their potential customers because they would mass – produce and had the manufacturing process improvement skills to perfect production, and (2) close contact with multiple customers during development of the proprietary system would lead to faster and better results.
The corning staff began to refer to this approach as generation one (“Gen 1”) and to the proprietary system as “Gen 2.” The latter was to be a unique approach, and the team believed it would enable an unbeatable cost structure by utilizing proprietary corning technologies. In partnership with the staff in corning, the research staff at FRC was dedicated exclusively to Gen 2. The development teams in a New York and Massachusetts focused on getting Gen 1 products into the market.
An early success was the launch of an unprinted coated glass slide in 1999. Mr.woodbury’s colleagues had been nervous about the launch, fearing potential competitors would discover some of corning’s proprietary science. However, mr.woodbury never dedicated significant resources to the product – it was not the big prize – the slide was welcomed by the market. User described it as far superior and far more reliable than any alternative.
Four different standards for micro array equipment were in place internationally. The marketing team focused on encouraging adoption of a single open standard…. Mean while, the team endeavored to get the Gen 1 system working. they did not foresee difficulties. Corning had mastered the process of applying a liquid coating to a glass surface. It was a common element of a many corning products. The one difference – which appeared minor at the time was that the liquid included DNA. The team struggled. They had troubled effectively mixing sufficiently large batches of DNA. Plus, supplies of DNA were of inconsistent quality from one vendor to the next. Has a result, consistently matching the DNA fluid to a glass coating to which it would adhere was tricky. One vendor Wreaked new frustration when it switched to a new method of cleaning the DNA in order to meet coning’s order – the largest it had ever filled. The new cleaning chemicals disturbed the printing process. The corning’s method for identifying correcting manufacturing problems were confounded by unexpected inconsistencies inherent in handling DNA. Monday, the orienting process appeared to be working fine, Tuesday mysterious problems arose. Tensions mounted between the physical scientists and life scientists on the team. The biologist were accustomed to phenomenon being inconsistent and imperfectly understood- that was the nature of their science but the physical scientists fixated on achieving perfection – which translated to extremely low error rates in manufacturing processes biologists eventually complained that they could find an audience for their view points. Dr. Chase recalled the tensions:
“ the biologist disagreed with our methodical approach. They wanted to get market. Corning focuses on quality – on making things work right. We would say we should not have these variability. These batch is bad. The biologist would say “ you don’t understand what is needed.” We would say” you don’t understand how good we can it.” They would say “humans have perhaps 100 thousand genes. Has of today we only know 7000 or so. 10% wrong in our world is not a big deal.”
As milestones in the development process were missed, other tensions initially buried in the excitement of launching a new business rose to the surface. The staff of FRC and team in corning were not working together effectively. Development staff in Massachusetts began to assert their independence, believing they could accomplish more on their own than in partnership with the team in New York. Interaction between the development and commercialization staffs was un-productive-the life sciences unit had much less experience developing and launching new products than other corning business units.
Further more, tensions arose between the staffs of the core life sciences business and the advanced molecular biology products lines – micro plates and microarrays. Mr.huntington recalled one incident.
“ I was travelling with one of our sales representatives, and a customer was interested in micro plates. And the rep said well, you are going to have to contact carol, because I don’t handle micro plates. I just about died there was synergy in approaching customers – we did well in some places and less well in others.”
The sales operations were not easy to integrate because the customer buying processes were very different the core life sciences products were inexpensive, and administrative staff made routine purchases several times per year by contracts, senior managers were involved in the system level decisions associated with micro-array purchases, and deliberated for long time periods. Longer, in-fat, than had been anti-coated in the business plan.
Augmenting these tensions, the micro-array commercialization team had assumes what Mr.adler described as a rather elitist attitude. Blaming him self, recalled telling the micro-array sales rep’s that they were selected because they were the best, because these venture was the future. They were successful in getting resources when ever they needed them, while the core business struggled to do so. One corning executive absorved that the same dynamics distributed co-operation between the telecommunicaions group and corning technologies.
The leadership group was also struggling to get along. Relationships between Mr.woodbury and Mr. Huntington, and also Mr.woodbury and Ms.hamel foundered. They had frequent adekward meetings, and failed achieve consensus on many decisions.
Ny late 1999, despite a budjet that had risen to roughly dollor 30M per year, the Gen 1 printing process was still not working. The Gen 2 process was way behind it’s development schedule. Most of the people involved in the venture has lost confidence. Their expectations had been dashed.
Diagnosing the problems with the venture:
Mr.ford, having succeeded Mr.gilbert as the president of corning technologies, was concerned about the prospects for a turnaround, as was Mr.Allen, who by then had replaced Mr.keller as head of the development group. (Refer to arganization chart, [Exhibit 1].)
The two agreed that the venture’s organizational approach appeared unwidely, and because of corning’s focus on fiber-optics, corning’s best leaders had not been selected to manage an important but highly risky venture. They also observed that the team managing the venture lacked cohesion. Worse, the various groups involved in the project were not sharing informatio9n, and were sometimes fighting.
Finally, Mr.frod and Mr.allen noted that giving the same general manager (Mr.huntington) responsibility for both mature and new product lines created too many conflicting pressures. The life sciences unit was trying to sustain profitability while the microarrays venture rapidly consumed cash.
Based on these observations, Mr.frod and Mr.allen decided to make some significant changes.
In 2002, with the benefit of hindsight, corning executives made several additional observations about what had transpired through late 1999. Dr.fraser observed that in the effort to get Gwn 1 products to market, resources allocation decisions had been ineffective. He described the problem:
When we hit problems, we would attempt to solve them by saying ‘look, there are five aspects to this problem. I need a couple of people to work on each.’ An expert, on the other hand, would say ‘there are five aspects to this problem, but based on my knowledge and experience I know that three are very minor and have almost no impact on what we are trying to do. We only need a couple of people each for the other two.’”
In addition, the leadership struggled on occasion in matching problems to the people with the right expertise. This created dissension among the staff, as some questioned why others were spending so much time working on problems that seemed unimportant. Dr.fraser also observed that the venture had been assembled without time for sufficient through, or without sufficient information.
Despite these issues, Dr.fraser felt that the technical progress had been significant. Corning had created a large base of talented scientists, constructed new laboratories, established some new intellectual property, created some incredible inventions, and built the basic Gen 2 printing machinery (which still needed to be perfected.)
“The early technical teams did incredible jobs even in the face of the disagreements, the overly optimistic market entry timings, and the lack of management experience in life sciences. Many of our technological accoplishments are paying off in other products today.”
Furthermore, Mr.adler observed that in an effort to get the product launched in the expected time frame, Ms.hamel and Mr.woodbury, who in fairness had insufficient power to reduce expectations, became very intent on advancing the project smartly through the five – stage innovation process:
“we’d make a lot of decisions to get back to plan. The same way you would in an operating business. In the venture capital world, where you have a certain amount of cash, you focus much more on your burn rate.”
Mr.allen reflected that they needed to allow more flexibility to iterate through stages – there were many ambiguities to resolve, and marching down a single path was an unlikely route to success. Problems could not always be resolved with simple, expedient solutions. While the team acted as though it was in stage 3 or stage 4 in the innovation process, a more reasonable assessment indicated that they were still in stage 2.
Reconstituting the Microarrays Business Team:
Mr.frod and Mr.allen had developed Greg Brown’s career over many years. They regarded him as one of corning’s most talented general managers. Like most of his colleagues, he had little exposure to life sciences businesses. But he had worked on development projects in the past, and had demonstrated an ability to get scientists, engineers, and business people all working together.
In November, 1999, they selected him to replace Mr.woodbury. Mr.brown felt some recluctance, but Mr.frod and Mr.allen knew him to be a “good soldier” and left him little choice in the matter.
Mr.allen viewed Mr.brown as the program manager, meaning that he had singular responsibility for the venture. Mr.frod wanted to be more involved in the venture, so Mr.brown communicated with both Mr.frod and Mr.allen frequently. Mr.brown and Mr.huntington had little experience working together, and each went out of their way to gain trust by communicating decisions and sharing information.
As part of the effort to reshape the business, Mr.ford, Mr.allen and Mr.huntington agreed to move all of the staff working on the project in Massachusetts to corning, NY, in order to move all of the staff working relationships. Roughly half of the staff resigned in the process, including some key scientists such as Samuel king, who appeared to have never overcome his resentment of corning since its acquisition of costar.
One of Mr.brown’s early concerns was gaining sufficient cooperation from Mr.woodbury to ensure a smooth transition. However, Mr.woodbury proved to be extremely helpful, and later confided that the he was relieved to put the venture behind him.
Mr.brown’s mandate was to diagnose any problems, and then decide whether or not the venture should go forward or not. But he never explicitly considered exiting, once he saw the business potential and the technology fit:
“ I just dove in. the possibilities were intriguing, and the challenge of overcoming technical hurdles was something I always liked.”
Mr. brown had learned to avoid momentous change early in a new position:
“I don’t belive you should go in and start mixing things up until you know what is going on. Things are the way they are for a reason.”
However, the atmosphere was so charged that Mr.brown felt compelled to act immediately:
“I will never forget this. On Monday I started to talk with the team. By Tuesday afternoon, I called everyone together because I was just so shocked. I said ‘we have got to talk. This ridiculousness has got to stop. We are all accomplished. We are all leaders. This thing will self-destruct if we don’t do something fast”
He went on to insist that conflicts could be no longer buried, that all frustrations must be aired. Some of the staff later let Mr.brown know that the meeting was much – needed, and longer due. Brian chase, a close colleague of Mr.brown’s emerged as both a senior technical advisor and the steady “voice of reason” that helped keep the research and development teams together.
The change in leadership reset expectations. The venture had a fresh start. The past was forgotten. While revenue expectations remained in the hundreds of millions of dollars, development milestones were pushed back roughly one year. The opportunity still looked attractive.
In the first quarter of 2000, however, the venture suffered a significant disappointment. The team had set expectations in the press and which customers that they were very close to launching a yeast DNA microarray (based on the Gen 1 manufacturing process.) but they discovered that their first large batch was contaminated. The team seemed to expect a harsh reaction from Mr.brown, but none came. There were no blantant operational mistakes. The team had worked hard, following their best understanding of the manufacturing process. Mr.brown accepted the problem, and set the team to diagnosing and fixing it.
Later, however, Mr.brown made additional changes to the organization. He placed adrew Roberts, a corning venteran who was at a natural transition point in his career, in charge of manufacturing. In addition, Mr.brown and Mr.allen agreed that Ms.hamel needed to be replaced by someone with more familiarity with life sciences. On a customer visit to smithkline beecham, Mr.allen met William hall, one of the first customers that bought corning’s unprinted coated glass slides. Dr.hall, one of the first customers that bought had a Ph.D in molecular biology, was well published, held several patents, and had spent the previous seven years managing the high throughput microarray facility at smith kline beecham.
Mr.allen hired Dr.hall in may, 2000 to replace Ms.Hamel. officially Dr.hall reported to Mr.allen, but Mr.allen made it clear that Mr.brown led the venture. The new business team was in place.
Working Towards Product Launch:
Through the summer of 2000, the team worked to fix the Gen 1 manufacturing line while continuing development of the Gen 2 process. The team solved problems with DNA supply by hiring a full time molecular biology expert to work with vendors to train suppliers and establish new standards for the industry. As a result, CMT launched the Gen 1 yeast microarray product in September.
But the market had shifted by them. Few researchers were running experiments on yeast DNA because progress on the mapping of the human genome enabled more enticing experiments using human DNA. While sales of the product were disappointing, customers gave outstanding feedback. According to Mr.huntington the product was a “home run” from technical standpoint. The feedback was a confidence boost for the CMT team. Internal perceptions of the venture’s performance were rising.
Around this time, Mr.ford acted to eliminate the conflicting pressures on Mr.huntington, created by the demands of simultaneously managing a nascent venture and a mature business. He made the microarray venture its own independent devision, dubbed corning microarray technologies (CMT). The microplates product line was merged with the life science unit under Mr.huntington. Mr.brown now reported directly to Mr.ford.
Meanwhile, progress on the development of the Gen 2 process was disappointeing. The relationship between the FRC and corning had improved. Still, cultural differences and the physical distance resulted in incomplete and occasionally inaccurate transfer of technology from the point of development (FRC) to the point of manufacture (Corning, NY). Mr.roberts described his role:
“I was to lead the transaction from development to manufacturing. But the job ended up being more development.and it changed dramatically over the next year and half. We had demon started feasibility, but were having difficulty with replicability.”
Mr.roberts endeavored to quicken tohe pace of learning by eliminating delays involved in experimentation. For example, he shortened the total time for testing new nozzles for the printing robots (a process that had steps in both france and New York) from a few months to few weeks. He also eliminated the delays in information flows associated with a quality control process from several weeks to several days.
Despite these improvements, the team continued to miss milestones. But in Mr.lewis’s observation, the milestones were more tangible under Mr.brown, and the team was more successful in overcoming the difficulties in diagnosing what was wrong. Things that the team did not known became increasingly identifiable and evident. Several key decisions made early in the development process were revisited.
Despite some struggles over staff assignments with the telecommunications group, delays could not be blamed on lack of resources. In fact, based on an aggressive revenue forecast to which the CMT team had committed, Mr.roberts built a large manufacturing staff many months before the product was ready.
By December 2000, the team felt that launch with a gen 2 product was imminent, and built some anticipation with customer directly and through the press. But another difficult setback followed.
Meanwhile, affymetrix continued to reiterate long-standing warnings that they suspected corning’s Gen 2 system infringed on their patents, and that they intended to litigate. The technical team believed that the affymetrix patents could be worked around, or would eventually crumble under legal challenges from elsewhere in the industries. Nonetheless, Mr.brown and Mr.ford had researched the problem and had begun pursuing conversations with affymetrix about licensing certain aspects of their printing technology over one year earlier. Negotiations were tense.
Sudden Cutbacks:
By the middle of 2001, the development team had overcame many hurdles, and Gen 2 product launch once again seemed imminent. The team successfully produced a unique human DNA product, and manufacturing yields approached 80%. Confidence and excitement continued to build, though corning employees outside of CMT may only have noticed that the Gen 2 product still hadn’t been launched. (The team had also preparing for launch.) the market still appeared promising – roughly 30% of the microarrays were still self – printed by potential customers, while another 44% used the expensive affymetrix system.
Meanwhile, orders for corning’s fiber – optic cable were unexpectedly plummeting Mr.ford was in a bind. He anticipated that annual budgeting cycle for 2002 would result in severe, corporate – wide budget cuts in October, and best – case forecasts for CMT still showed a $30M loss. He asked Mr.brown for options for keeping the venture alive with half or less of its current budget.
Upon return from his two weeks of travel, the CMT team presented Mr.brown with a plan for a $15M per year budget. The plan allowed the venture to continue to make progress, albeit at a slower rate. Mr.brown was pleased with the plan and with the team, which had proven able to make consensus decisions involving sacrifice. (Dr.fraser, who was involved in formulating the plan, later reflected that the budget was too big to begin with.) Shortly thereafter, Mr.brown reached agreement with affymetrix on a framework for an expensive licensing agreement.
Meanwhile, Mr.ford had commissioned another consulting study to review a wide range of growth options for corning, including taking another look at CMT. The consultants encouraged a sytem – level view of the genomics market. They forecast that profitability in the industry would eventually shift to bioinformatics – computer systems, software, and services for managing the information generated by genetic experimentation. They recommended that corning acquire the bio – informatics capability rather than try to build it themselves. If corning did so, the consultants argued, they would certainly have influence in the industry to get standards. It was unclear just how expensive the acquisition would be.
A bioinformatics industry was in fact developing. But some scientists at corning dismissed the consulting recommendation because they were aware of customers that readily handled the data collection and analysis aspects of their work on spreadsheets. Plus, they argued, laboratories protected their valuable results and would hesitate to let outsiders manage them.
The telecom market weakened further, so much so that September 2001 became known as the “september from hell.” Mr.Ford decided to stop funding CMT entirely. Mr.brown, Mr.allen, and Mr.fraser, who wrote a forty – page white paper on how CMT could still succeed following a new approach, all endeavored to change his mind – but to no avail. Mr.brown recalled some of Mr.ford comments:
“I know you belive in the business greg. But to be honest, I just don’t know. I don’t know the customers, and can’t justify continued investment.”
Others at the corporate level were unable to be supportive, too busy dealing with the fibre market to give much attention. Mr.ford cited a number of reasons for the decision (in no particular order): 1) scare capital, 2) lack of control over intellectual property and aggressive affymetrix posturing, 3) uncertainly over how the industry would evolve, including ambiguity regarding the necessity to buy into the bioinformatics market, 4) repeated missed deadlines, 5) no revenue streams beyond roughly $5M per year for unprinted slides, 6) several potential competitors appeared to have spent far more even than corning to develop a microarray product line . . . . , and 7) personal discomfort and unfamiliarity with the business – a feeling shared by the rest of the corporate management team.
In late 2001, the decision was made to stop the program. When all was said and done, half of the sales staff and most of the manufacturing staff was out placed or laid off. Cutbacks were not as severe within R&D – positions were identified on other projects inside corning. All efforts to print microarrays were halted. All of the yeast microarrays were sold at bargain prices, and supplies of human DNA were written off . . . .
THE NEXT YEAR:
Over the next following twelve months, the telecommunications market showed little sign of recovery. Corning eliminated 12,000 of 40,300 jobs world wide. They announced closure of seven major manufacturing plants, reduced capital spending from $2.5 billion to $1.8 billion, and stopped all expansion projects in the telecommunications segment. In order to pay for remaining expenses, corning discontinued dividing payments in july 2001, issued new shares to raise $225 million in august 2001, and issued convertible debt to raise $665 million in November 2001.
Year – end results for 2001 showed that telecommunications revenues dropped 14% to $4.5 billion compared to a 74% increase between 1999 and 2000. Corporate – wide, revenues dropped 12% to $6.3 billion, and corning suffered a net loss of $5.5 billion (including the $4.8 billion write – off). Long – term debt as a percentage of total capital increased to 45% from 27%. Late in 2001, standard and poor’s downgraded corning’s debt rating from A to BBB and maintained a negative outlook. Moody and followed with similar downgrades. In april, 2002, CEO Matt Dickenson stepped down, just 16 months followed after his appointment.
Mr.brown was evaluated positively on his performance in managing CMT, and was assigned another new venture related to diesel technologies. Mr.ford belived this project had a higher probability of success, and anticipated that Mr.brown would soon be running a major new division.
Dr.hall continued to work for corning in the life sciences area. A great deal of scientific and engineering known – how was retained, and corning continued to develop evaluate possible new products in the life sciences market. In fact, they expanded their offering of unprinted slides and offered kits which included the slides plus reagents used in the printing process.
As of the autumn of 2002, genetics researchers still had no compelling alternative to the affymetrix system other than printing their own microarrays.
For Discussion:
1) Was DNA microarray a sensible growth opportunity for corning to pursue?
2) What are the main differences between the CMT business model and the general business model for corning technologies?
3) Did corning build an adequate level of expertise in molecular biology? Explain.
4) Why did the initial microarray venture leadership team falter?
5) Evaluate greg brown’s priorities upon taking over the newly created CMT division.
6) How was the microarray venture affected by the buildup and subsequent sudden decline of the telecommunications business?
7) On a graph over time, trace perceptions of how the microarray venture was perfoming. On what basis did these perceptions from? Change? Evaluate.
8) In 2002, how secure do you suspect was affymetrix position in the microarray market? Explain.