Case Study Description of Toward an Innovation Sourcing Strategy
This is an MIT Sloan Management Review article. Companies are increasingly looking beyond their boundaries for help with innovation, working with customers, research companies, business partners, and universities--and even competitors. They are also expanding the purposes for which they consider external sources appropriate. Businesses today are using external sources for all phases of innovation, from discovery and development to commercialization and even product maintenance. Although these changes sound good and are benefiting a great many companies, they add a new layer of complexity to the manager's tasks. And, unfortunately, despite the growing acceptance of external innovation, the authors have found that many companies lack a sourcing strategy to guide them in managing it. They often take an ad hoc approach that produces uneven results--the very problem they are trying to avoid. Instead of dealing with external sources one by one and one at a time, companies should systematically examine and rationalize the increasingly important activity of innovation sourcing. The authors explain how companies can organize their use of external sources holistically, using innovation channels just as they manage specific distribution channels to reach end customers.
Authors :: Sirkka Jarvenpaa, Jane Linder, Thomas H. Davenport, Juyne Linger
Swot Analysis of "Toward an Innovation Sourcing Strategy" written by Sirkka Jarvenpaa, Jane Linder, Thomas H. Davenport, Juyne Linger includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that External Innovation facing as an external strategic factors. Some of the topics covered in Toward an Innovation Sourcing Strategy case study are - Strategic Management Strategies, Innovation, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Toward an Innovation Sourcing Strategy casestudy better are - – central banks are concerned over increasing inflation, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, technology disruption, talent flight as more people leaving formal jobs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Toward an Innovation Sourcing Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Toward an Innovation Sourcing Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the External Innovation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which External Innovation 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 Toward an Innovation Sourcing Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Toward an Innovation Sourcing Strategy case study
2. Improving business portfolio management of External Innovation
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 External Innovation
Strengths Toward an Innovation Sourcing Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of External Innovation in Toward an Innovation Sourcing Strategy Harvard Business Review case study are -
Strong track record of project management
– External Innovation is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– External Innovation is one of the leading recruiters in the industry. Managers in the Toward an Innovation Sourcing Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- External Innovation 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 External Innovation is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Toward an Innovation Sourcing Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– External Innovation has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. External Innovation 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.
Training and development
– External Innovation has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Toward an Innovation Sourcing Strategy 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.
High switching costs
– The high switching costs that External Innovation 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.
Ability to lead change in Technology & Operations field
– External Innovation 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 External Innovation in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– External Innovation is one of the most innovative firm in sector. Manager in Toward an Innovation Sourcing Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– External Innovation is present in almost all the verticals within the industry. This has provided firm in Toward an Innovation Sourcing Strategy 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.
Low bargaining power of suppliers
– Suppliers of External Innovation in the sector have low bargaining power. Toward an Innovation Sourcing Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps External Innovation to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of External Innovation
– The covid-19 pandemic has put organizational resilience at the centre of everthing that External Innovation does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– External Innovation 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 Sirkka Jarvenpaa, Jane Linder, Thomas H. Davenport, Juyne Linger 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.
Weaknesses Toward an Innovation Sourcing Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Toward an Innovation Sourcing Strategy are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Toward an Innovation Sourcing Strategy, in the dynamic environment External Innovation has struggled to respond to the nimble upstart competition. External Innovation has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 External Innovation supply chain. Even after few cautionary changes mentioned in the HBR case study - Toward an Innovation Sourcing Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left External Innovation vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Toward an Innovation Sourcing Strategy 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 External Innovation has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of External Innovation, firm in the HBR case study Toward an Innovation Sourcing Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Toward an Innovation Sourcing Strategy 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 External Innovation 's lucrative customers.
Slow to strategic competitive environment developments
– As Toward an Innovation Sourcing Strategy HBR case study mentions - External Innovation 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.
Capital Spending Reduction
– Even during the low interest decade, External Innovation 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.
Aligning sales with marketing
– It come across in the case study Toward an Innovation Sourcing Strategy 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 Toward an Innovation Sourcing Strategy can leverage the sales team experience to cultivate customer relationships as External Innovation is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, External Innovation is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Toward an Innovation Sourcing Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, External Innovation 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.
Skills based hiring
– The stress on hiring functional specialists at External Innovation has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities Toward an Innovation Sourcing Strategy | 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 Toward an Innovation Sourcing Strategy are -
Developing new processes and practices
– External Innovation 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.
Building a culture of innovation
– managers at External Innovation 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.
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 External Innovation 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.
Better consumer reach
– The expansion of the 5G network will help External Innovation to increase its market reach. External Innovation 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, External Innovation can use these opportunities to build new business models that can help the communities that External Innovation operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for External Innovation 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
– External Innovation can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Toward an Innovation Sourcing Strategy 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.
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. External Innovation can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of External Innovation has opened avenues for new revenue streams for the organization in the industry. This can help External Innovation to build a more holistic ecosystem as suggested in the Toward an Innovation Sourcing Strategy case study. External Innovation can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. External Innovation 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. External Innovation 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.
Using analytics as competitive advantage
– External Innovation 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 Toward an Innovation Sourcing Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help External Innovation to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– External Innovation 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, External Innovation is facing challenges because of the dominance of functional experts in the organization. Toward an Innovation Sourcing Strategy 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 Toward an Innovation Sourcing Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Toward an Innovation Sourcing Strategy are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents External Innovation with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. External Innovation needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– External Innovation 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, External Innovation 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 Toward an Innovation Sourcing Strategy .
Technology acceleration in Forth Industrial Revolution
– External Innovation has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, External Innovation 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.
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. External Innovation can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 External Innovation.
Increasing wage structure of External Innovation
– 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 External Innovation.
Regulatory challenges
– External Innovation 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.
Consumer confidence and its impact on External Innovation demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Toward an Innovation Sourcing Strategy, External Innovation 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 .
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. External Innovation 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 External Innovation in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Toward an Innovation Sourcing Strategy 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 Toward an Innovation Sourcing Strategy 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 Toward an Innovation Sourcing Strategy 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 Toward an Innovation Sourcing Strategy 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 Toward an Innovation Sourcing Strategy 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 External Innovation needs to make to build a sustainable competitive advantage.
