STAMYPOR

MANAGEMENT OF INNOVATION

Abhishek Divekar PGP/18/137

Kalyani P PGP/18/140
Ralins A PGP/18/160
Vineela Bavineni PGP/18/337
Naved Hasan PGP/18/356
Priyesh V P FPM/04
 INTRODUCTION
Dutch State Mines(1902)
Corporate Managing
Internal Audit
Secretariat Board
Coal Mining to Fertilizers and Chemicals

By 2000, 16 BGs in 3 Clusters

Corporate Staff Central
R&D, HR, Finance and Strategy
Departments Services

Formation of NBD in 1995

NBD
New Resin – STAMYPOR

Large investments made

Polymers and
Life Sciences Performance
Industrial
Does STAMYPOR qualify as an NBD Products Materials
Chemicals
Project?

• Fine Chemicals • Elastomers • Polyethylenes

• Anti-infectives • Engineering Plastics • Polypropylenes
Does it add value to resin Industry? • Food Specialities • Coating Resins • Hydrocarbons
• Bakery Ingredients • Composite Resins • Fibre
Sales = 30% • Engineering Plastic Intermediates
Products • Melamine
Does the market potential justify the sunk Sales = 30% • Agro
costs and further investments required? Sales = 40%
What is the Innovation of Stamypor?
What is its Uncertainty Profile and
Managerial Challenges
 Adaptive
New Entry Uncertainty Profile
Extended
Markets

Radical Huge
Innovation Medium Both Direct
Low supplier investments Lower
buyer and Indirect
power : In- made and Substitute
bargaining Competition
house further Threat
power high
required

Product
Innovation

What were the How is the market

Is the product Are the resources
competitive potential of the
high tech? available?
conditions? product?
 Why is it interesting to
have a separate NPD unit
in the light of innovation?
 New Business Development
Division
 It is a perfect example of Corporate Entrepreneurship
followed by companies nowadays which involves
investments in creation of new value that create either
new source of competitive advantage or renewal of the
value proposition
 There are two types focused approaches to Corporate
Entrepreneurship :
 New Venture Groups which is a group of individuals, or a
division within a corporation, that identifies, evaluates and
cultivates venture opportunities
 Business incubators is a corporate new venture group that
supports and nurtures fledging entrepreneurial ventures until they
can thrive on their own as stand-alone businesses.
 CONTINUED………
 The New Business Development Division set up by
DSM to commercialize successfully radical new
technological innovations
 NBD can be put in the New venture group category as it is
a part of DSM group and could works on product
development projects that were out of scope of the
Business Groups (BGs)
 The main reasons that DSM went for the setting up of NBD
in spite of having separate R&D centres for each business
unit and a corporate R&D centre were
 The growing gap between fundamental and applied scientific
research
 A disparity between the industrial research and application of
the results in existing companies
Effectiveness of Stage Gate Process
3 Stage Process
Stage Gate Process
Selection of Ideas
• New Business  Innovativeness
Development
 Autonomy
 Structured process
 Periodic review
Project
Development  Elimination of infeasible ideas
• Business Evaluation
Project Disadvantages
•Not very effective for radical
innovations which require iterative
processes.
Business •Quality of ideas selected was
development limited by the capability of the
• Start up company person at stage 1
 Is Rein Nieland the right person to
evaluate the project?
 Nieland being Project Team Leader, may not be the right
person.

 Managerial Conceit :
 Successful managers believe they possess superior
expertise to manage uncertainty
 Likely to shift away from analysis to trusting own judgement
 Tend to overlook small problems which may possess
serious threat ( while doing related diversification)
 Escalation of commitment : Sticking around and try to
make their decision work
 Is Rein Nieland the right person to
evaluate the project?
 The idea of joint effort with IGM for dying process after
analysing a lot went wrong
 Team Leader may find hard to reverse process. As the
experiment goes for 10 years, investment may go in vain.
 Team leader has the autonomy in defining certain actions
(may be biased)
 A dedicated team should be in place for evaluation of the
project
 Real Options Analysis: What
should Rein report?
 Looks at investment as a sequence of steps and at each
step the investor has the following options
 Investing additional funds to grow or accelerate
 Delaying
 Shrinking the scale of project
 Abandoning the project
 The financial analysis of continuing the project shows that
 It could cause huge losses to the firm
 It doesn’t meet the criteria for NBD projects
 Rein Neiland should report to abandon the project
 Difficulties and Lessons to be
learned
 Entrepreneurial strategy: Presence of Opportunity,
Resources and people

 Managing innovation: Huge investment, leading the

innovation, building capability inside vs collaboration

 Strategic envelope: leveraging innovation efforts

Checklist of innovation efforts
 How much will the innovation initiative cost?
 How likely is to actually commercially viable?
 How much value it will add?
 What will be learned if it does not pan out?
 1996
Financial Analysis
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Price/kg
Investment in Fixed Assets 682 16000 5 6.5 907
Sales volume Success rate
Crosslinkers 10 17.5 25 37.5 50 75 100 75% 50%
Anti-oxidants 40 70 100 125 150 225 300 33% 33%
Surfactants 30 65 100 150 200 300 400 80% 50%
Other Additives 2 6 10 15 20 30 40 80% 80%
Total Volume 82 158.5 235 327.5 420 630 840
Sales Revenue(@5/Kg)
Crosslinkers 34012.5 59521.88 85031.25 127546.9 170062.5 255093.8 340125
Anti-oxidants 59862 104758.5 149655 187068.8 224482.5 336723.8 448965
Surfactants 108840 235820 362800 544200 725600 1088400 1451200
Other Additives 7256 21768 36280 54420 72560 108840 145120
Total Revenue 209970.5 421868.4 633766.3 913235.6 1192705 1789058 2385410
Sales Revenue(@6.5/Kg)
Crosslinkers 29477.5 51585.63 73693.75 110540.6 147387.5 221081.3 294775
Anti-oxidants 77820.6 136186.1 194551.5 243189.4 291827.3 437740.9 583654.5
Surfactants 88432.5 191603.8 294775 442162.5 589550 884325 1179100
Other Additives 9432.8 28298.4 47164 70746 94328 141492 188656
Total Revenue 205163.4 407673.8 610184.3 866638.5 1123093 1684639 2246186
Variable Costs
Production costs 74374 143759.5 213145 297042.5 380940 571410 761880
Total Variable Costs 74374 143759.5 213145 297042.5 380940 571410 761880
Fixed Costs 1668000 1668000 1668000 1668000 1668000 1668000 1668000

Profits(@6.5/Kg) -1537211 -1404086 -1270961 -1098404 -925847 -554771 -183695

Profits(@5/Kg) -1532404 -1389891 -1247379 -1051807 -856235 -450353 -44470

Thank You