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 - – central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing energy prices, technology disruption, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google,
increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, 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 -
High switching costs
– The high switching costs that Zappos Hsieh has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
Analytics focus
– Zappos Hsieh is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Noah Askin, Gianpiero Petriglieri can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Low bargaining power of suppliers
– Suppliers of Zappos Hsieh in the sector have low bargaining power. Tony Hsieh at Zappos: Structure, Culture and Radical Change has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Zappos Hsieh to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
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.
Ability to lead change in Organizational Development field
– Zappos Hsieh is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Zappos Hsieh in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Zappos Hsieh is one of the leading recruiters in the industry. Managers in the Tony Hsieh at Zappos: Structure, Culture and Radical Change are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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 -
Capital Spending Reduction
– Even during the low interest decade, Zappos Hsieh has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
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.
Products dominated business model
– Even though Zappos Hsieh has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Tony Hsieh at Zappos: Structure, Culture and Radical Change should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study Tony Hsieh at Zappos: Structure, Culture and Radical Change that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Tony Hsieh at Zappos: Structure, Culture and Radical Change can leverage the sales team experience to cultivate customer relationships as Zappos Hsieh is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Zappos Hsieh is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Tony Hsieh at Zappos: Structure, Culture and Radical Change can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
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 star products
– The top 2 products and services of the firm as mentioned in the Tony Hsieh at Zappos: Structure, Culture and Radical Change HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Zappos Hsieh has relatively successful track record of launching new products.
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.
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 -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Zappos Hsieh to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Zappos Hsieh to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Zappos Hsieh in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Organizational Development segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Zappos Hsieh has opened avenues for new revenue streams for the organization in the industry. This can help Zappos Hsieh to build a more holistic ecosystem as suggested in the Tony Hsieh at Zappos: Structure, Culture and Radical Change case study. Zappos Hsieh can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Zappos Hsieh can use these opportunities to build new business models that can help the communities that Zappos Hsieh operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Zappos Hsieh can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Zappos Hsieh to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Zappos Hsieh in the consumer business. Now Zappos Hsieh can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Better consumer reach
– The expansion of the 5G network will help Zappos Hsieh to increase its market reach. Zappos Hsieh will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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 -
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 .
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.
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.
Stagnating economy with rate increase
– Zappos Hsieh can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Zappos Hsieh demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Zappos Hsieh business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Zappos Hsieh high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business 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.
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.