That’s entertainment

This issue marks the first time that Lightwave has moved its fearless Top 5 company selections into the magazine proper. (The first two Top 5 attempts appeared in our annual Optical Engineering Sourcebook, which this year is being replaced by a digitally enhanced Buyer’s Guide-watch your e-mail inboxes next month.) As we explain in the article, the members of the Lightwave editorial staff determine which companies we like via a combination of personal observations, interaction with a wide range of companies, input from analysts, and a little reading of tea leaves.

Note that I said “reading,” not “smoking.”

However, trying to figure out the proper combination of these factors inevitably implies an answer to the fundamental question of what makes a company a true leader in its field. It seems to me that we can look to the entertainment world for a few ideas.

How well a company is doing financially certainly has to count. A vendor with a neat technology that no one wants to buy is like a critically acclaimed television show that languishes at the bottom of the ratings. The innovation can be applauded, but the overall impact is minimal. To take the television metaphor further, companies can have broad success by appealing to the lowest common denominator, perhaps in the form of a broad portfolio of products that don’t necessarily represent the cutting edge of technology in every instance but that fill some requirements superbly and a wide range of needs well enough. However, as other companies attempt to copy that formula, the appeal is diluted. Thus, just as critics question how many reality shows or trumped-up competitions (“Macramé with the Stars,” anyone?) the public will watch, financial and market analysts wonder how many “one-stop shop” companies the industry will support.

Therefore, most companies have to choose a different path to success. As our rankings describe, we think that several firms have found the right track by examining their skill sets and sticking with what they do best. They can be compared to some of the sleeper hits of any movie season. They don’t have the big budgets of the would-be summer blockbusters, but they don’t have to match the ticket sales of the blockbusters to make money, either. In fact, in terms of profit percentage, you can always find mid-range motion pictures that outperform many of the big-ticket offerings from the major studios.

And, of course, there will always be startups or boutique companies that fill niches that are too small for the bigger players, but require attention nonetheless. Like art-house films or independent-label music acts, they don’t make a lot of money, but they fulfill their business model and meet important needs in the market while promising growth in the future with a bit more maturity and development.

The last several years, the focus among companies large and small, from component suppliers to systems developers, has been on paring costs and reorganizing processes and infrastructures to meet new market realities. This has been particularly true for Western optical components firms. Most companies should complete the majority of their restructurings this year, which means their focus will begin to change. The goal will no longer be just to figure out a way to survive, to “right-size” for the current shape of the industry. Now companies must determine how to move forward to meet requirements other than price, to address needs in new, more efficient ways. They must determine whether the assumptions they held about themselves in the time before manufacturing was transferred to Asia, facilities were consolidated, and R&D was slashed still hold. What kind of companies are they now and what kind of companies do they want to be? How will they entertain the market?

We open our Top 5 article by suggesting that a brighter future awaits the optical communications industry. I firmly believe this is true. But it’s up to the management of the companies involved in this field to realize that just cutting production costs and lowering operating expenses isn’t enough-it’s just a first step. Once most of your competitors have restructured the same way you have, the playing field is once again leveled.

Now what are you going to do to amuse us?

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