INTERNAL ENTREPRENEURSHIP AT THE DOW CHEMICAL COMPANY

Group 5• Alice• Gitanjali• Maria Vasantha Nathan• Neha Thomas• Rahil Nicholas• Samuel  Nirmal Kumar

ENTREPRENEUR vs. INTRAPRENEUR

ENTREPRENEUR

• Enters the business with his own money – more risk

• Has ownership to the business/firm

• Is entitled to returns/profits from the business

INTRAPRENEUR

• Enters into a venture with capital funding and resources from parent (employer) company – less risk

• Only manages the business – no ownership

• Is entitled to fixed salary + bonus (if any)

DOW CHEMICALS – COMPANY BACKGROUND

Leader in Science and Technology and provided innovative plastic, chemical and agro products.

Second largest chemical manufacturer in the world

Served different consumer markets.

Sales reached $27.8 billion in 2001 on the merger with Union Carbide.

This surge came after continued flat growth of the organization.

Growth became a priority.

Several new growth initiatives launched in 2000 (including epoxy.com).

• Ranked #50 on 2001 Fortune 500 (following merger with Union Carbide in 2001)

• Annual sales of approximately >$59,000 million• >50,000 employees around the world• 171 manufacturing sites in 35 countries• Serve customers in >170 countries

BUSINESS SEGMENTS

• Electronic and Specialty Materials

• Coatings and Infrastructure

• Health and Agricultural Sciences

• Performance Systems

• Performance Products

• Basic Plastics

• Basic Chemicals

• Hydrocarbons and Energy

EPOXY BUSINESS @ DOW• Epoxy resins - used in manufacture of electrical laminates, composites, adhesives

and coatings.

• Turnover in 2000 – Under $1 billion.

• Specialty, high margin business, but highly capital intensive.

• 20% of customers (global) generated 80% sales.

• Epoxy business – cyclical in nature

• Problem for Dow – capacity utilization was becoming difficult

• Distribution channels – Direct Company supply & Distributors

• EpiCenter and Customer Account Executives (CAE) – customer support resources and helpline

IMPORTANCE OF CUSTOMER TO DOW

Identifying the gap

EXTERNAL ENVIRONMENT• Dot com revolution – 1998

• ChemConnect, Plasticsnet

• Quick money from internet based initiatives and businesses

• MyAccount@Dow initiative

ORIGIN OF IDEA

• 1998 - dot.com revolution• Scheduling of internet training programs by Dow Chemicals• Ian Telford – Idea of an Internet start-up for their EP&I division

• Wanted to explore the Un-addressed Space of the Customer base

• Exploit first-mover advantages

E-epoxy.com• First presentation made to Epoxy Leadership Team in 1999.

• Three key features of the new channel:

- Orders had to be in multiples of truck loads

- Only selected epoxy products offered online.

- Fixed contractual terms, no negotiations.

• Initial responses in favour of idea – 3/12 members.

• Corporate IS against the idea – ready to launch MyAccount@Dow (extranet).

• Problems with posting prices of products online.

• Telford proposed a new pricing policy for products online(promo-code).

• Business plan developed.

• Telford started a rumor via e-mail prior to meeting claiming a major competitive announcement was in the offing.

• ELT approved a budget of $1 million for the venture.

• The venture was put on hold in mid 2000 – due to reorganizing by Bob Wood.

• Telford succeeded in presenting the idea to Wood and got commitment of many managers.

- Projections of internet’s impact on business.

- Site useful for auctioning production not tied to contracts.

- Finding alternate customers to clear idle capacity.

• Telford’s commitment resulted in Wood’s approval of the venture.

• On August 1, 2000 Telford became the head of epoxy.

• Telford had a good coordination with the IS dept. and succeeded in building a committed team.

• Launch on January 29, 2001 covered US and Europe.

• Global launch with 9 different languages and webpages followed on September 19.

• Initial problems due to different geographies.

• Ad campaigns gave the first mover advantage.

FINANCIAL PERFORMANCE• Positive EBIT in the fourth quarter of 2001, less than a

year after launch.

• Consistently positive EBIT there after due to strict cost

control and low running costs

• Around 300 customers registered by March 2002

• 2003 – EBIT showed cumulative positive

• Hit a rough patch in 2005

HURDLES FACED• Acknowledgement of the epoxy.com idea by EP&I division

• Especially during the change in the top management executives

• Problems with proposed posting of product pricing• Thought that price transparency would potentially limit their negotiating

ability with key accounts

• Had to carefully leverage the meager budget given for the initial research and prototype building

• Although customers can order products online, Dow Chemical Company would still need to contact with customers to clarify and confirm some orders. This might increase the labor cost and decrease the order process efficiency.

Strengths

• Low investment – high returns• Fast growing sector – e-

commerce• First Mover advantages

Threats

Prices of products become available to competitors also.

Success in the online selling sphere is generally short lived.

Weakness

• Future of the initiative depends upon the team that inherits it

• Slow to change sales practices

Opportunities

• Can expand online into other business segments also easily since basic framework is already present. Eg. Xiameter• Attract more customers due to ease of use

SWOT ANALYSIS

INTRAPRENEUR & THE ORGANIZATION

• Support and conditions to work

• Encouragement for self-development

• Communication throughout organization

• Development of Organization

• Objectives and vision of organization

• Engine for internal growth

• Network to function effectively

• Internal entrepreneurs need to be hired, trained and motivated

ENTREPRENEURIAL LESSONS (1)

Understanding the markets and spotting the gaps

Identifying the right target market

Seek help where ever and when ever required and from the best sources – Seek the right partnerships

Choose high return, low investment ventures

Have an eye for detail and a long term plan and vision

Be passionate and have high levels of energy

ENTREPRENEURIAL LESSONS (2)

Selecting and building up the right team

Understanding all the stakeholders

Travelling the path less travelled

Correct execution of an idea

Going around obstacles rather than knocking them down – Smart way of doing things

Positive publicity of an entrepreneur = Positive publicity for the enterprise (and vice versa)