Open Innovation and Strategy SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Open Innovation and Strategy
The increasing adoption of more open approaches to innovation fits uneasily with current theories of business strategy. Traditional business strategy has guided firms to develop defensible positions against the forces of competition and power in the value chain, implying the importance of constructing barriers rather than promoting value creation through openness. Recently, however, firms and even whole industries, such as the software industry, are experimenting with novel business models based on harnessing collective creativity through open innovation. The apparent success of some of these experiments challenges prevailing views of strategy. At the same time, many of these experimenters now are grappling with issues related to value capture and sustainability of their business models, as well as issues of corporate influence and the potential co-option of open initiatives. These issues bring us back to traditional business strategy, which can offer important insights. To make strategic sense of innovation communities, ecosystems, networks, and their implications for competitive advantage, a new approach to strategy--open strategy--is needed. Open strategy balances the tenets of traditional business strategy with the promise of open innovation.
Authors :: Henry W. Chesbrough, Melissa M. Appleyard
Swot Analysis of "Open Innovation and Strategy" written by Henry W. Chesbrough, Melissa M. Appleyard includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Innovation Strategy facing as an external strategic factors. Some of the topics covered in Open Innovation and Strategy case study are - Strategic Management Strategies, Creativity, Innovation and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Open Innovation and Strategy casestudy better are - – increasing commodity prices, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, technology disruption, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions,
increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Open Innovation and Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Open Innovation and Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Innovation Strategy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Innovation Strategy 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 Open Innovation and Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Open Innovation and Strategy case study
2. Improving business portfolio management of Innovation Strategy
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 Innovation Strategy
Strengths Open Innovation and Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Innovation Strategy in Open Innovation and Strategy Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Innovation Strategy 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.
Sustainable margins compare to other players in Strategy & Execution industry
– Open Innovation and Strategy firm has clearly differentiated products in the market place. This has enabled Innovation Strategy to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Innovation Strategy to invest into research and development (R&D) and innovation.
Innovation driven organization
– Innovation Strategy is one of the most innovative firm in sector. Manager in Open Innovation and Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Innovation Strategy 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 Henry W. Chesbrough, Melissa M. Appleyard 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.
Ability to recruit top talent
– Innovation Strategy is one of the leading recruiters in the industry. Managers in the Open Innovation and Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Innovation Strategy 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 Innovation Strategy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Open Innovation and Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Innovation Strategy in the sector have low bargaining power. Open Innovation and Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Innovation Strategy to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Innovation Strategy has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Open Innovation and Strategy 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)
– Innovation Strategy 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 Open Innovation and Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Innovation Strategy is present in almost all the verticals within the industry. This has provided firm in Open Innovation and Strategy 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.
Ability to lead change in Strategy & Execution field
– Innovation Strategy 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 Innovation Strategy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Innovation Strategy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Open Innovation and Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Open Innovation and Strategy are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Open Innovation and Strategy, is just above the industry average. Innovation Strategy 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, Innovation Strategy 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, Innovation Strategy 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.
Skills based hiring
– The stress on hiring functional specialists at Innovation Strategy has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Aligning sales with marketing
– It come across in the case study Open Innovation and Strategy 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 Open Innovation and Strategy can leverage the sales team experience to cultivate customer relationships as Innovation Strategy is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Open Innovation and Strategy HBR case study mentions - Innovation Strategy 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.
Increasing silos among functional specialists
– The organizational structure of Innovation Strategy is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Innovation Strategy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Innovation Strategy to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Innovation Strategy products
– To increase the profitability and margins on the products, Innovation Strategy needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Open Innovation and Strategy, it seems that the employees of Innovation Strategy 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, Henry W. Chesbrough, Melissa M. Appleyard suggests that, Innovation Strategy 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Open Innovation and Strategy 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 Innovation Strategy 's lucrative customers.
Opportunities Open Innovation and Strategy | 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 Open Innovation and Strategy are -
Learning at scale
– Online learning technologies has now opened space for Innovation Strategy 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Innovation Strategy is facing challenges because of the dominance of functional experts in the organization. Open Innovation and Strategy 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Innovation Strategy 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, Open Innovation and Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Innovation Strategy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Innovation Strategy 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, Innovation Strategy 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.
Creating value in data economy
– The success of analytics program of Innovation Strategy has opened avenues for new revenue streams for the organization in the industry. This can help Innovation Strategy to build a more holistic ecosystem as suggested in the Open Innovation and Strategy case study. Innovation Strategy can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Innovation Strategy 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 Open Innovation and Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Innovation Strategy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Innovation Strategy to increase its market reach. Innovation Strategy 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.
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 Innovation Strategy in the consumer business. Now Innovation Strategy can target international markets with far fewer capital restrictions requirements than the existing system.
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. Innovation Strategy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Innovation Strategy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Innovation Strategy can use these opportunities to build new business models that can help the communities that Innovation Strategy operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Threats Open Innovation and Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Open Innovation and Strategy are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Innovation Strategy 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.
Stagnating economy with rate increase
– Innovation Strategy 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.
Regulatory challenges
– Innovation Strategy 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 Strategy & Execution industry regulations.
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. Innovation Strategy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Innovation Strategy is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Open Innovation and Strategy, Innovation Strategy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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 Innovation Strategy.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Innovation Strategy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Innovation Strategy has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Innovation Strategy needs to keep up with the evolution of technology in the Strategy & Execution 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.
Consumer confidence and its impact on Innovation Strategy 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.
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 Innovation Strategy in the Strategy & Execution sector and impact the bottomline of the organization.
Environmental challenges
– Innovation Strategy 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. Innovation Strategy can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
High dependence on third party suppliers
– Innovation Strategy 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.
Weighted SWOT Analysis of Open Innovation and Strategy 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 Open Innovation and Strategy 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 Open Innovation and Strategy 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 Open Innovation and Strategy 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 Open Innovation and Strategy 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 Innovation Strategy needs to make to build a sustainable competitive advantage.
