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 energy prices, increasing commodity prices, wage bills are increasing, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption,
there is increasing trade war between United States & China, supply chains are disrupted by pandemic , 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 -
Highly skilled collaborators
– Esa Carpet 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 Interface's Evergreen Services Agreement HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Training and development
– Esa Carpet has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Interface's Evergreen Services Agreement 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.
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.
Ability to lead change in Technology & Operations field
– Esa Carpet 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 Esa Carpet in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Effective Research and Development (R&D)
– Esa Carpet 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 Interface's Evergreen Services Agreement - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Successful track record of launching new products
– Esa Carpet has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Esa Carpet 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.
Strong track record of project management
– Esa Carpet is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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 -
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.
Slow decision making process
– As mentioned earlier in the report, Esa Carpet 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. Esa Carpet 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Rogelio Oliva, James Quinn suggests that, Esa Carpet 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.
Capital Spending Reduction
– Even during the low interest decade, Esa Carpet 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 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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Interface's Evergreen Services Agreement HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Esa Carpet has relatively successful track record of launching new products.
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.
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.
Increasing silos among functional specialists
– The organizational structure of Esa Carpet is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Esa Carpet needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Esa Carpet to focus more on services rather than just following the product oriented approach.
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 -
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.
Creating value in data economy
– The success of analytics program of Esa Carpet has opened avenues for new revenue streams for the organization in the industry. This can help Esa Carpet to build a more holistic ecosystem as suggested in the Interface's Evergreen Services Agreement case study. Esa Carpet 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 Esa Carpet in the consumer business. Now Esa Carpet can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Esa Carpet 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.
Loyalty marketing
– Esa Carpet 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.
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.
Developing new processes and practices
– Esa Carpet can develop new processes and procedures in Technology & Operations 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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Esa Carpet 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, Interface's Evergreen Services Agreement, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Esa Carpet to increase its market reach. Esa Carpet 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Esa Carpet is facing challenges because of the dominance of functional experts in the organization. Interface's Evergreen Services Agreement 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.
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 -
Shortening product life cycle
– it is one of the major threat that Esa Carpet is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Esa Carpet 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.
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.
Technology acceleration in Forth Industrial Revolution
– Esa Carpet has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Esa Carpet needs to keep up with the evolution of technology in the Technology & Operations 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 wage structure of Esa Carpet
– 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 Esa Carpet.
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.
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.
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.
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.
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.
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 .
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.