CE Lecture 4

- Dedicated Teams

- "in charge" at top management

- Helping in reporting

- Helping in achieving challenges

- Develop platform competencies

- Fiscally intensive

- There are some matching institutions

- Fostering of start ups

DSM has transformed from a traditional chemical-based company to a specialist in Life Sciences and Materials Science.

“Innovation and Entrepreneurship are key elements of our strategy. They are the driving forces behind further growth and implementing sustainable changes in our organization”

They require departure from the corporation’s proven business definition as well as its assumptions about what makes a business successful (i.e. they require forgetting)

They leverage some of the assets and capabilities of the corporation (i.e. they require borrowing)

They are not simply product line extensions, geographic expansions or technological improvements that enhance proven business

They target emerging and poorly defined industries

They are launched before any competitor proves itself 

They are highly potential for revenue growth

They require the development of new knowledge and capabilities

Cannibalizing the existing customer base

Destroying and undermining the value of existing distribution networks

Compromising the quality of service offered to customers

Undermining the company’s image or reputation

Destroying the overall culture of the company

Legitimizing the new business; others may follow

Isolation & Replication.

Replication can be not effective in a new innovative business but also can be a mistake to isolate and don't make any use of the synergies between NewCo and CoreCo

Govindarajan and Trimble 2005 - Organizational DNA for Strategic Innovation

Hire outsiders!

Make sure that NewCo reports to an exceptional high level NewCo must create its own roles and responsibilities to manage marketing and sales.

Evaluate performance of NewCo that matches its goals and aspirations. Be particularly careful with the profitability measure

Shift the basis of accountability for NewCo executives from performance against predictions to rigor and speed in testing the assumptions that the predications are based upon NewCo must develop a unique culture. 

Reinforce a common set of values that inspires both NewCo and CoreCo

Reconsider incentives built into compensation and promotion policies

Ensure that CoreCo’s income statement is properly compensated through fair transfer pricing policies

Anticipate and Monitor Tensions at points of interactions. Ensure that NewCo is sufficiently empowered

Carefully manage expectations of NewCo’s performance

Horizon 1 :

Focus: Executing to defend, extend, and increase profitability of existing businesses

Outputs: Annual operating plan; tactical plans; resourcing decisions and budgets

Horizon 2

Focus: Resourcing initiatives to build new businesses

Outputs: Business building strategies; investment budget; detailed business plans for new ventures

Horizon 3

Focus: Uncovering options for future opportunities and placing bets on selected options

Outputs: Decisions to explore; initial project plan; project milestones

Horizon 1

People: Operators. Deep functional and/or industry experts; strong drive to hit targets; discipline

Approach: Create personal (career and compensation) consequences for near-term performance impose ‘no excuse’ mentality

Horizon 2

People: Business builders. Entrepreneurial desire to create; comfort with ambiguity and change; top-line-focused;

Approach: Provide autonomy, freedom to act; and Mandate to create and build; opportunity To create personal wealth through ‘ownership’. Opportunity to build, create, and leave a legacy

Horizon 3

People: Visionaries. Champions; Unconventional thinkers

Approach: Provide psychological rewards; recognition of ideas; freedom to experiment and explore; provide career advantages; opportunity to satisfy individual curiosity; option to become Horizon 2 business builder.

“As we head into a time of stronger growth coupled with increase technological change, the message for senior executives is clear: if you aim to maintain control of your corporation and deliver value to shareholders and customers, you must embrace creative destruction rather than wait to become a victim of this unstoppable force”. Quotation from Richard Foster

Global Infrastructure

Strong brand reputation

Partner relationships

Scientific Knowledge

Experience with Regulators

Process Excellence

Ambitious entrepreneurship is a necessary condition to remain competitive. In their search for a scalable business model many young companies face important challenges, but they have proven to be capable to achieve great success and in a very short time to care for disruptive changes in existing markets. Changes that are permanent and put strong pressure on existing relationships in various industries and sectors

ENECO will invest 100 mln in startups

The group has put aside 100 million euros to invest in innovative entrepreneurs. Eneco thus joins other firms in their search for new ideas. KPN Ventures, Sanoma Ventures, Randstad New Venture and Aegon Venture Fund;

"If you can not Beat them, join them "is the new motto”

Buy influence in small number of interesting startups.

Startup instrumental in pursuing long-term organizational goals.

Help the corporation move faster in responding to new opportunities.

Individual startups are less critical but collectively act to shift the position of the corporation.

Our role is to fill the innovation pipeline for DSM and the global ecosystem we operate in. 

We want to achieve the "Venture 2020 Focus Areas". Dsm will do it by helping inventors and entrepreneurs from ideation to operating sustainable businesses in our Venture 2020.

Typical investment parameters and strategic partnering:

Lifetime investment from €1 – 20 mln, with our typical first investment between 100k and 5m We take minority stakes, usually between 5 -25%

We lead rounds or follow, typically prefer to syndicate larger deals, and will do seed through post -IPO if there is a good strategic fit

We are active partners and usually ask to serve on boards

We are “on the ground” in the US and Europe and are most active in those geographies

Our investments are intended to create mutual benefits beyond funding: Coach entrepreneurs applying our individual and corporate experience and network in the Venture Focus Areas Tap into, as desired and appropriate (and always at the entrepreneurs request), DSM’s vast resources and know -how in IP, validation, scaling manufacturing, quality and safety, market intelligence, partnering and licensing; new technology scouting, M&A and venturing

Exhibit 3 provides a tabular overview of the four models. These four archetypes might not capture every model found in the wild, however, Exhibit 3 presents a good starting point to analyze or design a corporation’s engagement with startups.

Startups programs are tailored to allow the corporation to engage with a large number of startup.

- Organizational interface with core business is highly critical!

- Budget-driven units may not have foreseen and planned new activity.

- Attracting and retaining startups! Monitoring the masses.

- Well networked both externally and internally

Carefully consider your objectives to engage with startups. Programmes that deliver significant benefit to your company and startups are based on real needs, not corporate social responsibility

Select the programme(s) that best deliver on these objectives. Our framework helps you explore which programme types tend to most suitable to achieve different objectives.

Secure board-level sponsorship. Support from the topis pivotal to get programmes off the ground and provide employees with the confidence to take risks when trying out new collaborations with startups.

Develop key performance indicators. Include long-term metrics to measure progress of the programs. Program-elected KPIs for employees will ensure effective implementation of the program inside the company

Capture data and feedback continuously to iterate the model. Test what works in an initial pilot, then scale up, and continue to improve the program

Hand the startup program to people with an entrepreneurial mindset. Managers of startup programs have to understand the world of startups and treat them as partners, not agencies or employees.

Allocate an internal champion with decision and budget power. Each startup relationship needs a senior champion to save time for startups and the corporate. A ‘quick’ no is better than a protracted ‘maybe’.

Create a publicly visible, single access point for startups. This access point is ideally a team who knows the organization well to direct startups towards relevant programs or units.

Scout internationally to attract the best startups and technologies. Those may not be located in the same city or country than your headquarter is locates. Consider partnerships with organizations that can scout on your behalf, or a network of local partners.

Make it easier for startups to work with you. This includes shortening payments terms for startups, facilitating processes to register as a qualified supplier or adopting flexible approaches to IP that startups cannot give fully away.