Case Study Description of Interface's Evergreen Services Agreement
In an attempt to reduce its ecological footprint, Interface Americas, a leading manufacturer of commercial carpet tile, has launched the Evergreen Services Agreement (ESA)--a lease agreement that provides would-be carpet purchasers with comprehensive floor-covering services (color, texture, warmth, beauty, acoustics, and safety). Under ESA, Interface retains ownership of all carpet material, thereby ensuring proper recycling. Despite active media attention and a lot of interested calls from potential buyers, Interface is having difficulty selling ESA. CEO Dan Hendrix is at a crossroad and must decide whether to continue support for ESA or to focus on other initiatives. This case, grounded in a failed negotiation with the University of Texas, Houston, details a discussion of the difficulties of structuring a long-term lease agreement, defining a new service value proposition for the customer, and developing a sustainable business model for product-related services.
Swot Analysis of "Interface's Evergreen Services Agreement" written by Rogelio Oliva, James Quinn includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Esa Carpet facing as an external strategic factors. Some of the topics covered in Interface's Evergreen Services Agreement case study are - Strategic Management Strategies, Marketing, Product development, Social enterprise, Supply chain, Sustainability and Technology & Operations.
Some of the macro environment factors that can be used to understand the Interface's Evergreen Services Agreement casestudy better are - – increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, increasing energy prices, increasing government debt because of Covid-19 spendings,
increasing transportation and logistics costs, increasing commodity prices, etc
Introduction to SWOT Analysis of Interface's Evergreen Services Agreement
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Interface's Evergreen Services Agreement case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Esa Carpet, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Esa Carpet 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 Interface's Evergreen Services Agreement can be done for the following purposes –
1. Strategic planning using facts provided in Interface's Evergreen Services Agreement case study
2. Improving business portfolio management of Esa Carpet
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 Esa Carpet
Strengths Interface's Evergreen Services Agreement | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Esa Carpet in Interface's Evergreen Services Agreement Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Esa Carpet in the sector have low bargaining power. Interface's Evergreen Services Agreement has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Esa Carpet to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Esa Carpet 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.
Learning organization
- Esa Carpet 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 Esa Carpet is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Interface's Evergreen Services Agreement Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Esa Carpet is present in almost all the verticals within the industry. This has provided firm in Interface's Evergreen Services Agreement 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.
Analytics focus
– Esa Carpet 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 Rogelio Oliva, James Quinn 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.
Superior customer experience
– The customer experience strategy of Esa Carpet in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Esa Carpet
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Esa Carpet does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Interface's Evergreen Services Agreement 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.
Cross disciplinary teams
– Horizontal connected teams at the Esa Carpet are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Technology & Operations industry
– Interface's Evergreen Services Agreement firm has clearly differentiated products in the market place. This has enabled Esa Carpet to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Esa Carpet to invest into research and development (R&D) and innovation.
Innovation driven organization
– Esa Carpet is one of the most innovative firm in sector. Manager in Interface's Evergreen Services Agreement Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Esa Carpet has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Esa Carpet to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Interface's Evergreen Services Agreement | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Interface's Evergreen Services Agreement are -
No frontier risks strategy
– After analyzing the HBR case study Interface's Evergreen Services Agreement, it seems that company is thinking about the frontier risks that can impact Technology & Operations 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Interface's Evergreen Services Agreement, in the dynamic environment Esa Carpet has struggled to respond to the nimble upstart competition. Esa Carpet 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 Esa Carpet products
– To increase the profitability and margins on the products, Esa Carpet needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Esa Carpet 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.
Slow to strategic competitive environment developments
– As Interface's Evergreen Services Agreement HBR case study mentions - Esa Carpet 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 cash cycle compare to competitors
Esa Carpet 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.
Low market penetration in new markets
– Outside its home market of Esa Carpet, firm in the HBR case study Interface's Evergreen Services Agreement needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Interface's Evergreen Services Agreement, it seems that the employees of Esa Carpet 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.
Need for greater diversity
– Esa Carpet 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 operating costs
– Compare to the competitors, firm in the HBR case study Interface's Evergreen Services Agreement 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 Esa Carpet 's lucrative customers.
Products dominated business model
– Even though Esa Carpet 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 - Interface's Evergreen Services Agreement should strive to include more intangible value offerings along with its core products and services.
Opportunities Interface's Evergreen Services Agreement | 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 Interface's Evergreen Services Agreement are -
Leveraging digital technologies
– Esa Carpet 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Esa Carpet can use these opportunities to build new business models that can help the communities that Esa Carpet operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Building a culture of innovation
– managers at Esa Carpet 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 Technology & Operations segment.
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. Esa Carpet 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. Esa Carpet 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. Esa Carpet 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Esa Carpet 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 Esa Carpet to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Esa Carpet can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Esa Carpet 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, Esa Carpet 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.
Buying journey improvements
– Esa Carpet can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Interface's Evergreen Services Agreement 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Esa Carpet in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Manufacturing automation
– Esa Carpet 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.
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 Esa Carpet 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.
Threats Interface's Evergreen Services Agreement External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Interface's Evergreen Services Agreement are -
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 Esa Carpet in the Technology & Operations sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Interface's Evergreen Services Agreement, Esa Carpet 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 .
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.
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.
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 Esa Carpet.
Environmental challenges
– Esa Carpet 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. Esa Carpet can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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. Esa Carpet 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.
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. Esa Carpet needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Esa Carpet 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. Esa Carpet can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Esa Carpet business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Esa Carpet 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Esa Carpet with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Interface's Evergreen Services Agreement 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 Interface's Evergreen Services Agreement 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 Interface's Evergreen Services Agreement 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 Interface's Evergreen Services Agreement 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 Interface's Evergreen Services Agreement 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 Esa Carpet needs to make to build a sustainable competitive advantage.