Dsm - Stamypor Case

Problem Definition:

DSM is a company consisting of 16 business groups (BGs) organized across 3 clusters: Life Science Products, Performance Materials, and Polymers & Industrial Chemicals. There are also some functional groups that support the BGs. The New Business Development (NBD) division of DSM is faced with the decision of whether it should continue to develop the Stamypor resin. The product is already near the end of the second stage of development. If NBD’s management board approves this product to continue into the third stage, it will require about 16 million euros to be invested for equipment. However, if the Stamypor project is ended, no further expenditures will be required, allowing DSM-NBD to cut its losses and move on with other projects or priorities.

Decision Point:

DSM should refrain from any further investment of resources into Stamypor and stop hemorrhaging the company’s money. Stamypor currently faces several problems, in addition to the large amount of money that must be invested for the project to continue. Several direct competitors already have the ability to provide similar products, while indirect competitors have the process technology to also enter this market, if they choose to do so. It is likely that Stamypor will not be able to compete without investing in a new production process. Furthermore, there could be difficulty in retaining customers as we don’t have sufficient barriers to entry for potential competitors.

Analysis:

In “Why bad projects are so hard to kill”, we understand that faith often gives birth to projects, but this faith needs to be increasingly tested with data as the project proceeds further. Several flaws can be observed when we analyze the way DSM handled Stamypor. The very act of purchasing a patent based on “relatedness” to one of DSM’s clusters and bypassing the first step of the NBD Stage-gate process, which was more about detailed analysis with empirical evidence and capturing the “voice of the customer”, was a violation in some ways. It is surprising that Stamypor was found to be at the beginning of the value chain, yet it was given such leeway with regards to the NBD processes. The 4 team members work individually with little collaboration, further complicating matters. Typically, competition is studied proactively before the conceptualization