Case Study Description of Innovation at Progressive (A): Pay-As-You-Go Insurance
Used as part of the second module of a course on Managing Service Operations, which addresses the design of sustainable service models (606-031).Consumer auto insurance is a price-sensitive industry in which customers rarely pay a premium to a provider even for additional service features. Progressive spends more on additional service features than its competitors do; consumers don't pay extra for these features, yet the company makes money on a product its competitors often do not. Central to Progressive's success is its ability (a) to turn operational savings into value-added service and (b) to capitalize on its unique competencies through clever service design. Progressive is considering a national rollout of Autograph, a pay-as-you-go insurance service offering that recently completed a successful pilot in Texas. A rewritten version of an earlier case.
Authors :: Frances X. Frei, Hanna Rodriguez-Farrar
Swot Analysis of "Innovation at Progressive (A): Pay-As-You-Go Insurance" written by Frances X. Frei, Hanna Rodriguez-Farrar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Service Progressive facing as an external strategic factors. Some of the topics covered in Innovation at Progressive (A): Pay-As-You-Go Insurance case study are - Strategic Management Strategies, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Innovation at Progressive (A): Pay-As-You-Go Insurance casestudy better are - – talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing commodity prices, geopolitical disruptions,
there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Innovation at Progressive (A): Pay-As-You-Go Insurance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Innovation at Progressive (A): Pay-As-You-Go Insurance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Service Progressive, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Service Progressive 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 Innovation at Progressive (A): Pay-As-You-Go Insurance can be done for the following purposes –
1. Strategic planning using facts provided in Innovation at Progressive (A): Pay-As-You-Go Insurance case study
2. Improving business portfolio management of Service Progressive
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Service Progressive
Strengths Innovation at Progressive (A): Pay-As-You-Go Insurance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Service Progressive in Innovation at Progressive (A): Pay-As-You-Go Insurance Harvard Business Review case study are -
Strong track record of project management
– Service Progressive is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Service Progressive 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 Innovation at Progressive (A): Pay-As-You-Go Insurance - 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
– Service Progressive 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 Frances X. Frei, Hanna Rodriguez-Farrar 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
– Service Progressive is present in almost all the verticals within the industry. This has provided firm in Innovation at Progressive (A): Pay-As-You-Go Insurance 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 Technology & Operations segment
- digital transformation varies from industry to industry. For Service Progressive digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Service Progressive 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.
Operational resilience
– The operational resilience strategy in the Innovation at Progressive (A): Pay-As-You-Go Insurance 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.
Successful track record of launching new products
– Service Progressive has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Service Progressive 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.
Superior customer experience
– The customer experience strategy of Service Progressive in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Service Progressive 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 Innovation at Progressive (A): Pay-As-You-Go Insurance HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Technology & Operations field
– Service Progressive 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 Service Progressive in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Service Progressive in the sector have low bargaining power. Innovation at Progressive (A): Pay-As-You-Go Insurance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Service Progressive to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Service Progressive
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Service Progressive does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Innovation at Progressive (A): Pay-As-You-Go Insurance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Innovation at Progressive (A): Pay-As-You-Go Insurance are -
Low market penetration in new markets
– Outside its home market of Service Progressive, firm in the HBR case study Innovation at Progressive (A): Pay-As-You-Go Insurance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Service Progressive is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Service Progressive needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Service Progressive to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Service Progressive 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 - Innovation at Progressive (A): Pay-As-You-Go Insurance should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Service Progressive 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.
Slow to strategic competitive environment developments
– As Innovation at Progressive (A): Pay-As-You-Go Insurance HBR case study mentions - Service Progressive 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.
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 Service Progressive supply chain. Even after few cautionary changes mentioned in the HBR case study - Innovation at Progressive (A): Pay-As-You-Go Insurance, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Service Progressive vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Service Progressive 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.
High cash cycle compare to competitors
Service Progressive 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.
Aligning sales with marketing
– It come across in the case study Innovation at Progressive (A): Pay-As-You-Go Insurance 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 Innovation at Progressive (A): Pay-As-You-Go Insurance can leverage the sales team experience to cultivate customer relationships as Service Progressive is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Innovation at Progressive (A): Pay-As-You-Go Insurance, in the dynamic environment Service Progressive has struggled to respond to the nimble upstart competition. Service Progressive has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Service Progressive products
– To increase the profitability and margins on the products, Service Progressive needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Innovation at Progressive (A): Pay-As-You-Go Insurance | 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 Innovation at Progressive (A): Pay-As-You-Go Insurance are -
Buying journey improvements
– Service Progressive can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Innovation at Progressive (A): Pay-As-You-Go Insurance 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Service Progressive is facing challenges because of the dominance of functional experts in the organization. Innovation at Progressive (A): Pay-As-You-Go Insurance 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.
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 Service Progressive 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.
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 Service Progressive in the consumer business. Now Service Progressive can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Service Progressive can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Service Progressive 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Service Progressive can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Service Progressive 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. Service Progressive 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.
Manufacturing automation
– Service Progressive can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Using analytics as competitive advantage
– Service Progressive 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 Innovation at Progressive (A): Pay-As-You-Go Insurance - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Service Progressive 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 Service Progressive to increase its market reach. Service Progressive 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Service Progressive 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, Innovation at Progressive (A): Pay-As-You-Go Insurance, 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 Service Progressive 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.
Threats Innovation at Progressive (A): Pay-As-You-Go Insurance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Innovation at Progressive (A): Pay-As-You-Go Insurance are -
Regulatory challenges
– Service Progressive 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 Technology & Operations industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Innovation at Progressive (A): Pay-As-You-Go Insurance, Service Progressive may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Shortening product life cycle
– it is one of the major threat that Service Progressive is facing in Technology & Operations 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Service Progressive 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 Innovation at Progressive (A): Pay-As-You-Go Insurance .
Increasing wage structure of Service Progressive
– 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 Service Progressive.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Service Progressive with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Service Progressive 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.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Service Progressive can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Service Progressive in the Technology & Operations 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 Service Progressive.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Service Progressive in the Technology & Operations industry. The Technology & Operations 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. Service Progressive 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.
Weighted SWOT Analysis of Innovation at Progressive (A): Pay-As-You-Go Insurance 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 Innovation at Progressive (A): Pay-As-You-Go Insurance 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 Innovation at Progressive (A): Pay-As-You-Go Insurance 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 Innovation at Progressive (A): Pay-As-You-Go Insurance 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 Innovation at Progressive (A): Pay-As-You-Go Insurance 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 Service Progressive needs to make to build a sustainable competitive advantage.
