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 - – increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, cloud computing is disrupting traditional business models, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy,
supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, 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 -
High brand equity
– External Innovation has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled External Innovation to keep acquiring new customers and building profitable relationship with both the new and loyal 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Toward an Innovation Sourcing Strategy, 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Toward an Innovation Sourcing Strategy, is just above the industry average. External Innovation needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
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.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, External Innovation 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, Toward an Innovation Sourcing Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. External Innovation can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
Leveraging digital technologies
– External Innovation 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.
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.
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.
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.
Manufacturing automation
– External Innovation 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 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.
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.
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 -
High dependence on third party suppliers
– External Innovation 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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.