Theory of Constraints Handbook - James Cox Iii [334]
The company had been searching for new applications for solar panels, including solar-powered refrigeration and similarly powered water pumping installations, but none had demand that would match First Solar’s growth objectives. As luck would have it, two events on the other side of the world were about to change First Solar’s destiny forever.
The German federal government introduced legislation to provide financial incentive for the use of renewable energy. This triggered extraordinary interest and growth in the use of renewable energy, including photovoltaics (PV), just as First Solar’s low cost, high volume manufacturing process was coming to life.
The second event was the demise of Antec Solar after multiple bankruptcies. That company had been the only other solar panel manufacturer using CdTe as its semiconductor material. That left First Solar as the only company able to manufacture low-cost solar modules in large volumes. Trade press banner headlines described First Solar as “The Last Man Standing,” predicting that the CdTe technology was all but dead.
This helped detract potential competitors from developing the same technology, opening up a precious window of opportunity where First Solar could perfect its low-cost, highly automated manufacturing technology.
With the advent of the renewable energy feed-in tariff, a number of project development companies also emerged in Germany. They found the large-scale project development opportunities, and coordinated the finance, site permitting, and construction. Their entrepreneurial, high-risk culture meshed well with that of First Solar, and First Solar forged close ties with key players to secure a strong foothold in the nascent market.
Throughout the period of torrid growth, Mike Ahearn steered the corporate strategy by three simple rules:
1. Set goals that were clear, measurable, and challenging.
2. Systematically identify and remove constraints that prevent the company from achieving those goals.
3. Drive execution excellence.
This simple, but by no means easy approach had a profound impact. It resulted in the exponential growth of annual manufacturing capacity from 25 MW in 2005 to more than 1000 MW in 2009, a 40-fold increase in four years.
The increase in capacity was matched by a commensurate gain in output as shown in Fig. 16-15. The leftmost vertical axis represents annual module production, while the rightmost vertical axis represents module efficiency. The horizontal axis is the period from 2001 to 2007.
Mike Ahearn also re-engaged Jim Nolan, the stalwart VP of Operations from the early days, appointing him to the First Solar Board of Directors to secure access to his deep knowledge and understanding of the company. Throughout this time, John Walton remained a committed provider of capital, investing some $165 million up to the IPO in November 2005. That investment turned into a public company with a market capitalization of some $12 billion.
By 2009, sales had grown to $1.2 billion and net profit had grown nearly 10-fold. The First Solar management team gained the respect of Wall Street, with its enviable record of delivering on its promises. One analyst wrote: “I have gained much more appreciation for the caliber of First Solar’s management team. This company has executed at an extremely high level and is well prepared to face future challenges.”
One Merrill Lynch investment analyst figured out what was really contributing to this enviable track record. In an investor note dated June 2009, he wrote:
Corporate philosophy revealed
Mixed in with the roadmaps on cost/watt and conversion efficiency at the analyst meeting were telling indications of First Solar’s business approach. Although financial