Alcatel lucent merger case study

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 disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2014, Richard Ivey School of Business Foundation 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 This document is authorized for use only by nogueres elmi (noguereselmi@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Page 2 9B14M169 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.