Tony Hsieh at Zappos: Structure, Culture and Radical Change SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Organizational Development
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Tony Hsieh at Zappos: Structure, Culture and Radical Change
After 18 months of attempting to transition the company to holacracy, Tony Hsieh, Zappos' celebrity CEO, decided it was time to make the change happen. In March 2015, he sent an email to all Zappos employees offering them 3 months' severance pay if they felt that self-management was not for them. One month later, 14% of the workforce had quit, including 20% of the tech department, potentially putting at risk a complex transition to a new online platform mandated by parent company Amazon. The case recounts how Tony Hsieh financed, championed, and ultimately became CEO of online shoe retailer Zappos. A passionate entrepreneur who made millions at a young age, Hsieh was known for his penthouse parties, for what he referred to as his "tribe". He brought the same sense of community to Zappos, which he moved from San Francisco to Las Vegas where employees could "be like family". Despite the company's unabashedly weird culture, it had the lowest employee turnover rate in the industry. Widely admired for its outstanding customer service, Zappos was repeatedly listed among Fortune's "Best Places To Work." When in 2009 Amazon acquired Zappos for $1.2 billion, it promised to preserve its management and culture. But Hsieh's decision to implement holacracy - a form of organizational self-management that replaces job titles and hierarchy with "circles" that employees step in and out of according to their preferences and skills - was less popular than hoped. Hence his "rip the Band-Aid" approach, to ensure that only employees committed to the change remained at the company.
Swot Analysis of "Tony Hsieh at Zappos: Structure, Culture and Radical Change" written by Noah Askin, Gianpiero Petriglieri includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Zappos Hsieh facing as an external strategic factors. Some of the topics covered in Tony Hsieh at Zappos: Structure, Culture and Radical Change case study are - Strategic Management Strategies, Leadership, Organizational culture, Organizational structure, Technology and Organizational Development.
Some of the macro environment factors that can be used to understand the Tony Hsieh at Zappos: Structure, Culture and Radical Change casestudy better are - – there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing energy prices, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs,
central banks are concerned over increasing inflation, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Tony Hsieh at Zappos: Structure, Culture and Radical Change
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tony Hsieh at Zappos: Structure, Culture and Radical Change case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Zappos Hsieh, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Zappos Hsieh operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Tony Hsieh at Zappos: Structure, Culture and Radical Change can be done for the following purposes –
1. Strategic planning using facts provided in Tony Hsieh at Zappos: Structure, Culture and Radical Change case study
2. Improving business portfolio management of Zappos Hsieh
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Zappos Hsieh
Strengths Tony Hsieh at Zappos: Structure, Culture and Radical Change | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Zappos Hsieh in Tony Hsieh at Zappos: Structure, Culture and Radical Change Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Zappos Hsieh are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Successful track record of launching new products
– Zappos Hsieh has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Zappos Hsieh has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Organizational Development industry
– Tony Hsieh at Zappos: Structure, Culture and Radical Change firm has clearly differentiated products in the market place. This has enabled Zappos Hsieh to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Zappos Hsieh to invest into research and development (R&D) and innovation.
Strong track record of project management
– Zappos Hsieh is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Zappos Hsieh is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Zappos Hsieh is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tony Hsieh at Zappos: Structure, Culture and Radical Change Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Zappos Hsieh has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Zappos Hsieh to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Tony Hsieh at Zappos: Structure, Culture and Radical Change Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Zappos Hsieh digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zappos Hsieh has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Training and development
– Zappos Hsieh has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tony Hsieh at Zappos: Structure, Culture and Radical Change Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Zappos Hsieh has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Tony Hsieh at Zappos: Structure, Culture and Radical Change - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Zappos Hsieh has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Tony Hsieh at Zappos: Structure, Culture and Radical Change HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Zappos Hsieh in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Tony Hsieh at Zappos: Structure, Culture and Radical Change | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tony Hsieh at Zappos: Structure, Culture and Radical Change are -
Interest costs
– Compare to the competition, Zappos Hsieh has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the segment, Zappos Hsieh needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Tony Hsieh at Zappos: Structure, Culture and Radical Change, it seems that the employees of Zappos Hsieh don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High bargaining power of channel partners
– Because of the regulatory requirements, Noah Askin, Gianpiero Petriglieri suggests that, Zappos Hsieh is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tony Hsieh at Zappos: Structure, Culture and Radical Change, in the dynamic environment Zappos Hsieh has struggled to respond to the nimble upstart competition. Zappos Hsieh has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Zappos Hsieh has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of Zappos Hsieh is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Zappos Hsieh needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Zappos Hsieh to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Tony Hsieh at Zappos: Structure, Culture and Radical Change, is just above the industry average. Zappos Hsieh needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Zappos Hsieh supply chain. Even after few cautionary changes mentioned in the HBR case study - Tony Hsieh at Zappos: Structure, Culture and Radical Change, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Zappos Hsieh vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Zappos Hsieh has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As Tony Hsieh at Zappos: Structure, Culture and Radical Change HBR case study mentions - Zappos Hsieh takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Tony Hsieh at Zappos: Structure, Culture and Radical Change | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Tony Hsieh at Zappos: Structure, Culture and Radical Change are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Zappos Hsieh can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Organizational Development industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Zappos Hsieh can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Zappos Hsieh can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Zappos Hsieh is facing challenges because of the dominance of functional experts in the organization. Tony Hsieh at Zappos: Structure, Culture and Radical Change case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Zappos Hsieh can develop new processes and procedures in Organizational Development industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Building a culture of innovation
– managers at Zappos Hsieh can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Organizational Development segment.
Loyalty marketing
– Zappos Hsieh has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Using analytics as competitive advantage
– Zappos Hsieh has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Tony Hsieh at Zappos: Structure, Culture and Radical Change - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Zappos Hsieh to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Zappos Hsieh can use the latest technology developments to improve its manufacturing and designing process in Organizational Development segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Leveraging digital technologies
– Zappos Hsieh can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Zappos Hsieh to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Zappos Hsieh can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Zappos Hsieh can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Tony Hsieh at Zappos: Structure, Culture and Radical Change, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Zappos Hsieh can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tony Hsieh at Zappos: Structure, Culture and Radical Change suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Tony Hsieh at Zappos: Structure, Culture and Radical Change External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tony Hsieh at Zappos: Structure, Culture and Radical Change are -
Technology acceleration in Forth Industrial Revolution
– Zappos Hsieh has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Zappos Hsieh needs to keep up with the evolution of technology in the Organizational Development sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Zappos Hsieh needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Organizational Development industry regulations.
Increasing wage structure of Zappos Hsieh
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Zappos Hsieh.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Zappos Hsieh in the Organizational Development sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Zappos Hsieh can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Tony Hsieh at Zappos: Structure, Culture and Radical Change .
Shortening product life cycle
– it is one of the major threat that Zappos Hsieh is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Zappos Hsieh needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Zappos Hsieh can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Zappos Hsieh needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Zappos Hsieh in the Organizational Development industry. The Organizational Development industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Zappos Hsieh will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Organizational Development field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Zappos Hsieh can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Zappos Hsieh with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Tony Hsieh at Zappos: Structure, Culture and Radical Change Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Tony Hsieh at Zappos: Structure, Culture and Radical Change needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Tony Hsieh at Zappos: Structure, Culture and Radical Change is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Tony Hsieh at Zappos: Structure, Culture and Radical Change is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Tony Hsieh at Zappos: Structure, Culture and Radical Change is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Zappos Hsieh needs to make to build a sustainable competitive advantage.
