Case Study Description of Electrolux AB: Managing Innovation
The world's second largest home appliances company has introduced a change in its global organization structure. Electrolux AB has consolidated its research and development, marketing and design functions at the top to form what is known as the "Innovation Triangle." This change is in tune with the pursuit of innovation as a source of differentiation in a competitive industry. The concept has been tested in Electrolux Brazil for four years before being scaled up globally. The amplified version of the Innovation Triangle has a singular objective: to facilitate innovation enterprise-wide by leveraging cross-functional, cross-geographical and cross-business synergies. The ultimate goal is to launch new products faster, better and in greater number. The unveiling of the new organizational structure presents an opportunity for the company's Innovation team to review the company's ongoing innovation initiatives. The four-member team grapples with issues around improving the company's innovation pipeline.
Swot Analysis of "Electrolux AB: Managing Innovation" written by Jean-Louis Schaan, Chandra Sekhar Ramasastry includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Electrolux Innovation facing as an external strategic factors. Some of the topics covered in Electrolux AB: Managing Innovation case study are - Strategic Management Strategies, Innovation, Organizational culture and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Electrolux AB: Managing Innovation casestudy better are - – increasing government debt because of Covid-19 spendings, wage bills are increasing, increasing energy prices, technology disruption, there is backlash against globalization, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion,
cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Electrolux AB: Managing Innovation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Electrolux AB: Managing Innovation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Electrolux Innovation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Electrolux Innovation 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 Electrolux AB: Managing Innovation can be done for the following purposes –
1. Strategic planning using facts provided in Electrolux AB: Managing Innovation case study
2. Improving business portfolio management of Electrolux Innovation
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Electrolux Innovation
Strengths Electrolux AB: Managing Innovation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Electrolux Innovation in Electrolux AB: Managing Innovation Harvard Business Review case study are -
Highly skilled collaborators
– Electrolux Innovation 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 Electrolux AB: Managing Innovation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Electrolux Innovation 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 Electrolux Innovation is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Electrolux AB: Managing Innovation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Electrolux Innovation in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Electrolux Innovation 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.
Cross disciplinary teams
– Horizontal connected teams at the Electrolux Innovation 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.
Effective Research and Development (R&D)
– Electrolux Innovation 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 Electrolux AB: Managing Innovation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Electrolux Innovation 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 Jean-Louis Schaan, Chandra Sekhar Ramasastry 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.
Diverse revenue streams
– Electrolux Innovation is present in almost all the verticals within the industry. This has provided firm in Electrolux AB: Managing Innovation case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Electrolux Innovation digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Electrolux Innovation 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
– Electrolux Innovation has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Electrolux AB: Managing Innovation 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.
Operational resilience
– The operational resilience strategy in the Electrolux AB: Managing Innovation 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 Electrolux Innovation in the sector have low bargaining power. Electrolux AB: Managing Innovation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Electrolux Innovation to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Electrolux AB: Managing Innovation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Electrolux AB: Managing Innovation are -
Increasing silos among functional specialists
– The organizational structure of Electrolux Innovation is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Electrolux Innovation needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Electrolux Innovation to focus more on services rather than just following the product oriented approach.
High cash cycle compare to competitors
Electrolux Innovation 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 Electrolux AB: Managing Innovation HBR case study mentions - Electrolux Innovation 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.
Products dominated business model
– Even though Electrolux Innovation 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 - Electrolux AB: Managing Innovation should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Electrolux AB: Managing Innovation has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Electrolux Innovation 's lucrative customers.
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 Electrolux Innovation supply chain. Even after few cautionary changes mentioned in the HBR case study - Electrolux AB: Managing Innovation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Electrolux Innovation vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Electrolux AB: Managing Innovation 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 Electrolux Innovation has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Electrolux AB: Managing Innovation, is just above the industry average. Electrolux Innovation 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.
Interest costs
– Compare to the competition, Electrolux Innovation 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, Electrolux Innovation 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.
Aligning sales with marketing
– It come across in the case study Electrolux AB: Managing Innovation 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 Electrolux AB: Managing Innovation can leverage the sales team experience to cultivate customer relationships as Electrolux Innovation is planning to shift buying processes online.
Opportunities Electrolux AB: Managing Innovation | 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 Electrolux AB: Managing Innovation are -
Leveraging digital technologies
– Electrolux Innovation 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Electrolux Innovation in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Loyalty marketing
– Electrolux Innovation 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Electrolux Innovation can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Electrolux Innovation can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Electrolux Innovation can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Electrolux Innovation 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, Electrolux AB: Managing Innovation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Electrolux Innovation 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.
Buying journey improvements
– Electrolux Innovation can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Electrolux AB: Managing Innovation 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.
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 Electrolux Innovation 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Electrolux Innovation 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, Electrolux Innovation is facing challenges because of the dominance of functional experts in the organization. Electrolux AB: Managing Innovation 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.
Creating value in data economy
– The success of analytics program of Electrolux Innovation has opened avenues for new revenue streams for the organization in the industry. This can help Electrolux Innovation to build a more holistic ecosystem as suggested in the Electrolux AB: Managing Innovation case study. Electrolux Innovation can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Electrolux AB: Managing Innovation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Electrolux AB: Managing Innovation are -
Environmental challenges
– Electrolux Innovation 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. Electrolux Innovation can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing wage structure of Electrolux Innovation
– 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 Electrolux Innovation.
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 Electrolux Innovation in the Strategy & Execution sector and impact the bottomline of the organization.
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 Electrolux Innovation.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Electrolux Innovation with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Electrolux Innovation 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 Electrolux AB: Managing Innovation .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High dependence on third party suppliers
– Electrolux Innovation 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.
Consumer confidence and its impact on Electrolux Innovation 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.
Shortening product life cycle
– it is one of the major threat that Electrolux Innovation is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Electrolux Innovation business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Electrolux Innovation can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Electrolux Innovation in the Strategy & Execution industry. The Strategy & Execution 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.
Weighted SWOT Analysis of Electrolux AB: Managing Innovation 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 Electrolux AB: Managing Innovation 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 Electrolux AB: Managing Innovation 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 Electrolux AB: Managing Innovation 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 Electrolux AB: Managing Innovation 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 Electrolux Innovation needs to make to build a sustainable competitive advantage.
