Corporate Entrepreneurship

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Corporate Entrepreneurship

• Salvatore Sciascia
• 23/05/2003

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Section 1 The concept of Corporate
Entrepreneurship
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C.E. as action Entrepreneurship within existing
organizations
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The field of Entrepreneurship

• The scholarly examination of how, by whom, and
  with what effects opportunities to create future
  goods and services are discovered, evaluated and
  exploited.
• Consequently the field involves the study of
• sources of opportunities
• the process of discovery, evaluation and
  exploitation of opportunities
• and the set of individuals who discover, evaluate
  and exploit them
• (Shane and Venkatamaran, 2000)

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Corporate Entrepreneurship

• Strategic Renewal corporate entrepreneurial
  efforts that result in significant changes in an
  organization's strategy and structure
• Corporate Venturing corporate entrepreneurial
  efforts that lead to the creation of new business
  organizations within the corporate organization
• The concepts both suggest changes in the strategy
  and structure of an existing corporation, which
  may involve innovation for the industry.

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Independent Entrepreneurship (strictu sensu)
Strategic Renewal
New for the market
Internal Venturing
I
II
INITIATIVE
Strategic Renewal
Start-up
Old for the market
Internal Venturing
III
IV
Whithin an existing organization
Outside any existing organization
CONTEXT
Independent Entrepreneurship (latu sensu)
Corporate Entrepreneurship (latu sensu)
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Designs for Internal Venturing
Special Business Unit
Independent Business Unit
Complete Spin off
Operational Relatedness
New Department
New Venture Division
Contracting
Integration
Micro new venture department
Nurturing and Contracting
Strategic Importance
(Burgelman, 1983)
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Types of Strategic Renewal
Rejuvenating Innovation
Leadership Innovation
Degree of Industry Change
Catch up Change
Kaizen
Degree of Internal Change
(Baden-Fuller, 1995)
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The capacity to change
Capacity to change
Leadership
Rejuvenating
Catch up
(Baden-Fuller, 1995)
Time
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C.E. as strategic management approach
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Between two fields
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Competition has a new meaning

• Competition as positioning (outside-in)
• Competition as dominating (inside-out)
• Competition as innovating

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The entrepreneurial orientation
(Miller, 1983)
Innovation
Proactiveness
Risk taking
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The entrepreneurial continuum
(Stevenson Gumpert, 1985)
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Promoter Vs Trustee in Strategic Orientation

• Where is the opportunity?
• What resources do I need to capitalize on it?
• What structure is appropriate?

• What resources do I control?
• What structure determines our organizations
  relationship to its mkt?
• What opportunity is appropriate?

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A contextual model
(Burgelman, 1983)
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A new Business Idea
Competitive system
WHO
Niche/segment
Clients
Stakeholders
consonance
consonance
Normanns Business Idea
WHAT
HOW
Offered perspectives/ required contributions
Firms structure
consonance
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Behind the Business Idea...
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the Underlying Strategic Orientation
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Section 2 Cases
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Modafil - Bottega Verde
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Case discussion

• Wich are the main events in the history of
  Modafil?
• Describe Bottega Verde B.I. before and after the
  acquisition by Modafil.
• What is Modafil U.S.O.?
• Which were the tension determinants that brought
  Modafil to grow?
• Which role has the knowledge played within the
  entrepreneurial process?

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1960. Modafil is established as traditional wool
mill
1965. Modafil starts mail-order of knitting wool
Main events
1967. Euronova is established as mail-order
company with a catalogue of miscellaneous products
1971-78. Euronova holds a catalogue of cosmetic
products Miss Beauté
1973. Modafil abandons wool production, to focus
on mail-order sale of knitting wool
1987. Mondoffice is established, focusing on
mail-order sale of office furniture
1989-92. Euronova is sold to the German group
Otto Versand. Non-competition agreement excluding
cosmetics.
1991. Within Modafil, a catalogue with household
linen is started (Ricami Esclusivi)
1992. Bottega Verde is bought from Mr. Morriconi.
It is active in mail-order sale of cosmetics,
purchased from outside contractors.
1997-99. Mondoffice is sold to a foreign
multinational
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WHO
Competitive system
1st B.I. (1)

• Increase of sales in volume
• Predominance of traditional distribution channels
• General tendency towards complex cosmetics
• Absence of competitors in mail-order distribution
  channel
• Small, weak Italian competitors (e.g.,
  LErbolario)
• Few large European competitors (e.g., Yves
  Rocher)
• Common practice of outsourcing production

WHAT
Product system

• Average quality (compared to competitors)
• Natural-products, Herborist-like image
• Average/high price (compared to competitors)
• Risk of stock-breaks
• Absence of promotions and discounts
• Old fashioned catalogues

HOW
Structure

• Randomly-developed addresses file
• Outsourcing of production (2-3 small suppliers)
• Product-formulas developed by suppliers
• In-house made catalogues
• Store in Pienza
• 3 employees for packaging 1 store salesperson
• Casual help from the 2 children

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Stakeholders

• Relatives (1 son, 1 daughter)
• Bank
• 4 Employees

1st B.I. (2)
? Offered perspectives/ ? required contributions
Structure (1981-92)
? Limited growth and development perspectives,
due to a business idea stemming from the mere
need to survive and have fun ? Unspecific
required contribution ? Flexibility, due to
hectic business activity and chaotic organization
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Competitive system
WHO

• Stagnation of sales in volume
• Democratization of cosmetic products
• Tendency towards natural cosmetics
• Increase in modern-distribution market share
• Decline or stagnation of some traditional
  distribution channels
• Increasing request for quality-control in
  production
• Absence of competitors in mail-order distribution
  channel
• Small, weak Italian competitors (e.g.,
  LErbolario)
• Few large European competitors (e.g., Yves
  Rocher)
• Common practice of outsourcing production

2nd B.I. (1)
Structure
HOW

• Addresses file (built in 30 years )
• In-house made catalogues
• RD laboratory
• Employees experienced in mail-order sales
• Naj-Oleari brand (for kickers, i.e., gifts)
• Call center in Pienza (75 part-time employees)
• Consultants (product development, raw materials,
  quality control, plant layout, information
  system, MKTG policies)
• Pavia University (Doctor Berardesca,
  dermathologist) consultants for live
  dermatological tests.
• Substantial financial resources (from Euronova
  sell-off)
• After 1994
• Chemistry and micro-biology laboratories
• Property production plant

WHAT
Product system

• Average quality (compared to competitors)
• Chemically and dermatologically tested products
• Low price (compared to competitors)
• Customer-tailored promotions
• Frequent addition of new products
• Reliable delivery (no stock-breaks)
• On-line service
• Frequent discounts
• Good-image/low-quality kickers (i.e., gifts)
• Natural-products, Herborist-like image
• Modern, professional catalogues

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Stakeholders

• Relatives (wife, 2 sons, 1 daughter, in-laws)
• Employees
• Banks
• Local community (Biella province)

?Offered perspectives/ ?required contributions
? Diversified, growing firm, making use of
advanced managerial tools. ? Responsibility
position in growing, managerially-sophisticat
ed firms (for family members). ? Secure job
(for employees and local community) ? High
debt/equity ratio, but considerable
cash-flows from operations (for banks) ? Work
activities coherent with entrepreneurs
vision ? Willingness to work in a partially
informal, unstructured setting ? Willingness to
learn (both from internal and external
sources, i.e., consultants) ? Work experience in
mail-order business (from higher-rank
employees)
2nd B.I. (2)
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U.S.O.

• Scope.
• Mail-order.
• Traditional, natural image (when
  appropriate).
• Location reinforcing image (when appropriate).
• Broadest targeted market

Quality. Stable, average quality level
(appropriate to targeted segments)

• Profit.
• Long term objective for the family
• Short term profits systematically reinvested

• Managerial philosophy.
• Sophisticated managerial tools
• External consultants
• Closed governance structure
• Autocratic managerial style
• Informal organizational structure
• Incremental commitment of internal resources
• High propensity towards using external resources
• High propensity towards calculated risk

• Stakeholders.
• Securing a future to successors
• Offering a secure job to employees
• Employing people from local communities
• Developing entrepreneurship

Role in Competition. Gradually but aggressively
dominating entered competitive arenas
Growth. Primary objective
Time. Long-term, i.e., future generations of
successors
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Tension to growth
Securing a responsibility position in growing,
managerially sophisticated firms
Diffused tension determinants
entrepreneurs growth orientation
Stagnation of Modafil market after sharp decline
Sell-off of Euronova (1989-92)
Direct tension determinants
Availability of forty-years mail-order sales
experience.
Availability of address files and data-analysis
tools and techniques
Reduced growth potential
Strong will to grow
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2
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Availability of financial resources
'Cultural' family tendency towards 'natural'
products
Previous experience (Miss Beauté)
Existing growth potential
Non competition agreement
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Tension to grow
Direct tension towards a specific business area
(i.e., cosmetics)
Tension to grow in the mail-order sector
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Tension to grow in the mail-order sale of
cosmetics
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The role of knowledge
External context/Environment
Organizational context
External resources/competencies
Organizational and Governance Structure
Attitude towards resource/knowledge
combinations. Pursuit of entrepreneurial
opportunities, regardless of internal resources
currently controlled
Content. Entrepreneurial behavior
Growth orientation
Strategic context
Internal resources/competencies
Behavioral context/Past experiences
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Barilla - Mulino Bianco
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Barilla

• Its the largest pasta maker in Italy it holds
  one of the most appealing brands for the Italian
  consumers.
• This family-owned giant has revenues for 2
  billions Euros, employs 8.500 persons, produces
  in 25 different plants (5 of them are abroad) and
  exports in more then 100 countries.
• Its Italian market share (in pasta) is 25

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Mulino Bianco

• Mulino Bianco is a line of products that Barilla
  funded 25 years ago under this umbrella-brand we
  find biscuits, cakes, sweet snacks, crackers and
  bread (the so called bakery products).
• In all these markets Mulino Bianco has a leading
  position in Italy.
• The division is growing so fast that MB sales
  count for about 50 of the Barillas group
  turnover

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A growing and innovating company (1)

• 1877 Pietro Barilla settles a pasta and bread
  shop in Parma
• 1910 he settles the first plant 80 employees
  produce 8000 kilos of pasta daily
• 1911 the famous corporate logo is created
• 1936 the number of employees reaches 700
• 1950 the Barillas visit the States they come
  back to Italy with new ideas to improve
  efficiency and customer satisfaction
• 1955 Barilla is the first company selling pasta
  in packs

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A growing and innovating company (2)

• 1960 The company become a PLC it employees 1300
  persons
• 1970 they build a plant in Pedrignano (its still
  the largest pasta plant in the world)
• 1971 W.R.Grace buys Barilla for over 70 million
  they start diversification
• 1975 they fund Mulino Bianco
• 1979 W.R.Grace sells the company to the Barillas
  for 65 million they build Barilla France, the
  first foreigner subsidiary

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A growing and innovating company (3)

• 1987 they structure their internationalization
  process and start focused advertising campaign in
  several foreign countries
• 1991 the Greek pasta leader Misko is taken over
  1992 They take over Pavesi, well known biscuits
  producer
• 1996 On average they reduce prices by 15 to face
  the strong competition of Hard Discount and own
  label products fresh pasta production starts
• 1999 They buy Wasa from Novartis
• 2000 Barilla launchs the filled dried pasta
• 2002 Barilla launchs the frozen pasta

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Tension to Corporate Entrepreneurship

• Mature pasta market
• Declining financial results
• Mono-business company (high risk)

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In which industry to diversify?

• growing market
• low competition
• good profitability
• possibility to innovate
• relatedness to pasta

WHO
Biscuits!
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The penetration strategy

• ? step by step they introduce other bakery
  products under the same umbrella-brand
• 1976 stick bread and toasted bread slices,
  already produced by Barilla, are shifted under MB
  brand
• 1977 sweet snacks and Pan carrè
• 1983 cream filled biscuits
• 1985 crackers
• 1986 fresh cakes
• ?inside the same segment, they enlarge the range
  products.
• this policy was implemented because, studying the
  customer behavior, a need of change was found
  after some months he is in need to change kind of
  biscuit.

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The business Idea
WHAT
HOW

• New Brand Mulino Bianco
• Image of traditional, simple and genuine pdt
• Original shapes
• Innovating packaging
• Strong promotion and advertising
• High price
• Wide range

• Investments in RD
• From external to internal production
• Accurate supplier selection
• Synergy in distribution
• Advanced information system

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Corporate Support

• Financial
• Organizational
• Bargaining power
• Brand reputation
• Efficiency culture
• Approach to the customer

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Conclusions

• Today competition means spotting entrepreneurial
  opportunities
• Innovation can be pursued in different ways (SR
  vs IV), requiring different organizational levers
• Corporate Entrepreneurship occurs with no regards
  to company size
• Develop an entrepreneurial orientation
• The success of entrepreneurial development is
  related mostly to immaterial factors