II-VI was founded 50 years ago as a specialized materials company. Today, as Coherent, it has technology platforms in multiple verticals and end markets. Coherent’s chair and CEO explains how it happened.

Chuck Mattera, chair and CEO of Coherent, formerly II-VI, has spent a lifetime building businesses by harnessing breakthrough technologies. At Coherent, he has championed a strategy focused on acquisitions to achieve scale and deliver innovations in the industrial, communications, electronics, and instrumentation markets. McKinsey’s André Andonian and Abhijit Mahindroo sat down with him to discuss the lessons he has learned and his plans for the future. An edited version of the conversation follows.

André Andonian: Chuck, you spent almost equal amounts of time at AT&T Bell Laboratories and then II-VI, now Coherent. What are the biggest lessons you’ve learned?

Chuck Mattera: I started at Bell in advanced materials and the semiconductor device laboratory, with a great interest in making devices that would allow people to get closer to each other. It was the largest industrial research lab then, with more than 25,000 people and 15,000 PhDs. There was expertise in basically every important technology. I learned a lot about culture, organization, people, technology, and business at such a large company. So when I joined II-VI, which was a totally different scale, I was interested in how innovation happened in a small one.

Innovation in a large company allows lots of technology options to be advanced. And integrating those fundamental technologies enabled it to bring breakthrough solutions to market and scale them quickly.

At Coherent, over the past 20 years, we have acquired more than 20 companies. We have learned a lot about integrating technologies and organizing management and talent. We also learned how to incorporate innovation, curiosity, and imagination into a product portfolio based on advanced materials.

Abhijit Mahindroo: II-VI began as a specialized materials company and now, as Coherent, has many technology platforms in multiple verticals and end markets. How did this happen?

Chuck Mattera: It happened through innovation, imagination, and an aspiration to enable the world to be safer, healthier, closer, and more efficient—which, in fact, is our mission. When I joined, the company’s core activity was making CO2 laser optics and materials for components for cutting and welding steel. But we set out to become a global company through acquisition and investment. More than 20 acquisitions later, we are a $5 billion company.

Abhijit Mahindroo: Coherent is a unique company dealing with photons and electrons. Why is this important?

Chuck Mattera: The foundation of all our businesses lies in advanced materials. Electrons and photons are fundamental particles of the universe. And for a materials company that delivers, among other things, lasers and electronics, they are essential to everything we do. At the end of the day, the most basic physical processes we use and harness involve generating and collecting photons. These come about by way of very specialized physical processes within the atom. Likewise, electrons play an important role in imparting physical properties to our semiconductor materials and systems, including the laser, but also semiconductor-powered electronics.

Abhijit Mahindroo: Coherent plays in the value chain from components and modules to subsystems and potentially even to systems. At the same time, its businesses serve both internal and external customers. What drives this strategy?

Chuck Mattera: It is a great question because people often ask about our vertically integrated strategy. When we think about investments, we ask ourselves some basic questions: One, what is our value proposition? Two, what core competencies do we have or need to fulfill that value proposition? And three, what are our sources of sustainable competitive advantage? Building a vertically integrated business on a materials foundation has allowed us to expand the range and complexity of our offerings—and to anticipate customer requirements and incorporate them into our products.
 

"When we think about investments, we ask ourselves some basic questions: One, what is our value proposition? Two, what core competencies do we have or need to fulfill that value proposition? And three, what are our sources of sustainable competitive advantage?"

In moving from materials to components, to subsystems, and now with Coherent, these four levels of integration mean we can manage the value chain to deliver to our customers exactly what they need.

A vertically integrated model of serving businesses allows us to accelerate time to market and make efficient use of the assets. As a manufacturing company, our investments in R&D and manufacturing must make a decent return. So it is like a symphony inside the company as we grow. Conducting and synchronizing that symphony is partly how we compete and why it is difficult to keep up with us.

André Andonian: Building on this symphony idea, you are continuously expanding the orchestra and the types of music that Coherent can produce. How do you develop this strategy? And how do you capture the full potential of these transactions?

Chuck Mattera: The process for the strategy involves a lot of people. It starts with a management decision to invest in markets that will sustain the company’s growth, allow us to define a leadership position, and continue to generate long-term stakeholder value. It involves all our people, our investors, the communities that we operate in, and our aspiration to change the world.

Our board has been engaged in a review process since the company was founded more than 50 years ago. Their process of questioning, challenging, and refining has served the company extremely well. So, strategy starts with deciding what to do and what not to do. And those have been important moments for us, including when we had to step back and ask ourselves, “What aspects of our strategy are not working?”

André Andonian: Coherent operates in many different countries. How do you ensure there is alignment between leaders and employees? And how do you create such a strong culture?

Chuck Mattera: We operate today in 18 countries and 78 locations. But I think the transparency of our purpose, mission, and values has generated a deep foundation of trust. That trust has allowed us to move faster than our competitors in deciding and executing.


"We operate today in 18 countries and 78 locations. But I think the transparency of our purpose, mission, and values has generated a deep foundation of trust. That trust has allowed us to move faster than our competitors in deciding and executing."

Abhijit Mahindroo: Over the past two years, tremendous uncertainty and geopolitical risk have buffeted the global economy. How can multinational corporations think about navigating such uncertainty?

Chuck Mattera: Our willingness to focus on a bold path forward has always challenged us to assess risk and put a risk management framework in place. I think our diversification, global footprint, and ability to communicate have created a strong foundation of trust that has allowed us to operate in the face of the pandemic and other challenges. Also, we are helped by having a diversified global leadership team of people who have been willing to stay with us.

Abhijit Mahindroo: One of the biggest challenges of our times is sustainability. How does Coherent contribute to addressing this?

Chuck Mattera: Our vision is a world transformed through innovative materials vital to the sustainability of future generations. We are a leading supplier of communications, computing, and consumer electronics, and these technologies have brought the world together, held it together, and allowed it to become more efficient. In addition, we have set our organization up to deliver long-term sustainable value, including in the electrification of transportation, where we are a leading innovator in silicon carbide power electronics.

Abhijit Mahindroo: How do you retain personal and institutional creativity and that of the institution over such a long period?

Chuck Mattera: I have to do more and more through other people. I focus on inspiring, sparking, challenging, establishing, and encouraging people to move quickly, avoid hidden biases, and fail early and often. My passion for watching people learn and grow has only deepened as the company has expanded.

Abhijit Mahindroo: Talent is a major differentiator for long-term success. What approach do you take to attracting, retaining, and developing the best talent for Coherent?

Chuck Mattera: At AT&T Bell Laboratories, I learned that high-tech people in a high-tech company, as well as enabling functions, have two things in common: they want exciting and challenging jobs and a manager, a leader, or a group of people around them who know more than they do and can help them. Their autonomy gives them a sense of purpose and allows them to contribute to the world and realize their potential with the necessary assets and resources. And that becomes a magnet for people who want to join us because our platform is an exciting place to learn and grow.

Also, there is a lot that we know we do not know. But one thing I discovered is that humility should ground the company’s culture.

André Andonian: What advice would you give a young professional just setting out in this field?

Chuck Mattera: When I started, I thought about it as a lifetime of learning. It is really important to be around people who are smart, hardworking, nice, patient, and who help us overcome our own gaps and shortcomings.

I think the most important behaviors are the willingness to continue to ask questions, read the literature, study what people have already considered, and embrace being together, collaborating, and learning from each other.

André Andonian: What has kept you excited during your tenure at II-VI and Coherent?

Chuck Mattera: When we recently completed a large acquisition, we changed up the values of the acquired company. I realized how important values are and that we are a little different. Our values are integrity, collaboration, accountability, respect, and enthusiasm. And taken together, in that order, they have allowed our employees to declare “I care” as the primary reason for them to come to the company, stay with us, and help change the world.