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 - – there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs,
central banks are concerned over increasing inflation, 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 -
Successful track record of launching new products
– Innovation Strategy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Innovation Strategy 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.
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.
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.
High switching costs
– The high switching costs that Innovation Strategy 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.
Organizational Resilience of Innovation Strategy
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Innovation Strategy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Innovation Strategy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Innovation Strategy 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.
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.
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.
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.
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.
Highly skilled collaborators
– Innovation Strategy 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 Open Innovation and Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
Need for greater diversity
– Innovation Strategy 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 star products
– The top 2 products and services of the firm as mentioned in the Open Innovation and Strategy 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 Innovation Strategy has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Innovation Strategy, firm in the HBR case study Open Innovation and Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
Products dominated business model
– Even though Innovation Strategy 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 - Open Innovation and Strategy should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Innovation Strategy is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Open Innovation and Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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 -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Innovation Strategy 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.
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.
Manufacturing automation
– Innovation Strategy 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.
Buying journey improvements
– Innovation Strategy can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Open Innovation and Strategy 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.
Loyalty marketing
– Innovation Strategy 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.
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.
Building a culture of innovation
– managers at Innovation Strategy 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 Strategy & Execution segment.
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.
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.
Leveraging digital technologies
– Innovation Strategy 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.
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.
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.
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.
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 -
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.
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.
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. Innovation Strategy needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
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 .
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.
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. Innovation Strategy 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.
Increasing wage structure of Innovation Strategy
– 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 Innovation Strategy.
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.
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.
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.
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.
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.