INTRAPRENEURSHIP Case Study
Intrapreneurial Creation of Anaconda-Ericsson Finance & Leasing Inc.
By Howard Edward Haller, Ph.D. is Professional Keynote Speaker, Published Intrapreneurship Book Author, the Leading Expert and Thought Leader on Intrapreneurship, Corporate Entrepreneurship, Intrapreneurship Program Creation, Using Intrapreneurship programs as a strategic tool for Recruiting and Retaining Key Employees, and Using Intrapreneurship to Increase Innovation and Foster Creativity.
Note: Howard Edward Haller, Ph.D.; serial Intrapreneur was Founder and Managing Director Anaconda-Ericsson Finance & Leasing Inc.
Corporate Entrepreneurship, otherwise known as Intrapreneurship is built around entrepreneurial techniques and innovation within a corporation, partnership, association, or organization to help a business create new product(s), service(s), or division(s). This can help a business or organization to grow, become more profitable, and help it survive through tough times. This article provides an overview of a “real world” successful case study of corporate innovation by utilizing intrapreneurship. PR1ME Computer Inc., manufacturer of a “super minicomputer”, was one of the first prominent users of intrapreneurship in the late 1970′s. The intrapreneurial success of the newly created PR1ME Leasing division helped the small growing OTC listed parent corporation (PR1ME Computer Inc.) to grow rapidly into one with over $480 million in sales. The strong sales and growth from this successful Intrapreneurship adventure resulted in PR1ME Computer Inc. being invited to become listed on the New York Stock Exchange only four years after launching!
The basic concept of Intrapreneurship has been in use for decades.
From 1977 to 1981, Howard Edward Haller, Co-Founder and one of the principle participants in the creation of the Intrapreneurial venture PR1ME Leasing, documented the financial and marketing impact of the successful intrapreneurship operation. Howard Edward Haller (now a Ph.D.) wrote the “real world” case study of PR1ME Leasing, which documented the significant growth and impact of using this intrapreneurial venture over a four year period (1977 to 1981), in June 1982 he successful defended his Thesis then shortly after that in his Master’s Thesis was Published by the University in 1982. Haller’s Thesis was the first academic case study of Intrapreneurship, published by the University in 1982.
But the term, intrapreneurship didn’t come into popularity until the 1980′s when Apple Computer embraced the concept. Apple’s Chairman, then and now, Steven Jobs is credited with bringing the term “Intrapreneurship” into the mainstream media. In an article (September 30, 1985) of Newsweek magazine, Job’s said, “The Macintosh team was what is commonly known as intrapreneurship . . . a group of people going, in essence, back to the garage, but in a large company.”
A successful Intrapreneurship program needs to deal with the issues of existing organizational structure and bureaucracy, which may be rigid. Enlightened and innovative organizations have formal intrapreneurship programs which allow an employee-intrapreneur some time and freedom to pursue new ideas and innovation within their organizations. To be effective, Intrapreneurship programs must be accepted and embraced by both middle management and senior management so that the innovation which can come out of such a program is beneficial and necessary to the firm. All parties must understand that their support of an intrapreneurship program will be both profitable and synergistic to the organization’s basic mission and long term success.
Being a successful intrapreneur takes a unique set of skills beyond creativity. A successful intrapreneur must be willing to take some risks at sharing and pushing an unique idea, have the perseverance to wait for senior management’s final approval to create and launch the product or service, and have the drive to see the idea through to fruition, no matter what.
In 1980, Anaconda-Ericsson Inc. was formed as a joint venture between Atlantic Richfield/ARCO’s Anaconda Copper Subsidiary and the Swedish (European) Telecommunication Giant L.M. Ericsson. These two parent companies had previously been partners in a copper mining interest in the western hemisphere. The products of this venture were ARCO’s Anaconda mining cables, and L. M. Ericsson’s main products were PBX equipment and transmission systems. Anaconda-Ericsson would also eventually market computers and other business-oriented products from Ericsson’s Information Systems.
The transmission operations of Anaconda-Ericsson Inc. got off to a successful start, mainly due to the fact that new carriers of long-distance networks such as MCI needed equipment. Anaconda-Ericsson Inc.’s sales of MCI equipment were the right product at the right time, with captive financing in place to make the sale easier by implementing a short selling cycle. Anaconda-Ericsson sales of $100’s of millions in MCI equipment was accelerated by the creation of a captive Leasing and Finance subsidiary.
In early 1981, Anaconda-Ericsson Inc. reached out to meet with an outside computer marketing expert and management consultant, Howard Edward Haller. Haller was known for his solid marketing and finance experience in helping PR1ME Computer Inc. a company where he had personally built the Intrapreneurial captive leasing and finance company, PR1ME Leasing.
The first task that Anaconda-Ericsson Inc. assigned to Haller was to sell off the existing AXXA Computer inventory and review the viability of the present US acquisitions of AXXA Corporation (manufacturer of word processing system built to compete against Wang Computer). Haller successfully sold off the entire existing AXXA inventory to AT&T and Pacific Bell. Haller recommended shutting down AXXA, based on the announcement by IBM of their new PC in August 1981 IBM PC made the AXXA, an 8 bit word processing computer, now out dated by the new 16 bit state-of-the-art IBM Personal Computer.
Haller then presented a formal business plan to create a western hemisphere captive finance and leasing subsidiary for Anaconda-Ericsson Inc., ARCO and L. M. Ericsson. Haller would design and create “de novo” an intrapreneurial venture “Western Hemisphere Finance and Leasing Subsidiary” to finance the sales of the ARCO’s products internationally which they built in the US and Europe. Anaconda-Ericsson Inc.’s Board of Directors and the Managing Directors approved the business proposal and appointed Haller the Managing Director (the European title for Chairman and CEO) of the new wholly owned subsidiary, Anaconda Ericsson Leasing and Finance Inc.
Anaconda- Ericsson Leasing & Finance Inc. was able to borrow well over $500,000,000 on a non-recourse basis from a group of major banks (similar to what was done by PR1ME Leasing) to fund Anaconda Ericsson’s Leasing and Finance with only a minimal investment by Anaconda-Ericsson Inc. No parent companies (ARCO or L. M Ericsson) guarantees on the bank debt were necessary to fund the newly created innovative captive equipment leasing subsidiary. In addition to bank debt, Anaconda- Ericsson Leasing & Finance Inc. also used “SEK debt” (Swedish Ex-IM Bank funding for export sales as the debt sources at low interest rates) to structure leverage leases and increase Anaconda-Ericsson Inc.’s sales and the Anaconda-Ericsson Finance and Leasing subsidiary’s sales and profits.
Anaconda-Ericsson’s Leasing and Finance Inc. was able to finance over $600 Million of Anaconda-Ericsson’s equipment in only 36 months, primarily on leasing or financing the L. M. Ericsson’s MCI equipment and Anaconda Wire & Cable equipment.
At the same time that Anaconda-Ericsson Inc. was utilizing intrapreneurial ventures to build their company, Apple Computer was also using intrapreneurship for the creation of Apple’s Macintosh computer. Intrapreneurship had now become a moving force in helping firms grow within the United States and around the world.
Two and half years after Haller’s Master’s Thesis was published by the University, “TIME” magazine published an article (February 4, 1985) entitled “Here come the Intrapreneurs.” Time’s article about Intrapreneurs included the following insight, “In 1975 Stephen Wozniak, then a 25-year-old designer at Hewlett-Packard, went to his boss with the idea of a microcomputer that could be hooked up to a home television set. The firm was not interested. Wozniak therefore started his own company with Steven Jobs, a friend working at Atari. The company: Apple Computer. Sales last year: $1.5 billion.” Note: Apple continues to grow and in 2010 the value of Apple Corporation exceeded the value of Microsoft.
Unfortunately, sometimes Senior or Middle management does value the human capital with their firm and they rejects ideas, innovation or creativity from their employees and can lose major product launches and literally Billions of dollars in sales and profits. Hewlett-Packard is a great example of this kind of mistake. If Hewlett-Packard would have had an Intrapreneurship program in place – they would have owned the APPLE phenomena, but they did not. When Stephen Wozniak, a part-time employee, presented his invention of his “personal computer” to an H-P executive, that executive is credited with rejecting the whole concept of individuals not needing or wanting personal computers. So, Wozniak and Jobs were free to go out as entrepreneurs and start building Apple Computer Inc. Apple became one of the leading companies in the personal computer industry.
Later, in 1986, John Naisbett in his book, “Re-Inventing the Corporation,” discussed how the use of corporate entrepreneurship (intrapreneurship) concepts and methods could be of significant importance for existing businesses to find new markets and new products.
The concept of Intrapreneurship was proven and established by the early 1990′s, well after a decade of observing successful firms such as APPLE Computer, PR1ME Computer, Corona Data Systems, and Anaconda-Ericsson. These business and other firms have proven that successfully using intrapreneurship significantly grew their businesses and that intrapreneurship (corporate entrepreneurship) had become an important part of best business practices within innovative companies.
In the early 1990’s, Harvard Business School Professor Rosabeth Moss Kanter commented on the use of corporate entrepreneurship (intrapreneurship) in the book “When Giants Learn to Dance” as a significant growth factor in ensuring the survival of a company.
Copyright (C) 1982-2012, Intrapreneurship Institute and Dr. Howard Edward Haller
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Howard Edward Haller, Ph.D. is Professional Keynote Speaker on Intrapreneurship, Corporate Entrepreneurship, Intrapreneurship Program Creation, Using Intrapreneurship programs as a strategic tool for Recruiting and Retaining Key Employees, and Using Intrapreneurship to Increase Innovation and Foster Creativity.
Dr. Howard Edward Haller is a “street smart” serial Intrapreneur and Entrepreneur, and is the Leading Expert and Thought Leader on Intrapreneurship, Intrapreneurship Program Creation, Intrapreneurship Program Implementation & Operation, and Entrepreneurship.
Dr. Haller is also a University Graduate Business School Professor, major University Trustee (Emeritus), and past University Board President, as well as a seasoned Senior Corporate Executive of major public and private companies. Haller was the Founder and Managing Director of Anaconda-Ericsson Finance and Leasing Inc.(for Anaconda-Ericsson Inc., the ARCO & LM Ericsson Joint Venture) Dr. Haller was Senior Vice President of United Artist/Tele-Communications Inc., where he managed assets in excess of $4 Billion.
Howard Edward Haller’s groundbreaking 1982 University published academic research on intrapreneurship is cited by Wikipedia.org in their “History of Intrapreneurship” entry. In addition, Dr. Haller’s 2009 published intrapreneurship book “Intrapreneurship Success: A PR1ME Example” is also cited by Wikipedia.org in their “History of Intrapreneurship.”
Book Dr. Howard Edward Haller to speak or consult with your entire firm or your senior executive on Intrapreneurship, Corporate Entrepreneurship , Intrapreneurship Program Creation or Increasing Innovation with your company.