Corporate EntrepreneurshipSalvatore Sciascia23/05/2003

Section 1: The concept of Corporate Entrepreneurship

C.E. as action: Entrepreneurship within existing organizations

The field of EntrepreneurshipThe 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)

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

Independent Entrepreneurship(strictu sensu)Strategic RenewalStart-upNew for the marketOld for the marketWhithin an existing organizationOutside any existing organizationCorporate Entrepreneurship (latu sensu)Internal VenturingStrategic RenewalInternal VenturingCONTEXTINITIATIVEIIIIIIIVIndependent Entrepreneurship (latu sensu)

Designs for Internal VenturingSpecial Business UnitIndependent Business UnitComplete Spin offNew DepartmentNew Venture DivisionContractingIntegrationMicro new venture departmentNurturing and Contracting

Operational Relatedness

Strategic Importance(Burgelman, 1983)

Types of Strategic RenewalRejuvenating InnovationLeadership InnovationCatch up ChangeKaizen

Degree of Industry Change

Degree of Internal Change(Baden-Fuller, 1995)

The capacity to changeTimeCapacity tochange

Catch upRejuvenatingLeadership(Baden-Fuller, 1995)

C.E. as strategic management approach

Between two fields

Competition has a new meaningCompetition as positioning (outside-in)Competition as dominating (inside-out)Competition as innovating

The entrepreneurial orientation(Miller, 1983)InnovationRisk takingProactiveness

The entrepreneurial continuum(Stevenson & Gumpert, 1985)

Promoter Vs Trustee in Strategic OrientationWhere 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?

A contextual model

(Burgelman, 1983)

A new Business Idea

Firms structureOffered perspectives/required contributionsStakeholdersCompetitive systemClientsNormanns Business IdeaNiche/segmentconsonanceconsonanceconsonanceWHOWHATHOW

Behind the Business Idea...

the Underlying Strategic Orientation

Section 2: Cases

Modafil - Bottega Verde

Case discussionWich 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?

1960. Modafil is established as traditional wool mill1965. Modafil starts mail-order of knitting wool1967. Euronova is established as mail-order company with a catalogue of miscellaneous products1971-78. Euronova holds a catalogue of cosmetic products: Miss Beaut1973. Modafil abandons wool production, to focus on mail-order sale of knitting wool1987. Mondoffice is established, focusing on mail-order sale of office furniture1989-92. 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 multinationalMain events

StructureProduct systemCompetitive systemRandomly-developed addresses fileOutsourcing of production (2-3 small suppliers)Product-formulas developed by suppliersIn-house made cataloguesStore in Pienza3 employees for packaging 1 store salespersonCasual help from the 2 children

Increase of sales in volumePredominance of traditional distribution channelsGeneral tendency towards complex cosmetics Absence of competitors in mail-order distribution channelSmall, weak Italian competitors (e.g., LErbolario)Few large European competitors (e.g., Yves Rocher)Common practice of outsourcing production

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

WHOWHATHOW1st B.I. (1)

3

Offered perspectives/ required contributionsStakeholders 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 organizationRelatives (1 son, 1 daughter)Bank4 Employees

Structure (1981-92)1st B.I. (2)

3

StructureProduct systemCompetitive systemAddresses file (built in 30 years )In-house made catalogues R&D laboratoryEmployees experienced in mail-order salesNaj-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 1994Chemistry and micro-biology laboratoriesProperty production plant

Average quality (compared to competitors)Chemically and dermatologically tested productsLow price (compared to competitors)Customer-tailored promotionsFrequent addition of new productsReliable delivery (no stock-breaks)On-line serviceFrequent discountsGood-image/low-quality kickers (i.e., gifts)Natural-products, Herborist-like imageModern, professional catalogues

Stagnation of sales in volumeDemocratization of cosmetic productsTendency towards natural cosmeticsIncrease in modern-distribution market shareDecline or stagnation of some traditional distribution channelsIncreasing request for quality-control in productionAbsence of competitors in mail-order distribution channelSmall, weak Italian competitors (e.g., LErbolario)Few large European competitors (e.g., Yves Rocher)Common practice of outsourcing production

2nd B.I. (1)WHOWHATHOW

2

Offered perspectives/required contributionsStakeholders Diversified, growing firm, making use of advanced managerial tools. Responsibility position in growing, managerially-sophisticated 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)Relatives (wife, 2 sons, 1 daughter, in-laws)EmployeesBanksLocal community (Biella province)

2nd B.I. (2)

2

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

Growth. Primary objectiveQuality. Stable, average quality level (appropriate to targeted segments)Time. Long-term, i.e., future generations of successorsStakeholders.Securing a future to successorsOffering a secure job to employeesEmploying people from local communitiesDeveloping entrepreneurship

Role in Competition.Gradually but aggressively dominating entered competitive arenasProfit.Long term objective for the familyShort term profits systematically reinvested

Managerial philosophy.Sophisticated managerial toolsExternal consultantsClosed governance structureAutocratic managerial styleInformal organizational structureIncremental commitment of internal resourcesHigh propensity towards using external resourcesHigh propensity towards calculated risk

U.S.O.

4

Tension to growthAvailability of forty-years mail-order sales experience.Reduced growth potential Tension to growTension to grow in the mail-order sectorentrepreneurs growth orientationSecuring a responsibility position in growing, managerially sophisticated firms Strong will to growStagnation of Modafil market after sharp declineSell-off of Euronova (1989-92)Availability of address files and data-analysis tools and techniquesExisting growthpotentialDirect tension towards a specific business area (i.e., cosmetics)Non competition agreementPrevious experience (Miss Beaut)'Cultural' family tendency towards 'natural' productsTension to grow in the mail-order sale of cosmetics Direct tension determinants Diffused tension determinantsAvailability offinancial resources12345

External context/EnvironmentContent.Entrepreneurial behavior:Organizational contextBehavioral context/Past experiencesStrategic contextGrowth orientationOrganizational and Governance StructureAttitude towards resource/knowledge combinations.Pursuit of entrepreneurial opportunities, regardless of internal resources currently controlledExternal resources/competenciesInternal resources/competenciesThe role of knowledge

Barilla - Mulino Bianco

BarillaIts 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%

Mulino BiancoMulino 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

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 daily1911 the famous corporate logo is created1936 the number of employees reaches 7001950 the Barillas visit the States: they come back to Italy with new ideas to improve efficiency and customer satisfaction1955 Barilla is the first company selling pasta in packs

A growing and innovating company (2)1960 The company become a PLC; it employees 1300 persons1970 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 diversification1975 they fund Mulino Bianco1979 W.R.Grace sells the company to the Barillas for $65 million; they build Barilla France, the first foreigner subsidiary

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 producer1996 On average they reduce prices by 15% to face the strong competition of Hard Discount and own label products; fresh pasta production starts1999 They buy Wasa from Novartis2000 Barilla launchs the filled dried pasta2002 Barilla launchs the frozen pasta

Tension to Corporate EntrepreneurshipMature pasta marketDeclining financial resultsMono-business company (high risk)

In which industry to diversify?growing marketlow competitiongood profitabilitypossibility to innovaterelatedness to pasta

Biscuits!WHO

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 brand1977 sweet snacks and Pan carr 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.

The business IdeaNew Brand Mulino Bianco Image of traditional, simple and genuine pdtOriginal shapesInnovating packagingStrong promotion and advertisingHigh priceWide rangeInvestments in R&DFrom external to internal productionAccurate supplier selectionSynergy in distributionAdvanced information system

HOWWHAT

Corporate SupportFinancialOrganizationalBargaining powerBrand reputationEfficiency cultureApproach to the customer

ConclusionsToday competition means spotting entrepreneurial opportunitiesInnovation can be pursued in different ways (SR vs IV), requiring different organizational leversCorporate Entrepreneurship occurs with no regards to company sizeDevelop an entrepreneurial orientationThe success of entrepreneurial development is related mostly to immaterial factors

3

3

2

2

4