Brendan R. Shannon EMBA XX - Executive Entrepreneurship - Dr.

De Noble Internal Entrepreneurship at Dow Chemical June 24, 2010 Background: In 2000, Dow Chemical, a multinational corporation comprised of eight business groups, was experiencing a decrease in sales turnover compared to figures from the mid-90s. As the company explored various avenues to increase sales in turnover, they focused on a variety of initiatives within stagnant divisions. The subject of this case is an entrepreneurial venture which focused on increasing sales turnover within the corporation's Epoxy Products and Intermediates ("EP&I´) business group. The EP&I line of business is a highly capital intensive, high profit margin, B2B segment. The top 20% of customers generate 80% of the division's revenues. EP&I is structured to deliver the product through two key avenues. First, the aforementioned top accounts are supplied directly and serviced by experienced sales representatives (Customer Account Executives ("CAEs")). Second, the product is distributed to smaller customers using local distributors who service wide geographic areas (usually entire countries). In 1998 EP&I launched a new centralized customer service center (Epicenter) that services accounts by providing access to technical assistance and account management. The Proposal, e-epoxy.com: Ian Telford, an 18-year Dow veteran with significant experience in chemical sales, proposed using the rapidly growing Internet as an opportunity to reduce overhead and drive sales volume. According to Telford, the sales model EP&I used at that time ignored a significant segment of the market. Telford noticed that while key customers were serviced by CAEs and midrange clients had access to the Epicenter, there was room to grow sales by focusing on lower volume, lower margin customers. The core concept focused on using the Internet to reduce the significant overhead associated with servicing larger, high-volume accounts. The venture aimed to use a rigid rule-based

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they are associated with some key risks. De Noble Internal Entrepreneurship at Dow Chemical June 24. with the top 20% of customers driving 80% of current profits. It was highly evident by 2000 that the Internet could no longer be ignored or dismissed as a fad. One aspect that could be improved in Telford¶s plan is to analyze the extent to which Dow may benefit from expanding the model to include midrange clients who were previously serviced only at the Epicenter. Specifically. loosely aware of their competitors¶ pricing based on intercompany staffing movement.Brendan R. the compensation structure existing at that time might have caused employees to be overly risk adverse. The greatest potential for the venture to fail came from internal stationary inertia. published pricing provides a contemporaneous benchmark with which to measure their contracts. Simply put. A key element that increased the potential of this venture is the growth of the Internet as a B2B and B2C business tool.Executive Entrepreneurship . care must be taken not to alienate existing high-margin customers when implementing this new venture aimed at smaller clients. While larger customers are. the compensation of existing executives and sales representatives was commission and profit based. the costs of trailing the market grew exponentially. Shannon EMBA XX . A revamp in pricing and delivery structure could highlight the extent to which employees' short-term self-interest might conflict with long-term organizational success.com would meet the low overhead projections of the business model. quantity minimums and terms would be fixed to facilitate a higher volume of simpler transactions. funds transfer and transaction processing. Page |2 . The prospects for the proposed line of business were good. however. As key competitors launched online ventures. Most importantly.Dr. Stated another way. using the Internet for sales requires publicizing pricing. Many industries were being completely revamped due to Internet supply chain management. of course. 2010 system to ensure that the new business generated by e-epoxy. Specifically set pricing.

Shannon EMBA XX .Executive Entrepreneurship .Brendan R. De Noble Internal Entrepreneurship at Dow Chemical June 24. scale fast" strategy offered the benefit of experimenting within a new market segment with low risk. the proposed e-epoxy. was "annoyed" by the video stunt. However. which was also a spoof.com venture was a wise investment for Dow. the short-term anomaly would have a manageable impact on the company's future. if the innovative succeeded. The proposed. the e-epoxy. Verrnaak. Telford's stir-things-up strategy went too far because he used so Page |3 .Dr. start smart. it is important to examine whether Dow's structure at that time and its corporate umbrella would facilitate future success in the EP&I group. While the concept is radically different from what was the existing sales/delivery model. the proposed venture allowed Dow to develop an internet sales platform with a relatively small investment. it would expand/change the Company's corporate umbrella. In this case. How do you know when you have crossed the line? There are a million potential answers to that question. His tactics included internal guerilla marketing via fabricated emails and a spoof FT. EP&I's business VP. "think big. 2010 Structural issues and selling the idea: As is the case with many businesses adapting their structure to the new potential of ecommerce. Especially considering a longer-term perspective.com venture did not fit under Dow's corporate umbrella. It is clear that Telford utilized some unique strategies in selling the e-epoxy. but one very important person. if it failed.com idea within Dow. The newly created venture did not fit neatly into any particular place on the corporation's organizational chart and Telfer proposed to introduce a radically different way for customers to interact with the company. The delivery process change for lower end customers had obvious long term potential to change relationships with mid and top range customers as well. Focusing too heavily on the status quo can cause the market to leave even the greatest companies behind.com article which were designed to create hype surrounding an upcoming Biz TV announcement.

the IS group and Cook (Vermaak's replacement). The second time around. where senior management tends to be promoted from traditionally nonentrepreneurial fields such as chemical engineering. One of the aforementioned stunts. could have generated the same buzz without generating the corresponding negative feedback. The push for final approval highlighted two key takeaways for Telford: (1) use conventional presentation tactics and enthusiasm as key tools for selling internal entrepreneurial ventures. Telford used more conventional strategies. This can be especially true in corporations such as Dow. business as usual can become a cancer. Shannon EMBA XX . e-epoxy.Executive Entrepreneurship . Without the passion of entrepreneurs and risk-takers such as Telford. It is difficult to generate change in large corporations with long-established methods of doing business. Telford used his drive and enthusiasm to champion a project that allowed the EP&I division to keep pace with the changes caused by the Internet marketplace. Page |4 . e-epoxy. and (2) involve key decision makers early. one being a passionate presentation to win over fellow managers. and proceed quickly after gaining approval to avoid encountering future hang-ups.com was definitely an effective use of Telford as a resource.Dr. 2010 many unconventional tactics together. The project's budget was suspended until further notice.Brendan R. After receiving approval and a budget of $1 million.com experienced a setback when two key EP&I executives who had originally approved the project were replaced. De Noble Internal Entrepreneurship at Dow Chemical June 24. Cook facilitated a meeting during which Telford used the ³fire in his belly" to convince the Group's president to fund the venture. Use of entrepreneurial talent: Despite the scarcity of entrepreneurial talents such as Telford's. perhaps a toned down version of the video.

As would be expected.Vermaak retired and was replaced by Phil Cook. the project gained approval based largely on his efforts. 2010 Key executive roles: A change in senior leadership during Telford's e-epoxy. Thermoset Business Group President. After assuming his new role. In May of 2000. As Telford's direct supervisor at the project¶s inception.com venture had a significant impact on the project¶s course. Business Group President for EP&I had a large role in the early success of the project." Fortunately Telford's enthusiasm and drive to see the project succeed were self-evident. who had final authority to approve the project. De Fitte was enthusiastic about e-epoxy.com. He was responsible for founding EP&I's Commercial Interface Initiative (CCI) which used technology to streamline the way the division interacted with and serviced its customers. The common thread among all four leaders was their belief in Telford over the project itself based on his enthusiasm. the chief effect of the leadership change was a setback in the project¶s progress while Telford fostered confidence among new decision makers. "fire in his belly. De Noble Internal Entrepreneurship at Dow Chemical June 24. Henry Vermaak.Brendan R. Shannon EMBA XX . he was willing to take the risk of providing a $100.Executive Entrepreneurship . His recognition of Telford's drive and enthusiasm were key in his support of the project. Philippe de Fitte served as commercial director for EP&I¶s Europe division before leaving in 2000. Cook organized a key meeting among managers that reinitiated the enthusiasm surrounding the project and was also instrumental in Telford gaining access to Bob Wood. Vermaak initially described himself as a "concerned supporter".com and had a history of championing internal technology-based solutions at Dow. Page |5 . When making his decision whether to support Telford¶s concept.000 budget for the project's early development. however. Most notably.Dr. In summary. Wood was most concerned with determining whether Telford had. he gave the initial authorization for Telford to develop the business plan that eventually became e-epoxy.

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