Miami Dade College Intrapreneurship at Alcatel Lucent Case Discussion hi thank you for helping me so its very straightforward, is writing about 5 most impo

Miami Dade College Intrapreneurship at Alcatel Lucent Case Discussion hi thank you for helping me so its very straightforward, is writing about 5 most important things about the case study attatched W14642
INTRAPRENEURSHIP AT ALCATEL-LUCENT
R. Chandrasekhar wrote this case under the supervision of Professor Simon Parker solely to provide material for class discussion.
The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have
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Version: 2015-01-13
In June 2014, Olivier Leclerc, director of Open Innovation & Intrapreneurship at Alcatel-Lucent, a global
telecommunications (telecom) equipment manufacturer based in France, was considering relaunching
boot camps in the company. Begun at its Belgium unit in 2006 and extended to other geographies in
2008, the boot camps had three objectives: to create value for the company from innovative ideas
generated from among employees, to stimulate an entrepreneurial spirit among employees and to enhance
opportunities for personal development for employees.
Boot camps had subsequently been discontinued, enterprise-wide, at the end of 2012 for several reasons.
First, overall company revenues had been declining while cost of sales was going up, leading, since 2008,
to net loss. Alcatel-Lucent was in the middle of a cost reduction plan called the Performance Program,
which was launched in July 2012 to secure internal savings totaling €1.25 billion1 by the end of 2013. The
program involved restructuring unprofitable units (e.g., Network Applications Business) and exiting
unprofitable markets (e.g., Managed Services), together reducing head count by 5,500 employees and
1,400 contractors worldwide. 2 There was also a growing view, exacerbated by the financial crunch, that
small businesses — lean, nimble and sub-scale — would not fit in a large corporation such as AlcatelLucent in which systems, processes and economies of scale ruled.
Under the leadership of a new chief executive officer (CEO) who took over in February 2013, the
Performance Program had been replaced by the Shift Plan, marking the beginning of a strategic shift
towards business segments that were not only growth intensive but cash generative. “I want to put
innovation back at the heart of Alcatel-Lucent,” said the CEO, adding that the management team would
be “refocusing our research and development [R&D] and redefining our innovation engine to support our
new choices of business.” 3 The goal was to replace the company’s legacy products with new generation
products. It was a clear signal that the spirit of intrapreneurship boot camps would be revived.
1
€1.0=US$0.736 in June 2014, www.x-rates.com/average/?from=USD&to=EUR&year=2014, accessed November 28, 2014.
Alcatel-Lucent Annual Report 2012, Form 20-F, p. 20.
3
“The
Shift
Plan
—
June
19,
2013
—
Video
Highlights
Press
&
Analyst
Conference,”
www.youtube.com/watch?v=tYwQQiHX7KM, accessed September 1, 2014.
2
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Said Leclerc:
As we now consider reigniting the boot camps at Alcatel-Lucent in the light of the Shift Plan, I
am facing three dilemmas. How do I reconcile the big business intolerance for failure with
failure-prone intrapreneurship? How do I design a forward-looking component into
intrapreneurship? How do I change the design and architecture of the boot camp in its new
edition?
TELECOM EQUIPMENT INDUSTRY
Globally, the telecom equipment industry had revenues of US$351 billion in 2013 (see Exhibit 1). Its
products and services provided the back-end support for the more high profile information technologies
(IT) sector, which was transforming the way the world lived, worked and interacted. The telecom
equipment industry itself was changing. The biggest driver of change was the expectation it was fuelling
among end-users. For example, consumers were getting addicted to connectivity, as evidenced by an
increase in the number of devices. They wanted faster and higher quality access. There was a progressive
move towards cloud networking and a greater mix of software in telecom equipment. Under pressure to
deliver new products and services to telecom carriers, its main customers, the industry was reinventing
itself regularly.
There were some recent major trends. Consolidation was common all along the chain — suppliers,
customers and equipment vendors themselves. The number of networking equipment vendors was coming
down. In addition to Alcatel-Lucent, the players included Avaya, Cisco Systems, Ericsson, Fujitsu,
Huawei, Nokia Solutions and Networks (NSN), Samsung and ZTE as well as Adtran, Calix, Ciena and
Juniper.
The nature of competition was changing in two ways. Companies from Asia were gaining market share
with low-priced products and services. They prevailed not only in emerging markets but also in the
developed markets of Europe and the United States. Secondly, new competitors from the mainstream IT
sector were entering the equipment market. Although they were far from meeting the stability and quality
standards of established telecom equipment companies, they were able to bring cost and time-to-market
advantages to the table on the strength of their standardized infrastructure and open platforms. As a result,
the differentiating factors that traditional manufacturers had enjoyed for so long such as – e.g., specialized
knowledge of telecom protocols and frequency management — were being eroded by global IT firms
such as IBM, HP and Accenture in areas including applications, platforms and value-added services.
Said Leclerc:
The key success factors of the telecom equipment manufacturing industry include the total cost of
ownership for the customer, product and service quality, technological advancement, on-time
delivery, flexible manufacturing capacities, local field presence and customer relationships.
Innovation has become the main source of differentiation in an industry that is commoditized.
Customer segmentation is also a common trend. It is often the basis for new product
development.
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ALCATEL-LUCENT COMPANY BACKGROUND
Formed in November 2006 with the merger of Alcatel SA (Alcatel) of France and Lucent Technologies
Inc. (Lucent) of the United States, Alcatel-Lucent was a global communications solutions provider.
Headquartered in Paris, it had consolidated revenues of €14.4 billion ($19.9 billion) for the year ending
December 2013 (see Exhibit 2). The company was spending over 15 per cent of its revenues on R&D
annually. Nearly 9,000 of its 62,000 employees worldwide were involved in R&D projects, and 12 of its
researchers had secured Nobel Prizes in Physics.
Both Alcatel and Lucent shared a lineage dating back to the late 1800s. Lucent had been formed in 1996
when AT&T, a U.S. enterprise involved in building a national communications network, spun off its
manufacturing facilities. AT&T had a legacy of internal ventures, including Bell Labs, a world-renowned
R&D facility at the time. Bell Labs had become, subsequently, an integral, albeit an independent, part of
Lucent. The merger with Alcatel had created synergies around market reach, product portfolio and R&D
costs for the combined entity.
For example, Alcatel was a dominant player in the European region and had strong positions in many
emerging markets while Lucent was better positioned in North America. Alcatel had a presence in the
enterprise market while Lucent had expertise in intellectual property (IP) based solutions. Alcatel was a
sales driven organization while Lucent was known for delivering global services. Both were strong on
R&D, and, post-merger, the combined entity had eliminated the overlapping of R&D projects, leading to
cost savings. 4
Alcatel-Lucent’s R&D had two primary thrusts: research focused on identifying new and disruptive
market opportunities, led by Bell Labs, and development focused on transitioning product concepts to
viable commercial offerings, led by individual business divisions. The company had a portfolio of over
32,000 active patents. It was also licensing selected technologies to generate licensing revenues.
Driven by the vision of “enriching people’s lives by transforming the way the world communicates,” 5
Alcatel-Lucent was focused on triple play (voice-data-image) technologies. It was in the middle of a
transition from an equipment supplier catering to large clients to a systems vendor covering the gamut of
the multimedia content distribution chain. It was deliveringturnkey telecom networks to customers for
whom communications were mission-critical in their core business.
In June 2013, the company launched a three-year strategic program called the Shift Plan designed to
reposition Alcatel-Lucent from a telecom generalist to a specialist player focused on IP networking, cloud
technologies and ultra broadband access (see Exhibit 3). In tune with the Shift Plan, the company had
realigned its businesses into three strategic businesses — Core Networking, Access and Others — each
with a tighter and more controlled portfolio.
The company’s organization structure consisted of three support divisions: Operations (covering delivery
and distribution), Sales (driving customer relationships) and Strategy & Innovation (responsible for
shaping the agenda for the future). In addition, there were three corporate functions: Finance and egal,
Human Resources (HR) and Marketing.
4
Tsvetan Kintisheff, “Kintisheff Research Report [Initiating Coverage],” November 22, 2006, https://amr.thomsonone.com
/Download.ashx, accessed August 10, 2014.
5
www.alcatel-lucent.com/about/overview, accessed December 2, 2014
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Alcatel-Lucent was outsourcing a major part of its manufacturing to a limited number of electronic
manufacturing service (EMS) companies. The latter were using the design specifications provided by
Alcatel-Lucent and testing their platforms in line with the quality assurance standards established by it.
They were procuring components and sub-assemblies based on the company’s demand forecasts.
INTRAPRENEURSHIP
The term “intrapreneur” was coined in the 1980s by Gifford Pinchot, a management consultant who also
outlined the 10 commandments of intrapreneuring (see Exhibit 4). 6 The term referred to employees
innovating within the framework of a large enterprise and using enterprise resources to monetize their
innovation. Unlike entrepreneurs, who promoted their own small start-ups by carrying the risk and raising
resources on their own, intrapreneurs worked within larger organizations where they were tasked with
developing new ideas that would transform the organizations for which they worked.
A study in the United Kingdom by the Chartered Institute of Personnel and Development (CIPD) had
shown that the country’s economic growth could be boosted if larger firms drove internal start-ups. The
research revealed that although 37 per cent of employees wanted the chance to become intrapreneurs
within their organizations, only 12 per cent of companies facilitated such opportunities. The study
concluded that the lack of facilitation potentially represented a “missed opportunity.” 7
A common factor among enterprises run by successors was the withering away of the entrepreneurial
spirit that made first-generation entrepreneurs successful. The phenomenon was also true of large
corporations where ownership and management of capital were independent of each other. As the
corporations grew in size, their professional managers relied on process rigour to deliver results.
Standardization was the universally acknowledged route to reduce costs and ensure efficiencies in
resource utilization. It ran into conflict with innovation, which could come into play only when rules were
broken. Intrapreneurship was seen by many companies as an option to regain innovative edge, and some
were experimenting with a framework that could facilitate it.
BOOT CAMPS
In spring 2006, Alcatel launched what it then called the Innovation Boot Camp in Belgium where it had
its R&D premises. The company was examining ways of bringing its researchers closer to the market and
translating the patents, which they were securing regularly, into go-to-market prospects. The initial idea
was to gather volunteers from among the researchers, put them through a short but intensive coaching
session and help them develop a business plan. The plan was to be presented to an expert group for
validation so that the best among them could be productized. The objective was to improve the
company’s sales to R&D ratio and do so more rapidly than before.
Alcatel realized that, notwithstanding the potential of a talent pool surfacing at the company, as a result of
the boot camp, there were risks of the new resource becoming a stand-alone. There were precedents in the
company of business plans developed by R&D or even Marketing not taking off because they were
inward-looking, developed in isolation from other functions. Therefore, Alcatel decided to make a multi6
Gifford Pinchot, “The Intrapreneur’s Ten Commandments,” November 20, 2011, www.pinchot.com/perspective/
intrapreneuring/, accessed September 5, 2014.
7
“Intrapreneurs: Entrepreneurs in a Day Job?,” March 12, 2014, www.leasingworld.co.uk/freepages/newsdetail.php?ID=1238, accessed May 28, 2014.
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disciplinary team, built around an individual and his or her idea, the focus of coaching. The team would
consist of specialists drawn, as necessary, from design, manufacturing, marketing and customer interface,
in addition to the researcher. Alcatel preferred to own the idea and create value for its own operations
either by transferring the project to one of its business units or by sending it on to Alcatel-Lucent
Ventures, which was a business incubator within Bell Labs, an autonomous R&D division of AlcatelLucent. It was also open to the possibility of a boot camp project being spun off through external venture
capital.
The first boot camp consisted of five teams of five members, rallying around one idea each (see Exhibit
5). While holding on to their regular jobs, the members attended a series of weekend retreats at a
countryside inn near Brussels. Alcatel had enlisted the help of the faculty of Antwerp-based Flanders
Business School (Flanders) to develop a curriculum aimed at building entrepreneurial skills. Each team
had a senior Alcatel manager assigned to help its members identify the market segments, prepare a
business plan, develop elevator pitches and make formal presentations. The final week marked an event
that was billed as Super Friday, when the teams presented their plans to a jury consisting of the CEO of
Alcatel Belgium, other top executives, local venture capitalists (VC) and the Flanders faculty. The short
15-minute presentations were followed by a grueling question and answer session where each team had to
convince the jury of not only the market needs and financial return of the project but also of its vision of
the project in terms of value creation for Alcatel.
The business plans making the final cut moved to the incubation phase where team members (now
reinforced by Alcatel specialists) met with potential customers and gathered additional feedback. If the
feedback was positive, Alcatel launched the project under the direction of an experienced manager.
By the time it merged with Lucent in November 2006, Alcatel had held six boot camps in Belgium and
identified 30 potential projects. Several businesses were in early commercialization. Post-merger, the boot
camps continued at Alcatel-Lucent with some changes. The Innovation Boot Camp was renamed the
Entrepreneurial Boot Camp and was extended beyond Belgium into France, China, India and the United
States. Each boot camp was an autonomous operation run by the country unit with little intervention from
the head office in Paris. The presentations by teams were made to an Innovation Board, which was also
country-specific and manned by local Alcatel-Lucent executives. Depending upon synergies and business
alignments, the project, in its final form, would become embedded into an Alcatel-Lucent business group,
or become part of Alcatel-Lucent Ventures or be handed over to an external VC.
In early 2008, Leclerc was drawn into strategizing the boot bamp. The French edition, known as “Défi
entreprendre” was scheduled to debut in Paris in June that year. 8 Having been with R&D at Alcatel with a
track record of papers (published in well-known journals) and patents, Leclerc was struck by how peer
recognition for a researcher came, even in the context of a large commercial enterprise, not from
developing a marketable product but from the number of papers published and patents held. He also knew
that several new-generation researchers were keen on breaking the traditional mould. They wanted to
pursue success in commerce in its own right rather than as an unintended and accidental by-product of
their work.
A major change introduced by Leclerc was to open the doors of Défi entreprendre not only to researchers
but for anyone across the enterprise who had an innovative idea.
8
“Innovation at Work Ep. 5 — ‘Défi Entreprendre’ Initiative,” September 9, 2009, www.youtube.com/watch?v=Su0jbxrmQII,
accessed December 2, 2014.
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Said Leclerc:
How do you turn a good idea into a bona fide innovation? By giving the person with an idea the
chance to develop it further. It does not matter whether she works in a research role, on the front
line in a managed service centre or at a desk writing a marketing communications manual. We
want to give all employees an opportunity not only to make suggestions for new products or
solutions but also to be part of the cross-organizational team that builds the business case to take
the idea forward. The goal of the program is to stimulate innovation and enhance creativity across
Alcatel-Lucent with a view to sharpen our competitive edge.
Leclerc enlisted the support of the faculty at ESCP-EAP, a European business school, for the teaching
part and of the consulting firm Ulysses Consulting SA, based in Geneva, for getting serial entrepreneurs
on board as team coaches.
RESULTS
By the end of 2012, Défi entreprendre had led to 32 projects in France (see Exhibit 6). Two of them
(MOSAR and Dekaps) had been commercialized, three (Contact Me My W…
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