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DuPont: Market-Driven Innovation

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DuPont: Market-Driven Innovation

In our first posting here, we introduced the Four models of Corporate Entrepreneurship. Our last two postings described how Google (NASDAQ: GOOG) and Whirlpool (NYSE: WHR) implemented the Enabler Model. Today, we introduce the Advocate Model, a relatively new and in some ways counterintuitive form of corporate entrepreneurship in which a group is designated to drive innovation and new business creation, but they are deliberately not provided with significant funds to do so.

In 1999, CEO Chad Holliday of DuPont (NYSE: DD) realized that the company needed some new thinking because, even though margins and returns had improved during the prior six years, growth had declined. In other words, the company was growing its earnings largely through cost reductions rather than by increasing top-line revenues. So Holliday asked senior executives in the corporate plans group to delve into strategic options for generating greater organic top-line growth. DuPont veteran Robert A. Cooper headed the effort.

Cooper and two DuPont staffers sought out academic and other insights into how to drive new business development. At the time, there was not much of a literature, as DuPont was among the first companies to think seriously about corporate entrepreneurship as a driver of organic growth. The company needed to determine what would be the practices and principles of a corporate-level effort that would work in the DuPont context.

The result was the DuPont Market-Driven Innovation (MDI) initiative. MDI is a five-stage process, as depicted in the figure below. Underlying each of the phases is a comprehensive set of methodologies and frameworks that supports the teams and provides consistency and rigor to the process. The essential first stage is Leadership Framing, during which the MDI team works with business unit leadership to define the core mission, growth domain, and decision criteria for opportunities that they are willing to fund. The next stage of the MDI program is aimed at conceptualizing new business ideas that are consistent with the strategic framing. A four-day “business builder” session helps people from both inside and outside DuPont generate and prioritize different business concepts. Teams will then typically spend between four and eight weeks developing a detailed business plan, including a 180-day contract with senior management to address major uncertainties of any concepts that are deemed promising enough to justify such an effort. If the project is funded, the team moves into the concept validation phase. Unlike initial business conception, which is typically qualitative and somewhat abstract, concept validation is much more data-driven. Here, teams pursue their 180-day contract with senior management, managing business risk by spending minimal resources in the early phases to test uncertainties and validate or invalidate their initial insights in real market environments. A concept can be cancelled at any point in the process; however, most often the process brings uncertainties to the surface and tests hypotheses in ways that help new business design teams evolve the concept for successful commercialization during the Execute phase.

Success within one business unit has a way of building interest from others, and over time, teams like those at DuPont can become critical change agents. There is no requirement that business units participate; they do so because they recognize the value of the program. Ellen Kullman, then group vice president for DuPont's Safety and Protection businesses, noted in 2005 that, “we have nearly a half a billion dollars of new revenues we would not have had had it not been for this program.”

The bottom line is that in corporate cultures where business units enjoy significant autonomy, a new business opportunity must be adopted by a business unit in order to come to fruition. This does not mean, however, that business units should be left on their own to develop new businesses. DuPont's MGI program is an Advocate organization that acts as evangelists and innovation experts, facilitating corporate entrepreneurship in conjunction with business units.

Robert C. Wolcott and Michael J. Lippitz are leading authorities on innovation and corporate entrepreneurship at the Kellogg School of Management at Northwestern University, and co-authors of Grow From Within: Mastering Corporate Entrepreneurship and Innovation (McGraw Hill, 2010). In the past seven years, they have studied more than 30 companies across industry sectors and developed an ongoing dialogue with them about corporate entrepreneurship through the Kellogg Innovation Network (KIN)

 

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