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 - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing commodity prices, technology disruption,
increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
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.
Low bargaining power of suppliers
– Suppliers of Wealthfront Aum in the sector have low bargaining power. The Wealthfront Generation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wealthfront Aum to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Wealthfront Aum 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 Luis M. Viceira, Allison M. Ciechanover 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 lead change in Finance & Accounting field
– Wealthfront Aum 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 Wealthfront Aum in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Successful track record of launching new products
– Wealthfront Aum has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wealthfront Aum 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.
Effective Research and Development (R&D)
– Wealthfront Aum 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 The Wealthfront Generation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Highly skilled collaborators
– Wealthfront Aum 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 The Wealthfront Generation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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 -
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Wealthfront Aum 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.
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.
No frontier risks strategy
– After analyzing the HBR case study The Wealthfront Generation, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Aligning sales with marketing
– It come across in the case study The Wealthfront Generation 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 The Wealthfront Generation can leverage the sales team experience to cultivate customer relationships as Wealthfront Aum is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The Wealthfront Generation, is just above the industry average. Wealthfront Aum 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Luis M. Viceira, Allison M. Ciechanover suggests that, Wealthfront Aum 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.
Need for greater diversity
– Wealthfront Aum 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 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.
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 -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wealthfront Aum can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Loyalty marketing
– Wealthfront Aum 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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wealthfront Aum to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Wealthfront Aum to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Wealthfront Aum 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 The Wealthfront Generation - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wealthfront Aum to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Wealthfront Aum 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. Wealthfront Aum 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.
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.
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.
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 -
Stagnating economy with rate increase
– Wealthfront Aum 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.
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.
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.
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 .
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.
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.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Wealthfront Aum business can come under increasing regulations regarding data privacy, data security, etc.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wealthfront Aum in the Finance & Accounting industry. The Finance & Accounting 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.
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.
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.