Corporate Entrepreneurship
Salvatore Sciascia
23/05/2003
1
Section 1:
The concept of
Corporate Entrepreneurship
2
C.E. as action:
Entrepreneurship within
existing organizations
3
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”
4
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.
5
Independent
Entrepreneurship
(strictu sensu)
Strategic Renewal
New
for the
market
INITIATIVE
I
Start-up
Internal
II
Venturing
Strategic Renewal
Old for
the
market
IV
Outside any
existing
organization
Internal
Venturing
III
Whithin an
CONTEXT existing
organization
Independent
Entrepreneurship
(latu sensu)
Corporate
Entrepreneurship
(latu sensu)
6
Designs for Internal Venturing
Operational
Relatedness
(Burgelman, 1983)
Special
Business Unit
Independent
Business Unit
Complete
Spin off
New
Department
New Venture
Division
Contracting
Integration
Micro
new venture
department
Nurturing and
Contracting
Strategic Importance
7
Types of Strategic Renewal
Rejuvenating
Innovation
Leadership
Innovation
Catch up Change
Kaizen
Degree of
Industry
Change
(Baden-Fuller, 1995)
Degree of Internal Change
8
The capacity to change
Capacity to
change
Leadership
Rejuvenating
Catch up
(Baden-Fuller, 1995)
Time
9
C.E. as strategic
management approach
10
Between two fields
i)
ii)
SM
SM
CE as
managem
ent
approach
E
E
CE as
action:
Strategic
Renewal
CE as
action:
Internal
Venturing
11
Competition has a
new meaning
• Competition as positioning
(outside-in)
• Competition as dominating
(inside-out)
• Competition as innovating
12
(Miller, 1983)
The entrepreneurial orientation
Innovation
Proactiveness
Risk taking
13
(Stevenson & Gumpert, 1985)
The entrepreneurial continuum
Promoter
Trustee
Commitment to Opportunities
Driven by perception of
opportunities
Revolutionary
Driven by controlled
resources
Evolutionary
Commitment of Resources
Many stages
Single stage
Control of Resources
Episodic use or rent
Ownership and employment
Management Structure
Flat
Hierarchical
Strategic Orientation
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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
organization’s
relationship to its
mkt?
• What opportunity is
appropriate?
15
A contextual model
Autonomous
strategic
behavior
Strategic
context
determination
Concept
of
strategy
Induced
strategic
behavior
Structural
context
determination
Strong influence
(Burgelman, 1983)
Weak influence
16
A new Business Idea
Competitive system
Substitutes
Niche/segment
Suppliers
Competitors
WHO
Clients
Stakeholders
New entrants
Normann’s
Business Idea
WHAT
HOW
Product system
Firm’s structure
Offered perspectives/
required contributions
consonance
17
Behind the Business Idea...
Scope
Meaning of
profit
Pursued
quality
developm
ent
Managerial and
organizational
‘philosophy’
Role in
competitive
arena
Time
horizon
Role towards main
stakeholders
Pursued
dimensional
growth
Competitive system
Suppliers
Substitutes
Competitors
Niche/s
egment
Clients
Stakeholders
New entrants
Normann’s
Business Idea
Product system
Firm’s structure
consonance
Offered perspectives/
required contributions
18
…the Underlying Strategic
Orientation
Pursued
quality
development
Scope
Meaning of
profit
Managerial and
organizational
‘philosophy’
Role in
competitive
arena
Time
horizon
Role towards main
stakeholders
Pursued
dimensional
growth
19
Section 2:
Cases
20
Modafil - Bottega Verde
21
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?
22
1960. Modafil is established
as traditional wool mill
1967. Euronova is
established as mailorder company with
a catalogue of
miscellaneous
products
1971-78.
Euronova holds a
catalogue of
cosmetic
products: Miss
Beauté
1989-92. Euronova is
sold to the German group
Otto Versand. Noncompetition agreement
excluding cosmetics.
1965. Modafil starts
mail-order of knitting
wool
1973. Modafil
abandons wool
production, to focus
on mail-order sale of
knitting wool
Main
events
1987. Mondoffice is
established, focusing on
mail-order sale of office
furniture
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
1994. Bottega Verde buys a
cosmetics plant, hence starting to
obtain its products internally.
23
Competitive system
1st B.I.
(1)
Product system
WHO
• 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., L’Erbolario)
• Few large European competitors (e.g., Yves Rocher)
• Common practice of outsourcing production
WHAT
• 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
24
Stakeholders
1st B.I.
(2)
• Relatives (1 son, 1 daughter)
• Bank
• 4 Employees
 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
25
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., L’Erbolario)
• Few large European competitors (e.g., Yves Rocher)
HOW Structure
• Common practice of outsourcing production
• Addresses file (built in 30 years )
• In-house made catalogues
• R&D laboratory
• Employees experienced in mail-order sales
WHAT
• Naj-Oleari brand (for “kickers”, i.e., gifts)
Product system
• Average quality (compared to competitors)
• Call center in Pienza (75 part-time employees)
• Chemically and dermatologically tested products • Consultants (product development, raw
• Low price (compared to competitors)
materials, quality control, plant layout,
• Customer-tailored promotions
information system, MKTG policies)
• Frequent addition of new products
• Pavia University (Doctor Berardesca,
• Reliable delivery (no stock-breaks)
dermathologist): consultants for ‘live’
• On-line service
dermatological tests.
• Frequent discounts
• Substantial financial resources (from Euronova
• Good-image/low-quality “kickers” (i.e., gifts)
sell-off)
• “Natural-products”, “Herborist-like” image
After 1994
• “Modern”, professional catalogues
• Chemistry and micro-biology laboratories
26
• Property production plant
2nd B.I.
(1)
Stakeholders
• Relatives (wife, 2 sons, 1 daughter, in-laws)
• Employees
• Banks
• Local community (Biella province)
2nd B.I.
(2)
Offered perspectives/
required contributions
 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
entrepreneur’s 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)
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Scope.
• Mail-order.
• “Traditional”, “natural”
image (when
appropriate).
• Location reinforcing
image (when
appropriate).
• Broadest targeted
market
U.S.O.
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
Role in Competition.
Gradually but
aggressively
dominating entered
competitive arenas
Time. Long-term, i.e.,
future generations of
successors
Quality. Stable,
average quality level
(appropriate to
targeted segments)
Stakeholders.
• Securing a future to successors
• Offering a secure job to
employees
• Employing people from local
communities
• Developing entrepreneurship
Growth.
Primary
objective
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Tension to growth
entrepreneur’
s growth
orientation
1
Securing a
responsibility
position in
growing,
managerially
sophisticated
firms
Strong will to grow
Tension to grow
Stagnation of
Modafil
market after
sharp
decline
2
‘Diffused tension’
determinants
Sell-off of
Euronova
(1989-92)
Reduced
growth
potential
Availability of
forty-years
mail-order
sales
experience.
3 Availability of
financial resources
Tension to grow
in the mail-order
sector
‘Direct tension’
determinants
Availability of
address files
and dataanalysis tools
and techniques
Existing growth
potential
4
Non
competition
agreement
5
Tension to grow in the
mail-order sale of
cosmetics
Previous
experience (Miss
Beauté)
'Cultural' family
tendency
towards 'natural'
products
Direct tension
towards a specific
business area
(i.e., cosmetics)
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The role of knowledge
External context/Environment
Organizational context
External resources/competencies
Organizational and
Governance
Structure
Growth orientation
Strategic context
Behavioral context/Past experiences
Attitude towards
resource/knowledge combinations.
Pursuit of entrepreneurial
opportunities, regardless of internal
resources currently controlled
Content.
Entrepreneurial
behavior:
Internal resources/competencies
30
Barilla - Mulino Bianco
31
Barilla
• It’s 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%
32
Mulino Bianco
• Mulino Bianco is a line of products that Barilla
funded 25 years ago: under this umbrellabrand 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 Barilla’s group
turnover
33
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
34
A growing and innovating
company (2)
• 1960 The company become a PLC; it employees
1300 persons
• 1970 they build a plant in Pedrignano (it’s 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
35
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
36
Tension to Corporate
Entrepreneurship
• Mature pasta market
• Declining financial results
• Mono-business company (high risk)
37
In which industry to diversify?
•
•
•
•
•
growing market
low competition
good profitability
possibility to innovate
relatedness to pasta
WHO
Biscuits!
38
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.
39
The business Idea
WHAT
New Brand “Mulino Bianco”
 Image of traditional, simple and
genuine pdt
Original shapes
Innovating packaging
Strong promotion and advertising
High price
Wide range
HOW
Investments in R&D
From external to internal production
Accurate supplier selection
Synergy in distribution
Advanced information system
40
Corporate Support
•
•
•
•
•
•
Financial
Organizational
Bargaining power
Brand reputation
Efficiency culture
Approach to the customer
41
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
42