Cumberland-Metals-Industries

9-580-104REV:AUGUST16,1985________________________________________________________________________________________________________________ProfessorBensonP.ShapiroandJeffreyJ.Shermanpreparedthiscase.HBScasesaredevelopedsolelyasthebasisforclassdiscussion.Itwasmadepossiblebyacompanythatpreferstoremainanonymous.Alldatahavebeendisguised.Casesarenotintendedtoserveasendorsements,sourcesofprimarydata,orillustrationsofeffectiveorineffectivemanagement.Copyright©1980PresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgoto—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.BENSONP.SHAPIROJEFFREYJ.SHERMANCumberlandMetalIndustries:EngineeredProductsDivision,1980RobertMinicucci,1vicepresidentoftheEngineeredProductsDivisionofCumberlandMetalIndustries(CMI),andThomasSimpson,groupmanageroftheMechanicalProductsGroup,hadspenttheentireWednesday(January2,1980)reviewinganewproductCMIwasabouttointroduce.(SeeExhibit1fororganizationcharts.)Theroomwassilent,andashewatchedthewaningraysofthesunfilteringthroughthewindow,Minicucciponderedallthathadbeensaid.TurningtowardSimpson,hepausedbeforespeaking.Curledmetalcushionpadsseemtohavemorepotentialthananyproductwe’veeverintroduced.Asuccessfulmarketintroductioncouldasmuchasdoublethesalesofthiscompany,aswellascompensateforthedeclineofsomeexistinglines.Italmostlookstoogoodtobetrue.Simpsonresponded,“ThepeopleatColerickFoundationCompanyarepressingustoselltothem.Sincetheydidtheoriginaltest,they’vebeenanxioustobuymore.Ipromisedtocontactthembytheendoftheweek.”“Fairenough,”Minicuccisaid,“buttalktomebeforeyoucallthem.Thewaywepricethiscouldhaveasignificantimpactoneverythingelsewedowithit.”TheCompanyCumberlandMetalIndustrieswasoneofthelargestmanufacturersofcurledmetalproductsinthecountry,havinggrownfrom$250,000insalesin1963toover$18,500,000by1979.(Exhibit2showsCMI’sincomestatement.)Itoriginallycustomfabricatedcomponentsforchemicalprocessfiltrationandotherhighlytechnicalapplications.Companyphilosophysoonevolvedfromsellingthemetalasafinishedproducttosellingproductsthatuseditasarawmaterial.Thecompany’sbigboostcamewiththeintroductionofexhaustgasrecirculation(EGR)valvesonU.S.automobiles.BoththeFordandChryslervalvedesignsrequiredahightemperaturesealtoholdtheelementsinplaceandpreventtheescapeofveryhotexhaustgases.CumberlanddevelopedaproductthatsoldunderthetrademarkSlip-Seal.Becauseitcouldmeetthedemandingspecifications1PronouncedMinikuchi.580-104CumberlandMetalIndustries:EngineeredProductsDivision,19802oftheautomakers,theproductcapturedaverylargepercentageoftheavailablebusiness,andthecompanygrewquiterapidlythroughthemid-1970s.Companymanagementwasnotsanguineaboutmaintainingits80%marketshareoverthelongterm,however,andmovedtodiversifyawayfromatotalrelianceontheproductandindustry.Thus,whenasalesrepresentativefromHoustonapproachedCMIwithanewapplicationforcurledmetaltechnology,managementexamineditclosely.TheProductBackgroundTheproductthatMinicucciandSimpsonweretalkingaboutwasacushionpad—anintegralpartoftheprocessfordrivingpiles.2Piledrivingwasgenerallydonewithalargecrane,towhichadieselorsteamhammerinsideasetofleadswasattached.Theleadsweresuspendedoverthepilefordirectionandsupport.Thehammerdrovethepilefromthetopoftheleadstoasufficientdepthintheground(seeExhibit3).Thecushionpadspreventedtheshockofthehammerfromdamaginghammerorpile.Theysatinacircular“helmet”placedoverthetopofthepileandwerestackedtokeepairfromcomingbetweenstrikerplateandram,asshowninExhibit3.Ofequalimportance,thepadseffectivelytransmittedenergyfromthehammertothepile.Agoodcushionpadhadtobeabletotransmitforcewithoutcreatingheat,andstillremainresilientenoughtopreventshock.Withanineffectivepad,energytransmittedfromthehammerwouldbegivenoffasheat,andthepilecouldstarttovibrateandpossiblycrack.Despitetheimportanceofthesepadstothepile-drivingprocess,littleattentionhadbeenpaidtothembymostoftheindustry.Originallyhardwoodblockshadbeenused.Althoughtheircushioningwasadequate,availabilitywasaproblemandperformancewaspoor.Constantpoundingquicklydestroyedthewood’sresiliency,heatbuiltup,andthewoodoftenignited.Theblockshadtobereplacedfrequently.Mostoftheindustryhadshiftedtoasbestospads(normally1/4-inchthick)whichwereusedmostoftenandseemedtoperformadequately,orstacksofalternatelayersof1/2-inch-thickaluminumplateand1-inch-thickmicartaslabs.(Thesewerenotfabricated,butsimplypiecesofmicartaandaluminumcuttospecificdimensions.)Bothpadscameinavarietyofstandarddiameters,themostcommonbeing11l/2inches.Diameterwasdeterminedbythesizeofthehelmet,whichvariedwiththesizeofthepile.CurledMetalandtheCMICushionPadCurledmetalwasacontinuousmetalwirethathadbeenflattenedandthenwoundintotight,continuousringlets.Theseallowedthemetaltostretchinbothlengthandwidthandgaveitthree-dimensionalresiliency.Becaus