You may not recognize Celestica’s name, but odds are your digital life runs through them. Whether you’re streaming a video, backing up your phone, or accessing the cloud, the underlying infrastructure was likely designed, assembled, or managed by Celestica. The company is one of the world’s largest electronics manufacturing service providers, trusted by global tech giants, aerospace firms, healthcare leaders, and industrial innovators.
Yet for much of its history, Celestica was a hidden giant: essential but trapped. Born inside IBM as a captive manufacturing arm, it spent 75 years as a cost center. After spinning out in the 1990s, it began serving external customers, but the operating model stayed fixed. Win high-volume contracts. Compete on price. Squeeze efficiency. Survive on razor-thin margins.
By 2019, the consequences of this approach were clear. Celestica had stalled. Revenues flatlined around $5 billion. Margins hovered at an anemic 4–5%. Some analysts encouraged investors to “take a pass.” The company’s playbook, which was optimized for cost and volume, had become a strategic dead end.
But just five years later, the picture had radically changed. Celestica’s revenues nearly doubled, crossing $10 billion. Operating margins climbed to 8%. Analysts once skeptical were citing “sustained momentum” and praising the company’s renewed strength.
What changed?
Celestica broke ranks with its past. It didn’t merely pivot but instead launched a full-scale revolt against the transactional mindset that had constrained it for decades. At the heart of this transformation was a deceptively simple yet radical concept: Customer Lifetime Value (CLV).
CLV: A New Compass
When Alok Agrawal joined Celestica as Vice President and Head of Corporate Strategy in 2019, he brought a disruptive thesis: in a commoditized industry, true differentiation doesn’t come from cost or scale, but from the quality and duration of customer relationships.
He reinforced CLV as Celestica’s strategic north star. This metric measures the total long-term value a customer delivers, not just this quarter’s revenue. CLV forced a fundamental shift in mindset across the organization, moving the focus from short-term transactions and operational efficiency to long-term relationships and strategic resource allocation. For Celestica, this meant asking new questions:
- How profitable will this customer be over the next 5–10 years?
- How much factory capacity, engineering talent, and executive attention will they consume?
- What would be the opportunity cost of saying yes to the wrong account?
This was a cultural revolution. CLV wasn’t a dashboard metric. It was a way of seeing the world differently.
The Old Guard: Transactional Thinking
Until this point, Celestica’s model was built on tactical optimization:
- The strategic emphasis was on cost reduction, manufacturing scale, and supply chain efficiency.
- Customers were largely Original Equipment Manufacturers (OEMs) pushing for lower prices on commoditized builds.
- Revenue was transaction-driven, project-based, and short-term.
- Lifecycle services, aftermarket support, and recurring revenue played little role in how the business defined success.
This model kept factories busy but did little to create long-term value.
The Inflection Point
Celestica’s pivot wasn’t just philosophical: it was structural. Within its Connectivity & Cloud Solutions (CCS) segment, the company launched Hardware Platform Solutions (HPS), an engineering-led initiative that bundled hardware, software, and lifecycle services into scalable platforms for cloud and hyperscale infrastructure.
This move elevated Celestica’s role from contract manufacturer to strategic enabler. It also marked a sharp break from project-based execution, aligning perfectly with the CLV playbook. Instead of chasing one-off builds, Celestica began embedding itself in its customers’ long-term roadmaps by providing continuity, integration, and high-margin recurring value. HPS didn’t just support the CLV strategy; it operationalized it.
The Cisco Conundrum
CLV forced Celestica to ask hard questions, and none more difficult than the one about Cisco.
For years, Cisco Systems was Celestica’s largest customer, accounting for nearly 20% of total revenue. The volume was reliable, but the economics were eroding. Margins were razor-thin. Cisco demanded cost concessions. The relationship consumed vast internal resources.
The strategic question became: In a customer-favored industry, where large accounts are difficult to win and even harder to walk away from, how do you know when it’s time to exit a relationship that no longer delivers long-term value?
Yet when viewed through the lens of CLV, the data told a different story. The lifetime value of Cisco was low. After factoring in margin pressure, capacity tie-up, and opportunity cost, the value was perhaps even negative.
The strategic question sharpened: Is it better to keep Cisco … or to reinvest that capacity in a hyperscaler like Google, Meta, or Amazon, whose CLV profile might be two to three times higher by year five or six?
Celestica chose the bold path. Slowly, deliberately, it reallocated resources away from low-value legacy accounts and toward customers with long-term strategic alignment.
Betting on Hyperscalers and High-Value Sectors
Celestica’s pivot toward hyperscalers — cloud and data center leaders like Meta and Google — aligned perfectly with CLV principles. These customers:
- Valued engineering quality and delivery speed, not just price.
- Required long-term infrastructure buildouts, creating visibility for years.
- Sought collaborative partnerships that extended beyond the manufacturing floor.
At the same time, Celestica’s Advanced Technology Solutions (ATS) expanded into aerospace, health tech, smart energy, and capital equipment, industries where contracts lasted years, product complexity was high, and margins were defensible.
HPS became a cornerstone of stickiness: combining hardware platforms with software, integration, and ongoing support which translated into repeatable, predictable revenue.
Between 2020 and 2022, Celestica’s ATS segment grew at a 19% compound annual rate. By 2024, recurring lifecycle services were embedded into the company’s identity. Strategy updates featured phrases like:
- “Delivering value-added solutions across the product lifecycle”
- “Driving sustained margin expansion through recurring service content”
CLV had gone from idea to infrastructure.
Building New Muscles
None of this happened without internal resistance.
CLV required Celestica to rewire how success was measured:
- Sales teams had to walk away from tempting short-term deals.
- Product leaders had to align roadmaps with lifecycle potential.
- Operations teams had to think in terms of multi-year commitments, not just throughput.
- Investors had to be shown that lower revenue today could mean stronger returns tomorrow.
It’s not unlike a personal health transformation. The formula of consuming fewer calories than you burn is simple. But success requires daily discipline, new habits, and the courage to say no to old indulgences. CLV is the same: easy to understand, hard to live.
The Results
By 2024, Agrawal was named CSO and Celestica’s revolution was undeniable. Its bold, CLV-driven transformation was profound. Years of disciplined execution and tough trade-offs reshaped the company’s trajectory, turning a philosophy of long-term value into financial performance.
- Revenue nearly doubled, from $5B to over $10B.
- Operating margins expanded from 5% to 8%.
- High-CLV sectors became core contributors to growth.
- The company evolved from a transactional builder to a strategic lifecycle partner.
Celestica was no longer just managing orders. It was managing long-term customer value.
The Strategic Takeaway for C-Suites
Celestica’s story offers a masterclass in strategic reinvention. It reminds us that:
- CLV is not a marketing metric; it’s a capital allocation tool.
- Capacity is finite and must be deployed where returns are highest.
- Walking away from revenue can be the most courageous and lucrative decision a company makes.
- Success compounds if you’re measuring the right thing.
For executives staring down inflection points, such as being trapped by legacy revenue, pressed for growth, and unsure where to place the next bold bet, Celestica offers more than a case study. It offers proof. Proof that with the right metrics, the right mindset, and the courage to walk away from comfortable but low-value relationships, a company can rewrite its trajectory.
At Celestica, the new strategy didn’t just coexist with the old. It systematically pushed it out, replacing volume-driven habits with value-driven discipline, and transforming the entire organization in the process.
CLV doesn’t just forecast the future. It forces the future by turning every customer decision into a strategic one and transforming short-term trade-offs into long-term advantage.
To learn more about how Customer Lifetime Value can reshape strategy, growth, and capital decisions, visit Outthinker.com.