Internal Entrepreneurship: Lessons from Dow Chemical Case

1. Internal Entrepreneurship: Lessons from Dow Chemical Case BA 560 Fall, 2006 Prof. Dowling

2. Key Sponsor Issues/Factors • HR development: • Encourage & reward entrepreneurial activities • Identify potential entrepreneurs • Match the right opportunity with the right entrepreneur • Empower but also be hands-on as coach and mentor • Plan personal development of entrepreneurs

3. Key Sponsor Issues/Factors • Execution Skills: • Ensure integrity of the project • Personal belief and public support of the concept (‘skin in the game’) • Set tough but realistic goals, budget & schedule • Demand results • Tolerate ‘idea’ failures

4. Key Sponsor Issues/Factors • Political skills: • Sell upwards effectively • Key linkage to corporate resources: financial, HR, time • Provide political cover • Provide exposure and career building opportunities for internal entrepreneurs • Provide project leadership/sponsorship continuity

5. Key Lessons ... • Nurturing internal entrepreneurship is a key for driving organic growth in a diversified firm • To be successful, e-epoxy.com needed an entrepreneur who championed the idea, a sponsor who provided support and channeled the idea to fit a strategic need, and an overall strategic context that supported entrepreneurship. • The scarcest resource in corporations are entrepreneurs

6. Key Lessons ... • An internal entrepreneur has to align his/her goals to fall within the corporate purpose (versus the external entrepreneur is in business to follow his/her vision) • The internal entrepreneur has, in principle, access to vast corporate resources (think James Bond ‘007’ here) versus the external entrepreneur who must constantly hustle for sufficient resources (“we need $$$ mantra”)

7. Application to Other Situations … • The engine for internal growth is the internal entrepreneur • Internal entrepreneurs need to be developed/hired, nurtured, and rewarded commensurate with results • The internal entrepreneur needs a network to function effectively. This social capital needs to be built/earned. It cannot easily be imported from outside.

8. Application to Other Situations … • “Small wins” encourage others to become more entrepreneurial • Sponsors are key to success; more importantly sponsors and entrepreneurs need to be matched proactively • The most critical variable in creating a long-term environment for internal entrepreneurship is a supportive organizational context set by top execs in the firm

9. Cautions ... • Sponsors come and go during a new internal venture; the successful entrepreneur needs to carefully cultivate new support for the venture over time as key players change (as Telford did) • Corporate growth can be top down driven or bottom-up (organic). Organic growth is almost impossible without a supportive culture and top management leadership

10. Characteristics of Effective Internal Entrepreneurs • Personality Traits: • Integrity • Political savvy • Honest about mistakes; takes feedback from sponsors • Shares credit • Breaks rules but always stays true to the corporate vision and values

11. Characteristics of Effective Internal Entrepreneurs • Experience: • Established track record; brings credibility and social capital • Long tenure within firm helps • General manager not a narrow expert; ability to think laterally

12. Characteristics of Effective Internal Entrepreneurs • Behaviors: • Ability to discover a profitable value proposition • Ability to communicate and market the value proposition; energy & passion • Ability to mobilize resources; networking ability • Ability to assemble and motivate a team of experts.

13. Characteristics of Effective Internal Entrepreneurs • Behaviors: • Ability to deliver results • Ability to take informed risks, make timely decisions, and be unafraid of consequences of breaking the rules and the possibility of failure • Ability to ramp up (execution skills) or pull the plug (provide career ‘escape routes’ for team members)