Case Study Description of The Wealthfront Generation
This case features Wealthfront, a Palo Alto California-based financial technology startup. Wealthfront created a fully-automated, low-cost online investment platform targeting the millennial generation. The founders positioned Wealthfront as a disruptive force within the asset management industry. By dramatically lowering the minimum investment required, they sought to democratize access to sophisticated investing. By the fall of 2014, the firm's assets under management (AUM) had surpassed $1.5 billion. CEO Adam Nash contemplates a variety of strategic questions including whether Wealthfront should maintain its focus on the consumer channel or expand into business to business channels in order to increase AUM.
Authors :: Luis M. Viceira, Allison M. Ciechanover
Swot Analysis of "The Wealthfront Generation" written by Luis M. Viceira, Allison M. Ciechanover includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wealthfront Aum facing as an external strategic factors. Some of the topics covered in The Wealthfront Generation case study are - Strategic Management Strategies, Entrepreneurship, Financial management, Strategy, Technology and Finance & Accounting.
Some of the macro environment factors that can be used to understand the The Wealthfront Generation casestudy better are - – increasing commodity prices, there is backlash against globalization, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, supply chains are disrupted by pandemic ,
technology disruption, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of The Wealthfront Generation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Wealthfront Generation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wealthfront Aum, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wealthfront Aum 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 The Wealthfront Generation can be done for the following purposes –
1. Strategic planning using facts provided in The Wealthfront Generation case study
2. Improving business portfolio management of Wealthfront Aum
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wealthfront Aum
Strengths The Wealthfront Generation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wealthfront Aum in The Wealthfront Generation Harvard Business Review case study are -
Sustainable margins compare to other players in Finance & Accounting industry
– The Wealthfront Generation firm has clearly differentiated products in the market place. This has enabled Wealthfront Aum to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Wealthfront Aum to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Wealthfront Aum digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wealthfront Aum 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.
High switching costs
– The high switching costs that Wealthfront Aum has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– Wealthfront Aum has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wealthfront Aum to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Wealthfront Aum in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Wealthfront Aum is present in almost all the verticals within the industry. This has provided firm in The Wealthfront Generation 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.
Training and development
– Wealthfront Aum has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The Wealthfront Generation 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.
Cross disciplinary teams
– Horizontal connected teams at the Wealthfront Aum 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.
Strong track record of project management
– Wealthfront Aum is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Wealthfront Aum is one of the most innovative firm in sector. Manager in The Wealthfront Generation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Wealthfront Aum 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 Wealthfront Aum is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Wealthfront Generation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Wealthfront Aum is one of the leading recruiters in the industry. Managers in the The Wealthfront Generation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses The Wealthfront Generation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Wealthfront Generation are -
Low market penetration in new markets
– Outside its home market of Wealthfront Aum, firm in the HBR case study The Wealthfront Generation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Wealthfront Aum products
– To increase the profitability and margins on the products, Wealthfront Aum needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Wealthfront Aum 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 - The Wealthfront Generation should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Wealthfront Aum has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Wealthfront Aum even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to strategic competitive environment developments
– As The Wealthfront Generation HBR case study mentions - Wealthfront Aum 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Wealthfront Aum is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study The Wealthfront Generation can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The Wealthfront Generation, it seems that the employees of Wealthfront Aum 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.
Interest costs
– Compare to the competition, Wealthfront Aum 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.
High cash cycle compare to competitors
Wealthfront Aum 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.
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 Wealthfront Aum supply chain. Even after few cautionary changes mentioned in the HBR case study - The Wealthfront Generation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Wealthfront Aum vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Wealthfront Aum is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Wealthfront Aum needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wealthfront Aum to focus more on services rather than just following the product oriented approach.
Opportunities The Wealthfront Generation | 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 The Wealthfront Generation are -
Building a culture of innovation
– managers at Wealthfront Aum 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 Finance & Accounting segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wealthfront Aum is facing challenges because of the dominance of functional experts in the organization. The Wealthfront Generation 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 Wealthfront Aum 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.
Learning at scale
– Online learning technologies has now opened space for Wealthfront Aum 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Wealthfront Aum 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, The Wealthfront Generation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Wealthfront Aum can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Better consumer reach
– The expansion of the 5G network will help Wealthfront Aum to increase its market reach. Wealthfront Aum 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.
Buying journey improvements
– Wealthfront Aum can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The Wealthfront Generation 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.
Creating value in data economy
– The success of analytics program of Wealthfront Aum has opened avenues for new revenue streams for the organization in the industry. This can help Wealthfront Aum to build a more holistic ecosystem as suggested in the The Wealthfront Generation case study. Wealthfront Aum can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 Wealthfront Aum in the consumer business. Now Wealthfront Aum can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Wealthfront Aum can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Wealthfront Aum can use these opportunities to build new business models that can help the communities that Wealthfront Aum operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Wealthfront Aum can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats The Wealthfront Generation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Wealthfront Generation are -
Environmental challenges
– Wealthfront Aum 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. Wealthfront Aum can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Wealthfront Aum.
Technology acceleration in Forth Industrial Revolution
– Wealthfront Aum has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Wealthfront Aum needs to keep up with the evolution of technology in the Finance & Accounting 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.
Increasing wage structure of Wealthfront Aum
– 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 Wealthfront Aum.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Wealthfront Aum can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Wealthfront Aum needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Wealthfront Aum 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.
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.
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. Wealthfront Aum 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Wealthfront Aum with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Wealthfront Aum 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 Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Wealthfront Aum 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 The Wealthfront Generation .
Shortening product life cycle
– it is one of the major threat that Wealthfront Aum is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of The Wealthfront Generation 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 The Wealthfront Generation 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 The Wealthfront Generation 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 The Wealthfront Generation 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 The Wealthfront Generation 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 Wealthfront Aum needs to make to build a sustainable competitive advantage.
