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Corporate Entrepreneurship. Salvatore Sciascia 23/05/2003. Section 1: The concept of Corporate Entrepreneurship. C.E. as action: Entrepreneurship within existing organizations. The field of Entrepreneurship.

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corporate entrepreneurship

Corporate Entrepreneurship

Salvatore Sciascia

23/05/2003

the field of entrepreneurship
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)

corporate entrepreneurship5
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.
slide6

Independent Entrepreneurship

(strictu sensu)

Strategic Renewal

New for the market

Internal Venturing

I

II

INITIATIVE

Start-up

Strategic Renewal

Old for the market

Internal Venturing

IV

III

Outside any existing organization

Whithin an existing organization

CONTEXT

Independent Entrepreneurship (latu sensu)

Corporate Entrepreneurship (latu sensu)

designs for internal venturing
Designs for Internal Venturing

Special Business Unit

Independent Business Unit

Complete Spin off

Operational Relatedness

NewDepartment

New Venture Division

Contracting

Integration

Micro new venture department

Nurturing and Contracting

Strategic Importance

(Burgelman, 1983)

types of strategic renewal
Types of Strategic Renewal

Rejuvenating Innovation

Leadership Innovation

Degree of Industry Change

Catch up Change

Kaizen

Degree of Internal Change

(Baden-Fuller, 1995)

the capacity to change
The capacity to change

Capacity to

change

Leadership

Rejuvenating

Catch up

(Baden-Fuller, 1995)

Time

between two fields

i)

ii)

CE as management approach

SM

SM

E

E

CE as action: Strategic Renewal

CE as action: Internal Venturing

Between two fields
competition has a new meaning
Competition has a new meaning
  • Competition as positioning (outside-in)
  • Competition as dominating(inside-out)
  • Competition as innovating
the entrepreneurial orientation

(Miller, 1983)

The entrepreneurial orientation

Innovation

Proactiveness

Risk taking

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?

Promoter Vs Trustee in Strategic Orientation
a contextual model
A contextual model

(Burgelman, 1983)

a new business idea

Substitutes

Suppliers

Competitors

New entrants

Product system

A new Business Idea

Competitive system

WHO

Niche/segment

Clients

Stakeholders

consonance

consonance

Normann’s

Business Idea

WHAT

HOW

Offered perspectives/

required contributions

Firm’s structure

consonance

behind the business idea

Substitutes

Suppliers

Competitors

Competitive system

New entrants

Pursued quality development

Scope

Niche/segment

Meaning of profit

Clients

Stakeholders

consonance

Managerial and organizational ‘philosophy’

Product system

consonance

Normann’s

Business Idea

Role towards main stakeholders

Role in competitive arena

Pursued dimensional growth

Time horizon

Offered perspectives/

required contributions

Firm’s structure

consonance

Behind the Business Idea...
the underlying strategic orientation

Pursued quality development

Scope

Meaning of profit

Managerial and organizational ‘philosophy’

Role towards main stakeholders

Role in competitive arena

Pursued dimensional growth

Time horizon

…the Underlying Strategic Orientation
case discussion
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?
slide23

1994. Bottega Verde buys a cosmetics plant, hence starting to obtain its products internally.

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

slide24

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., L’Erbolario)
  • 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
slide25

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

slide26

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)
  • Common practice of outsourcing production

2nd B.I. (1)

HOW

Structure

  • Addresses file (built in 30 years )
  • In-house made catalogues
  • R&D 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
slide27

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-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)

2nd B.I. (2)

slide28

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

tension to growth
Tension to growth

Securing a responsibility position in growing, managerially sophisticated firms

‘Diffused tension’ determinants

entrepreneur’s 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

1

2

3

Availability of

financial resources

'Cultural' family tendency towards 'natural' products

Previous experience (Miss Beauté)

Existing growth

potential

Non competition agreement

4

Tension to grow

Direct tension towards a specific business area

(i.e., cosmetics)

Tension to grow in the mail-order sector

5

Tension to grow in the mail-order sale of

cosmetics

slide30

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

Internal resources/competencies

Strategic context

Behavioral context/Past experiences

barilla
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%
mulino bianco
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 Barilla’s group turnover
a growing and innovating company 1
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
a growing and innovating company 2
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
a growing and innovating company 3
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
tension to corporate entrepreneurship
Tension to Corporate Entrepreneurship
  • Mature pasta market
  • Declining financial results
  • Mono-business company (high risk)
in which industry to diversify
In which industry to diversify?
  • growing market
  • low competition
  • good profitability
  • possibility to innovate
  • relatedness to pasta

WHO

Biscuits!

the penetration strategy
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.
the business idea
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 R&D
  • From external to internal production
  • Accurate supplier selection
  • Synergy in distribution
  • Advanced information system
corporate support
Corporate Support
  • Financial
  • Organizational
  • Bargaining power
  • Brand reputation
  • Efficiency culture
  • Approach to the customer
conclusions
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