In 1977, Crown Cork and Seal Company was the fourth largest producer of metal cans and crowns1 in the United States. Under John Connelly, chairman and CEO, Crown had raised itself up from near bankruptcy in 1957. After 20 years of consistent growth, the company had emerged as a major force in both the domestic and international metal container markets (see Exhibit 1). During those 20 years, Crown Cork and Seal had concentrated its manufacturing efforts on tin-plated cans for holding beer, soft drinks, and aerosol products.
By 1977, however, the ozone controversy and the trend toward legislative regulation of nonreturnable containers was threatening Crown’s domestic business. Was it time for a change in Crown’s formula for success or merely time for a reaffirmation of Connelly’s basic strategic choices? To explore these questions, this case looks at the metal container industry, Crown’s strategy and position within that industry, and the nature of the problems facing the company during mid1977. The Metal Container Industry in 1977 The metal container industry included 100 firms and a vast number of product lines.
This section describes the product segments in which Crown competed, examines the industry’s competitive structure, and looks at three industrywide trends:
- increasing self-manufacture,
- new material introductions,
- the effect of the “packaging revolution” on the competitive atmosphere.
The Products Metal containers made up almost a third of all packaging products used in the U. S. in 1976. Metal containers included traditional steel and aluminum cans, foil containers, and metal drums and 1 Crowns are flanged bottle caps, originally made with an insert of natural ork— hence the name Crown Cork and Seal. Karen D. Gordon and John P. Reed, research assistants, prepared this case under the direction of then Assistant Professor Richard Hamermesh as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 1 378-024 Crown Cork and Seal Company, Inc. pails of all shapes and sizes. Of these, metal cans were the largest segment, reaching a value of $7. 1 billion in 1976. Cans were being used in more than three-fourths of all metal-container shipments.
Cans were composed of two basic raw materials: aluminum and tin-plated steel. Originally, they were formed by rolling a sheet of metal, soldering it, cutting it to the right size, and attaching two ends, thereby forming a three-piece, seamed can. In the late 1960s, a new process introduced by the aluminum industry made possible a two-piece can. The new can was formed by pushing a flat blank of metal into a deep cup, which eliminated the need for a separate bottom. The product makers adopted the term “drawn and ironed” from the molding procedure.
The aluminum companies that developed the process, Alcoa and Reynolds, had done so with the intention of turning the process over to can manufacturers and subsequently increasing raw material sales. However, when the manufacturers were reluctant to incur the large costs involved in line changeovers, the two aluminum companies began building their own two-piece lines and competing directly in the end market. The new can had advantages in weight, labor, and materials costs and was recommended by the Food and Drug Administration, which was worried about lead from soldered three-piece cans migrating into the can’s contents.
Tin-plated can producers soon acknowledged the new process as the wave of the future. They quickly began to explore the possibilities for drawing and ironing steel sheets. By 1972 the technique was perfected, and investment dollars had begun to pour into line changeovers and new equipment purchases. Exhibit 2 illustrates the rapid switch to the two-piece can in the beverage industry. In the beer segment alone, almost half of the total cans used in 1974 were made by the new process. Growth
Between 1967 and 1976 the number of metal cans shipped from the manufacturers grew at an average of 3. 4% annually. As shown in Table A, the greatest gains were in the beverage segment, while shipments of motor oil, paints, and other general packaging cans actually declined. A 6% decline in total shipments in 1975 turned around as the economy picked up in all areas except basic food cans. For the future, soft drink and beer cans were expected to continue to be the growth leaders.
A typical three-piece can line cost $750,000 to $1 million. In addition, expensive seaming, end-making, and finishing equipment was required. Since each finishing line could handle the output of 3 or 4 can-forming lines, the minimum efficient plant required at least $3. 5 million in basic equipment. Most plants had 12 to 15 lines for the increased flexibility of handling more than one type of can at once.
However, any more than 15 lines became unwieldy because of the need for duplication of setup crews, maintenance, and supervision. The new two-piece can lines were even more expensive. Equipment for the line itself cost approximately $8. million, and the investment in peripheral equipment raised the per-line cost to $10-$15 million. Unlike three-piece lines, minimum efficient plant size was one line and installations ranged from one line to five lines.
Conversion to these two-piece lines virtually eliminated the market for new three-piece lines. No firms were installing new three-piece lines and the major manufacturers were selling complete, fully operational three-piece lines “as is” for $175,000 to $200,000. Many firms were shipping their old lines overseas to their foreign operations where growth potential was great. There were few ntrenched firms, and canning technology was not well known or understood.
The can industry was very competitive. The need for high capacity utilization and the desire to avoid costly line changeovers made long runs of standard items the most desirable business. As a result, most companies offered volume discounts to encourage large orders. From 1968 to 1975, industrywide profit margins declined 44%, reflecting sluggish sales and increased price competition. This trend hurt the small company, which was less able to spread its fixed costs. Raising prices above industry-set norms, however, was dangerous.
Continental tried this in the fall of 1963 with the announcement of a 2% price hike. Other manufacturers refused to follow its lead, and by mid-1964 Continental was back to industry price levels with a considerably reduced market share.
Because of the product’s bulk and weight, transportation was a major factor in a can maker’s cost structure. (One estimate put transportation at 7. 6% of the price of a metal can, with raw materials playing the largest part at 64% and labor following at 14. 4%. ) A manufacturer’s choice of lighter raw materials and plant location could have a large impact on total costs.
Most estimates put the radius of economical distribution for a plant at between 150 and 300 miles. Suppliers and Customers At one time the big U. S. steel companies were the sole suppliers of metallic raw material used by the metal container industry. Can companies, in turn, were the fourth largest consumers of steel products. During the 1960s and 1970s, aluminum—and to a lesser extent, fiber-foil and plastic— suppliers increasingly entered traditional tinplate markets. On the customer side, over 80% of the metal can output was purchased by the major food and beer companies.
Since the can constituted about 45% of the total costs of beverage companies, most had at least two sources of supply. Poor service and uncompetitive prices could be punished by cuts in order size. Because can plants were often set up to supply a particular customer, the loss of a large order from that customer could greatly cut into manufacturing efficiency and company profits. As 3 378-024 Crown Cork and Seal Company, Inc. one can executive caught in the margin squeeze commented, “Sometimes I think the only way out of this is to sell out to U. S. Steel or to buy General Foods. ”
Three major trends had plagued the metal container manufacturers since the early 1960s:
- the continuing threat of self-manufacture;
- the increasing acceptance of other materials such as aluminum, fiber-foil, or plastic for standard tinplate packaging needs;
- the “packaging revolution” leading to new uses and thus new characteristics for containers.
Self-Manufacture In the years 1971 to 1977, there had been a growing trend toward self-manufacture by large can customers, particularly of the low-technology standard items. As shown in Table B, the proportion of “captive” production increased from 18. 2% to 25. % between 1970 and 1976. These increases seemed to come from companies gradually adding their own lines at specific canning locations rather than from full-scale changeovers.
However, the temptation for major can users such as food and beer producers to begin making their own cans was high. As a result of such backward integration, Campbell Soup Company had actually become one of the largest producers of cans in the U. S. The introduction of the two-piece can was expected to dampen the trend toward self-manufacture, since the end users did not possess the technical skills to develop their own two-piece lines.
The greatest threat to the traditional, tin-plated can was the growing popularity of the new, lighter-weight aluminum can. The major producers of this can were the large aluminum companies, led by Reynolds Metals and Aluminum Company of America (Alcoa). Some traditional tin-plated can producers, such as Continental and American, also produced a small proportion of aluminum cans.
From 1970 to 1976 aluminum usage for cans increased, moving up from 11. 6% to 27. 5% of the total metal can market. It was expected to reach a 29% share in 1977. In absolute numbers, steel use remained fairly level while aluminum use tripled in those years (see Figure A). Most of the inroads were made in the beer and soft drink markets, where aluminum held 65% and 31% shares respectively in 1976. Additional gains were expected, as aluminum was known to reduce the problems of flavoring, a major concern of both the brewing and soft drink industries. Aluminum had several other important advantages over tinplate.
In 1976 the stock to manufacture 1,000 12-ounce beverage cans cost $17. 13 using steel and $20. 81 using aluminum. Moreover, “in early 1977, steel producers raised the price of tinplate by only 4. 8%, in contrast to an increase for aluminum can stock of about 9. 7%. [They did this] in an effort to enhance the competitiveness of steel vis-a-vis aluminum.
Some industry observers also expected the gap to widen as the auto companies increased their usage of aluminum and thus drove up aluminum prices. The two-piece tin-plated cans were also considerably stronger than their aluminum counterparts. Other materials. Two other raw materials threatened tinplate as the primary product in making containers: the new paper-and-metal composite called fiber-foil and the growing varieties of plastics. Fiber-foil cans were jointly developed by the R. C. Can Company and Anaconda Aluminum in 1962 for the motor oil market.
They caught on immediately, and by 1977 this composite material was the primary factor in the frozen juice concentrate container market as well. Plastics represented the fastest growing sector of the packaging industry and the principal force in packaging change. While can makers felt little initial effects from the introduction of plastics, they too could suffer if plastic bottles began to replace the cans being used as packaging for carbonated soft drinks. The Packaging Revolution Not only was the traditional package being reshaped and its materials reformulated, but by the 1970s containers also served a new purpose. Starting in the late 1950s the package itself became increasingly important in the marketing of the product it contained. The container was an advertising vehicle, and its features were expected to contribute to total product sales.
This had serious implications for the metal can industry. Although the tin can was functional, aluminum was easier to lithograph and plastic enabled more versatile shapes and designs. Pressure for continuing innovation to enhance marketing meant that companies had to make greater R expenditures in order to explore new materials, different shapes, more convenient tops, and other imaginative ideas with potential consumer appeal. Increasingly, metal can companies would have to contend with the research and marketing strengths of such giant integrated companies as Du Pont, Dow Chemical, Weyerhaeuser, Reynolds, and Alcoa.
In response to the integration of packaging by these major material suppliers, some metal can manufacturers began to invest in their own basic research. In 1963, American announced the start of construction on a research center where investigations in such areas as solid-state physics and electrochemistry might reveal potential sources of new products.
By the late 1960s all three of Crown Cork and Seal’s major competitors had diversified into areas outside the metal container industry. However, in 1977 all three still remained major producers of metal cans. Continental Group Because of the extent of its diversification, Continental changed its name in 1976, making Continental Can only one division of the large conglomerate. Although only 38% of the total company’s sales were in cans, it still held the dominant market share (18. 4%) of the U. S. metal can market. The remainder of Continental’s domestic sales were in forest products (20%) and other plastic and paper packaging materials (9%). In 1969 Continental began focusing its investment spending on foreign and diversified operations.
In 1972, the company took a $120 million after-tax extraordinary loss to cover the closing, realignment, and modernization of its domestic can-making facilities over a three-year period. Of the $120 million loss, close to 70% resulted from fixed asset disposals, pension fund obligations, and severance pay.
By 1976 almost one-third of the company’s revenues came from its overseas operations, which covered 133 foreign countries. Domestic investment went primarily to paper products and the plastic bottle lines. Very little was allocated for the changeover to new two-piece cans. “Crown Cork and Seal Company and the Metal Container Industry,” Can American also reduced its dependence on domestic can manufacture and, even more than Continental, emphasized unrelated product diversification. American competed in the entire packaging area—metal and composite containers, paper, plastic, and laminated products. In 1972, American “decided to shut down, consolidate, or sell operations that had either become obsolete or marginal [which] resulted in an after-tax extraordinary loss of $106 million.
By 1976, 20% of the company’s sales came from consumer products such as household tissues, Dixie paper cups, and Butterick dress patterns. American’s large chemical subsidiary brought in 15% of sales and another 15% came from international sales. Return on sales for the domestic container segment of American’s business had remained stable at about 5% for the last five years. For this period American’s average return on equity (7. 1%) was the lowest of the four major can manufacturers, a result of relatively poor performance in its diversified areas.
National’s attempt to join the trend toward diversification achieved somewhat mixed results. Until 1967 National was almost solely a can producer. After that, through acquisitions the company moved into glass containers, food canning, pet foods, bottle closures, and plastic containers. However, instead of generating future growth opportunities, the expansion into food products proved a drag on company earnings. Pet foods and vegetable canning fared poorly in the 1974–1975 recession years, and the grocery division as a whole suffered a loss in 1976. As a result, National began a stronger overseas program to boost its earnings and investment.
Crown Cork and Seal While its three major competitors turned to diversification, Crown Cork and Seal continued to manufacture primarily metal cans and closures. In 1976 the company derived almost 65% of its sales from tin-plated cans; crowns accounted for 29% of total sales and 35% of profits. The remaining sales were in bottling and canning machinery. In fact, Crown was one of the largest manufacturers of filling equipment in the world. Foreign sales—of crowns primarily—accounted for an increasingly large percentage of total sales (Exhibit 4). In 1976, Crown’s return on sales was almost twice that of its three larger competitors.
Over the previous 10 years Crown’s sales growth was second only to National Can, and Crown was first in profit growth. The following sections describe Crown’s history and strategy. Crown Cork and Seal Company Company History In August 1891 a foreman in a Baltimore machine shop hit upon an idea for a better bottle cap—a round piece of tin-coated steel with a flanged edge and an insert of natural cork. This crowncork top became the main product of a highly successful small venture, the Crown Cork and Seal Company. When the patents ran out, however, competition became severe.
The faltering Crown Cork was bought out in 1927 by a competitor, Charles McManus, who then shook the company back to life, bursting upon the “starchy” firm, as one old timer recalled, “like a heathen in the temple. ” Fortune, in 5 Crown Cork and Seal, Annual Report, 1962, described the turnaround: Under the hunch-playing, paternalistic McManus touch, Crown prospered in the thirties, selling better than half the U. S. and world supply of bottle caps. Even in bleak 1935 the company earned better than 13% on sales of $14 million. Then overconfidence led to McManus’ first big mistake.
He extended Crown’s realm into canmaking. Reasoning soundly that the beer can would catch on, he bought a small Philadelphia can company. But reasoning poorly, he plunged into building one of the world’s largest can plants on Philadelphia’s Erie Avenue. It grew to a million square feet and ran as many as fifty-two lines simultaneously. A nightmare of inefficiency, the plant suffered deepened losses because of the McManus mania for volume. He lured customers by assuming their debts to suppliers and sometimes even cutting prices below costs.
The Philadelphia blunder was to haunt Crown for many years. With all his projects and passion for leadership, McManus had no time or concern for building an organization that could run without him. Neither of his two sons, Charles Jr. and Walter, was suited to command a one-man company, although both had been installed in vice presidents’ offices. Crown’s board was composed of company officers, some of whom were relatives of the boss. The combination of benevolent despotism and nepotism had prevented the rise of promising men in the middle ranks. When McManus died in 1946, the chairmanship and presidency passed to his private secretary, a lawyer named John J. Nagle.
In a fashion peculiar to Baltimore’s family-dominated commerce, the inbred company acquired the settled air of a bank, only too willing to forget it lived by banging out bottle caps. In the muted, elegant offices on Eastern Avenue, relatives and hangers-on assumed that the remote machines would perpetually grind out handsome profits and dividends. In the postwar rush of business, the assumption seemed valid. The family left well enough alone, except to improve upon the late paternalist’s largess. As a starter, Nagle’s salary was raised from $35,000 to $100,000. Officers arrived and departed in a fleet of chauffeured limousines.
Some found novel ways to fill their days. A brother-in-law of the late McManus fell into the habit of making a day-long tour of the junior executives’ offices, appearing at each doorway, whistling softly, and wordlessly moving on. After hours, the corporate good life continued. More than 400 dining and country club memberships were spread through the upper echelons. A would-be visitor to the St. Louis plant recalls being met at the airport, whisked to a country club for drinks, lunch, cocktails, and dinner, and then being returned to the airport with apologies and promises of a look at the plant “next time.
Up to the early 1950s, Crown ran on a combination of McManus momentum and the last vestiges of pride of increasingly demoralized middle managers, who were both powerless to decide and unable to force decisions from above. Dividends were maintained at the expense of investment in new plant; what investment there was, was mostly uninspired.
Crown Cork and Seal Company, Inc. 378-024 share of U. S. bottle cap sales [in the early 1950s] slipped to under 33%. In 1952 the chaotic can division had such substantial losses that the company was finally moved to act. The board omitted a quarterly dividend. That brought the widow McManus, alarmed, to the president’s office. President Nagle counseled her to be patient and leave matters to him.
Matters soon grew worse. A disastrous attempt at expansion into plastics followed a ludicrous diversification into metal bird cages. Then in 1954 a reorganization, billed to solve all problems, was begun. The plan was modeled after Continental’s decentralized line and staff. The additional personnel and expense were staggering and Crown’s margins continued to dip.
One observer noted, “The new suit of clothes, cut for a giant, hung on Crown like an outsized shroud. ” The end seemed near. John Connelly Arrives John Connelly was the son of a Philadelphia blacksmith who, after working his way up as a container salesman, formed his own company to produce paper boxes. His interest in Crown began when he was rebuffed by the post-McManus management, which “refused to take a chance” on a small supplier like Connelly.
Fortune described Connelly’s takeover: By 1955, when Crown’s distress had become evident to Connelly, he asked a Wall Street friend, Robert Drummond, what he thought could be done with the company. I wrote him a three-page letter,” Drummond recalls, “and John telephoned to say he’d thrown it into the wastebasket, which I doubted. He said, ‘If you can’t put it into one sentence you don’t understand the situation. ’” Drummond tried again and boiled it down to this formula: “If you can get sales to $150 million and earn 4% net after taxes and all charges, meanwhile reducing the common to one million shares, you’ll earn $6 a share and the stock will be worth $90. ”
That was good enough for Connelly. He began buying stock and in November 1956 was asked to be an outside director—a desperate move for the ailing company. The stranger found the parlour stuffy. “Those first few meetings,” says Connelly, “were like something out of Executive Suite. I’d ask a question. There would be dead silence. I’d make a motion to discuss something. Nobody would second it, and the motion would die. ” It dawned on Connelly that the insiders knew even less about Crown than he did. He toured the plants—something no major executive had done in years. At one plant a foreman was his guide. His rich bass graced the company glee club, and he insisted on singing as they walked. Connelly finally told him to shut up and sit down.
The warning system silenced, Connelly went on alone and found workers playing cards and sleeping. Some were building a bar for an executive. At another plant he sat in on a meeting of a dozen managers and executives, ostensibly called to discuss the problem posed by customers’ complaints about poor quality and delivery. The fault, it seemed, lay with the customers themselves—how unreasonable they were to dispute Crown’s traditional tolerance of a “fair” number of defective crowns in every shipment; how carping they were to complain about delays arising from production foul-ups, union troubles, flat tires, and other acts of Ibid.
Connelly kept silent until a pause signaled the consensus, then he confessed himself utterly amazed. He hadn’t quite known what to make of Crown, he said, but now he knew it was something truly unique in his business life—a company where the customer was always wrong. “This attitude,” he told the startled executives, “is the worst thing I’ve ever seen. No one here seems to realize this company is in business to make money. ”
The Crisis In April 1957, Crown Cork and Seal was on the verge of bankruptcy. The 1956 loss was $241,000 after preferred dividends, and 1957’s promised to be worse. Bankers Trust Company had called from New York to announce the withdrawal of their $2. 5 million line of credit. It seemed that all that was left was to write the company’s obituary when John Connelly took over the presidency. His rescue plan was simple—as he called it, ”just common sense. ” Connelly’s first move was to pare down the organization. Paternalism ended in a blizzard of pink slips. The headquarters staff was cut from 160 to 80. Included in the departures were 11 vice presidents.
The company returned to a simple functional organization and in 20 months Crown had eliminated 1,647 jobs or 24% of the payroll. As part of the company’s reorganization, Connelly discarded divisional accounting practices; at the same time he eliminated the divisional line and staff concept. Except for one accountant maintained at each plant location, all accounting and cost control was performed at the corporate level; the corporate accounting staff occupied one-half the space used by the headquarters group. In addition, the central research and development facility was disbanded.
The second step was to make each plant manager totally responsible for plant profitability, including any allocated costs. (All company overhead, estimated at 5% of sales, was allocated to the plant level. ) Previously, plant managers had been responsible only for controllable expenses at the plant level. Under the new system, the plant manager was responsible even for the profits on each product manufactured in the plant. Although the plant manager’s compensation was not tied directly to profit performance, one senior executive pointed out that the manager was “certainly rewarded on the basis of that figure.
The next step was to slow production to a halt and liquidate $7 million in inventory. By midJuly Crown paid off the banks. Planning for the future, Connelly developed control systems. He introduced sales forecasting, dovetailed with new production and inventory controls. This move took control away from the plant managers, who were no longer able to avoid layoffs by dumping excess products into inventory. By the end of 1957 Crown had, in one observer’s words, “climbed out of the coffin and was sprinting. ” Between 1956 and 1961 sales increased from $115 million to $176 million, and profits soared.
After 1961 the company showed a 15. 45% increase in sales and 14% in profits on the average every year. However, Connelly was not satisfied simply with short-term reorganizations of the existing company. By 1960, Crown Cork and Seal had adopted a strategy that it would follow for at least the next 15 years. Crown’s Strategy Products and Markets Recognizing Crown’s position as a smaller producer in an industry dominated by giants,11 Connelly sought to develop a product line built around Crown’s traditional strengths in metal forming and fabrication.
He chose to return to the area he knew best—tin-plated cans and crowns— and to concentrate on specialized uses and international markets. A dramatic illustration of Connelly’s commitment to this strategy occurred in the early 1960s. In 1960 Crown held over 50% of the market for motor oil cans. In 1962 R. C. Can and Anaconda Aluminum jointly developed fiber-foil cans for motor oil, which were approximately 20% lighter and 15% cheaper than the metal cans then in use. Crown’s management decided not to continue to compete in this market and soon lost its entire market share.
In the early 1960s Connelly singled out two specific applications in the domestic market: beverage cans, and the growing aerosol market. These applications were called “hard to hold,” because the cans required special characteristics either to contain the product under pressure or to avoid affecting taste. The cans had to be filled in high-speed lines.
In the mid-1960s, growth in demand for soft drink and beer cans was more than triple that for traditional food cans. Crown had an early advantage in aerosols. In 1938 McManus had tooled up for a strongwalled, seamless beer can, which was rejected by brewers as too xpensive. In 1946 it was dusted off and equipped with a valve to make the industry’s first aerosol container.
However, little emphasis was put on the line until Connelly spotted high growth potential in the mid-1960s. In addition to the specialized product line, Connelly’s strategy was based on two geographic thrusts: expand to national distribution in the U. S. and invest heavily abroad. The domestic expansion was linked to Crown’s manufacturing reorganization; plants were spread out across the country to reduce transportation costs and to be nearer customers.
Crown was unusual in that it set up no plants to service a single customer. Instead, Crown concentrated on providing products for a number of customers near their plants. Also, Crown developed its lines totally for the production of tin-plated cans, not for aluminum. In international markets Crown invested heavily in undeveloped nations, first with crowns and then with cans as packaged foods became more widely accepted. Manufacturing When Connelly took over in 1957, Crown had perhaps the most outmoded and inefficient production facilities in the industry.
In the post-McManus regime, dividends had taken precedence over new investment, and old machinery combined with the cumbersome Philadelphia plant had given Crown very high production and transportation costs. Soon after he gained control, Connelly took drastic action, closing down the Philadelphia facility and investing heavily in new and geographically dispersed plants. From 1958 to 1963 the company spent almost $82 million on relocation and new facilities. By 1976, Crown had 26 domestic plant locations versus 9 in 1955.
The plants were small (usually under 10 lines versus 50 in the old Philadelphia complex) and were located close to the customer rather than the raw material source. 11 In 1956 Crown’s sales were $115 million compared with $772 million for American and $1 billion for Continental. 11 378-024 Crown Cork and Seal Company, Inc. Crown emphasized flexibility and quick response to customer needs. One officer claimed that the key to the can industry was “the fact that nobody stores cans” and when customers need them, “they want them in a hurry and on time. . . . Fast answers get customers.
To deal with rush orders and special requests, Crown made a heavy investment in additional lines, which were maintained in set-up condition. Marketing/Service Crown’s sales force, although smaller than American’s or Continental’s, kept close ties with customers and emphasized Crown’s ability to provide technical assistance and specific problem solving at the customer’s plant. This was backed by quick manufacturing responses and Connelly’s policy that, from the top down, the customer was always right. As Fortune described it: At Crown, all customers’ gripes go to John Connelly, who is still the company’s best salesman.
A visitor recalls being in his office when a complaint came through from the manager of a Florida citrus-packing plant. Connelly assured him the problem would be taken care of immediately, then casually remarked that he planned to be in Florida the next day. Would the plant manager join him for dinner? He would indeed. As Crown’s president put the telephone down, his visitor said that he hadn’t realized Connelly was planning to go to Florida. “Neither did I,” confessed Connelly, “until I began talking. ”
Research and Development Crown’s R&D focused on enhancing the existing product line. According to Connelly, “We are not truly pioneers. Our philosophy is not to spend a great deal of money for basic research. However, we do have tremendous skills in die forming and metal fabrication, and we can move to adapt to the customer’s needs faster than anyone else in the industry. ”
Research teams worked closely with the sales force, often on specific customer requests. For example, a study of the most efficient plant layout for a food packer or the redesign of a dust cap for the aerosol packager were not unusual projects. Crown tried to stay away from basic research and “all the frills of an R&D section of highclass, ivory-towered scientists. Explained John Luviano, the company’s new president: There is a tremendous asset inherent in being second, especially in the face of the everchanging state of flux you find in this industry. You try to let others take the risks and make the mistakes as the big discoveries often flop initially due to something unforeseen in the original analysis. But somebody else, learning from the innovator’s heartaches, prospers by the refinement.
This sequence was precisely what happened with the two-piece drawn and ironed can. The original concept was developed in the aluminum industry by Reynolds and Alcoa in the late 1960s. Realizing the can’s potential, Crown, in connection with a major steel producer, refined the concept for use with tinplate. Because of Crown’s small plant manufacturing structure and Connelly’s willingness to move fast, Crown was able to beat its competitors into two-piece can production.