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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
Executive Entrepreneurship .Brendan R. funds transfer and transaction processing. the compensation of existing executives and sales representatives was commission and profit based. they are associated with some key risks. As key competitors launched online ventures. The prospects for the proposed line of business were good. 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. loosely aware of their competitors¶ pricing based on intercompany staffing movement. De Noble Internal Entrepreneurship at Dow Chemical June 24. quantity minimums and terms would be fixed to facilitate a higher volume of simpler transactions.com would meet the low overhead projections of the business model.Dr. the costs of trailing the market grew exponentially. published pricing provides a contemporaneous benchmark with which to measure their contracts. however. Specifically. 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. While larger customers are. Most importantly. Specifically set pricing. the compensation structure existing at that time might have caused employees to be overly risk adverse. with the top 20% of customers driving 80% of current profits. of course. 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. care must be taken not to alienate existing high-margin customers when implementing this new venture aimed at smaller clients. It was highly evident by 2000 that the Internet could no longer be ignored or dismissed as a fad. 2010 system to ensure that the new business generated by e-epoxy. Page |2 . Stated another way. Shannon EMBA XX . using the Internet for sales requires publicizing pricing. Many industries were being completely revamped due to Internet supply chain management. The greatest potential for the venture to fail came from internal stationary inertia.
Verrnaak. the proposed e-epoxy. Focusing too heavily on the status quo can cause the market to leave even the greatest companies behind. scale fast" strategy offered the benefit of experimenting within a new market segment with low risk. it would expand/change the Company's corporate umbrella.com venture was a wise investment for Dow. The proposed. if the innovative succeeded. It is clear that Telford utilized some unique strategies in selling the e-epoxy. "think big. While the concept is radically different from what was the existing sales/delivery model. EP&I's business VP. In this case.com article which were designed to create hype surrounding an upcoming Biz TV announcement. However. His tactics included internal guerilla marketing via fabricated emails and a spoof FT. Especially considering a longer-term perspective. if it failed.Executive Entrepreneurship . start smart. Telford's stir-things-up strategy went too far because he used so Page |3 . The delivery process change for lower end customers had obvious long term potential to change relationships with mid and top range customers as well. De Noble Internal Entrepreneurship at Dow Chemical June 24.com venture did not fit under Dow's corporate umbrella. 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. 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 proposed venture allowed Dow to develop an internet sales platform with a relatively small investment.Brendan R.com idea within Dow. which was also a spoof. the short-term anomaly would have a manageable impact on the company's future. was "annoyed" by the video stunt. How do you know when you have crossed the line? There are a million potential answers to that question. Shannon EMBA XX . but one very important person. 2010 Structural issues and selling the idea: As is the case with many businesses adapting their structure to the new potential of ecommerce.Dr. the e-epoxy.
2010 many unconventional tactics together. Telford used more conventional strategies. The project's budget was suspended until further notice.Executive Entrepreneurship . This can be especially true in corporations such as Dow. the IS group and Cook (Vermaak's replacement). Shannon EMBA XX . perhaps a toned down version of the video. where senior management tends to be promoted from traditionally nonentrepreneurial fields such as chemical engineering. Without the passion of entrepreneurs and risk-takers such as Telford. and (2) involve key decision makers early.Dr.com was definitely an effective use of Telford as a resource. It is difficult to generate change in large corporations with long-established methods of doing business. De Noble Internal Entrepreneurship at Dow Chemical June 24. Page |4 . business as usual can become a cancer. e-epoxy. 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. The second time around. Cook facilitated a meeting during which Telford used the ³fire in his belly" to convince the Group's president to fund the venture. 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. After receiving approval and a budget of $1 million. Use of entrepreneurial talent: Despite the scarcity of entrepreneurial talents such as Telford's.com experienced a setback when two key EP&I executives who had originally approved the project were replaced.Brendan R. one being a passionate presentation to win over fellow managers. e-epoxy. could have generated the same buzz without generating the corresponding negative feedback. and proceed quickly after gaining approval to avoid encountering future hang-ups. One of the aforementioned stunts.
2010 Key executive roles: A change in senior leadership during Telford's e-epoxy. As would be expected.Vermaak retired and was replaced by Phil Cook. Vermaak initially described himself as a "concerned supporter". 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.com venture had a significant impact on the project¶s course." Fortunately Telford's enthusiasm and drive to see the project succeed were self-evident. Wood was most concerned with determining whether Telford had. As Telford's direct supervisor at the project¶s inception. "fire in his belly. Thermoset Business Group President.com. Most notably.com and had a history of championing internal technology-based solutions at Dow. Philippe de Fitte served as commercial director for EP&I¶s Europe division before leaving in 2000. Shannon EMBA XX .000 budget for the project's early development. His recognition of Telford's drive and enthusiasm were key in his support of the project. After assuming his new role. he was willing to take the risk of providing a $100. De Fitte was enthusiastic about e-epoxy. he gave the initial authorization for Telford to develop the business plan that eventually became e-epoxy. In summary.Executive Entrepreneurship . the chief effect of the leadership change was a setback in the project¶s progress while Telford fostered confidence among new decision makers. The common thread among all four leaders was their belief in Telford over the project itself based on his enthusiasm. De Noble Internal Entrepreneurship at Dow Chemical June 24. however. Page |5 .Dr. Henry Vermaak. the project gained approval based largely on his efforts. who had final authority to approve the project. When making his decision whether to support Telford¶s concept. In May of 2000.Brendan R. Business Group President for EP&I had a large role in the early success of the project. 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.
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