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Case Study

Terracycle (B): A million tradeoffs

By John Stuart Read, Philippe Margery and Jan Lepoutre

5 pages

October 2011

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Reference: IMD-3-2263

In 2001 Tom Szaky, a Princeton freshman, founded TerraCycle with the hope of creating perfect eco-capitalism. His idea was a company built on waste – worm waste to be exact. To help fund his fledgling company, Tom entered and won several business plan contests – though he turned down his biggest prize of US$1million because it came with strings attached that conflicted with his aspirations for the firm. Eventually, Tom dropped out of Princeton to pursue his dream of eliminating waste and the company expanded into upcycling – making products from waste that would otherwise have been sent to landfills. Eventually, the company moved into sponsored waste, whereby companies would pay it to set up collection sites, or brigades as TerraCycle called them, for used packaging associated with their brands. TerraCycle would take challenging-to-recycle packaging and turn it into affordable, high-quality products. Ten years later, TerraCycle’s eco-friendly products had received numerous environmental accolades, partnerships with multinationals such as Kraft, SmithKline Beecham and L’Oréal, and the company’s upcycled products were sold at major retailers from Home Depot to Walmart. But profits continued to elude the company, and Tom found himself at a crossroads.

Learning Objective

Each case in the five-part series addresses a key managerial issue at a crucial point in the company’s evolution. The series provides an excellent illustration of the transformation process entrepreneurs go through to ensure their company not only survives but also thrives during each phase of its development. The case series lends itself perfectly to active participation by students. The first three cases demonstrate all five principles of effectuation through the decisions as well as some of the successes and some of the mistakes Tom and his team made. Each case in the series ends at a crucial decision point that will push participants to think hard about: 1) the role of resources (investment and non-cash resources) in new venture creation; 2) the tradeoffs of ownership and control; 3) Building partnerships with consumers, multinationals and government; 4) the importance of the role of management as ventures evolve; 5) effectual partnership and contingency. This case series is ideal for a four-hour session (or two 120-minute sessions or three 90-minute sessions). There is also a compiled version of the case, which works well in a single 90 minute teaching session.

Keywords

Entrepreneurship, Social Entrepreneurship, Effectuation, Strategy, Competitive Strategy, Non-market Strategy, Innovation, Sustainability, Sustainable Development, Environmental Management, Waste Management, General Management

Settings

United States of America
2001-2011

Type

Published Sources

Available Languages

English

Related material

Teaching note, Video

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This case study is part of a series

TerraCycle (C): Eco-capitalism and “upcycling” waste
TerraCycle (D): Where’s the capital in eco-capitalism?
TerraCycle (K): Branded waste
Terracycle (A): Building a venture with spineless employees
Terracycle (B): A million tradeoffs
Terracycle: Outsmarting waste

2012 OIKOS AWARD (Social Entrepreneurship Track)

This case study is part of a series

TerraCycle (C): Eco-capitalism and “upcycling” waste
TerraCycle (D): Where’s the capital in eco-capitalism?
TerraCycle (K): Branded waste
Terracycle (A): Building a venture with spineless employees
Terracycle (B): A million tradeoffs
Terracycle: Outsmarting waste

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