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 - – technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic ,
central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
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.
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.
Sustainable margins compare to other players in Technology & Operations industry
– Toward an Innovation Sourcing Strategy firm has clearly differentiated products in the market place. This has enabled External Innovation to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped External Innovation to invest into research and development (R&D) and innovation.
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.
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the External Innovation 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.
Operational resilience
– The operational resilience strategy in the Toward an Innovation Sourcing Strategy 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.
Effective Research and Development (R&D)
– External Innovation 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 Toward an Innovation Sourcing Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Toward an Innovation Sourcing Strategy, it seems that the employees of External Innovation 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.
Products dominated business model
– Even though External Innovation 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 - Toward an Innovation Sourcing Strategy should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, Sirkka Jarvenpaa, Jane Linder, Thomas H. Davenport, Juyne Linger suggests that, External Innovation 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.
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 cash cycle compare to competitors
External Innovation 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 External Innovation is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. External Innovation needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help External Innovation to focus more on services rather than just following the product oriented approach.
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.
Interest costs
– Compare to the competition, External Innovation has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
Lack of clear differentiation of External Innovation products
– To increase the profitability and margins on the products, External Innovation needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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 -
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.
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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for External Innovation 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 External Innovation to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects External Innovation can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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 External Innovation in the consumer business. Now External Innovation can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Learning at scale
– Online learning technologies has now opened space for External Innovation 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.
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 -
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 External Innovation in the Technology & Operations sector and impact the bottomline of the organization.
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.
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.
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.
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 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.
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.
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 External Innovation business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that External Innovation is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 .
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 .
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.
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.