Case Study Description of Nephila: Innovation in Catastrophe Risk Insurance
At the cross-section of capital markets and the catastrophe insurance space stands the hedge fund Nephila. Nephila must decide how best to take advantage of the newly presented market opportunities post hurricanes Katrina, Wilma, and Rita. Nephila has a plethora of options as it brings capital markets understanding to the insurance space. Nephila can easily trade in and out of insurance products and is not subject to regulatory restrictions. Yet, Nephila only capitalizes 1% of the entire catastrophe reinsurance market. What is the best way to grow?
Swot Analysis of "Nephila: Innovation in Catastrophe Risk Insurance" written by Kenneth A. Froot, Michael Heinrich includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nephila Catastrophe facing as an external strategic factors. Some of the topics covered in Nephila: Innovation in Catastrophe Risk Insurance case study are - Strategic Management Strategies, Competition, Competitive strategy, Financial management, Financial markets, Innovation, Managing uncertainty, Marketing, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Nephila: Innovation in Catastrophe Risk Insurance casestudy better are - – increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, there is increasing trade war between United States & China,
competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Nephila: Innovation in Catastrophe Risk Insurance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nephila: Innovation in Catastrophe Risk Insurance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nephila Catastrophe, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nephila Catastrophe 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 Nephila: Innovation in Catastrophe Risk Insurance can be done for the following purposes –
1. Strategic planning using facts provided in Nephila: Innovation in Catastrophe Risk Insurance case study
2. Improving business portfolio management of Nephila Catastrophe
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nephila Catastrophe
Strengths Nephila: Innovation in Catastrophe Risk Insurance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nephila Catastrophe in Nephila: Innovation in Catastrophe Risk Insurance Harvard Business Review case study are -
Strong track record of project management
– Nephila Catastrophe is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Nephila Catastrophe in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Finance & Accounting field
– Nephila Catastrophe 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 Nephila Catastrophe in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Nephila Catastrophe
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nephila Catastrophe does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Nephila Catastrophe 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 Nephila: Innovation in Catastrophe Risk Insurance - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Nephila Catastrophe 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 Nephila: Innovation in Catastrophe Risk Insurance HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Nephila Catastrophe has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nephila Catastrophe to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Nephila Catastrophe digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nephila Catastrophe has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Cross disciplinary teams
– Horizontal connected teams at the Nephila Catastrophe 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.
High switching costs
– The high switching costs that Nephila Catastrophe has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Nephila Catastrophe 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 Nephila Catastrophe is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Nephila: Innovation in Catastrophe Risk Insurance Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Nephila Catastrophe is one of the most innovative firm in sector. Manager in Nephila: Innovation in Catastrophe Risk Insurance Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Nephila: Innovation in Catastrophe Risk Insurance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nephila: Innovation in Catastrophe Risk Insurance are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Nephila: Innovation in Catastrophe Risk Insurance, it seems that the employees of Nephila Catastrophe don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– Nephila Catastrophe has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Nephila Catastrophe 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.
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 Nephila Catastrophe supply chain. Even after few cautionary changes mentioned in the HBR case study - Nephila: Innovation in Catastrophe Risk Insurance, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nephila Catastrophe vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Nephila: Innovation in Catastrophe Risk Insurance HBR case study mentions - Nephila Catastrophe 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.
Increasing silos among functional specialists
– The organizational structure of Nephila Catastrophe is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Nephila Catastrophe needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nephila Catastrophe to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Nephila: Innovation in Catastrophe Risk Insurance 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 Nephila: Innovation in Catastrophe Risk Insurance can leverage the sales team experience to cultivate customer relationships as Nephila Catastrophe is planning to shift buying processes online.
Lack of clear differentiation of Nephila Catastrophe products
– To increase the profitability and margins on the products, Nephila Catastrophe needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Nephila Catastrophe 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. Nephila Catastrophe 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, Kenneth A. Froot, Michael Heinrich suggests that, Nephila Catastrophe 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.
Low market penetration in new markets
– Outside its home market of Nephila Catastrophe, firm in the HBR case study Nephila: Innovation in Catastrophe Risk Insurance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Nephila: Innovation in Catastrophe Risk Insurance | 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 Nephila: Innovation in Catastrophe Risk Insurance are -
Learning at scale
– Online learning technologies has now opened space for Nephila Catastrophe 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nephila Catastrophe can use these opportunities to build new business models that can help the communities that Nephila Catastrophe operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Nephila Catastrophe 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.
Loyalty marketing
– Nephila Catastrophe 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.
Better consumer reach
– The expansion of the 5G network will help Nephila Catastrophe to increase its market reach. Nephila Catastrophe 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nephila Catastrophe 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 Nephila Catastrophe to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Nephila Catastrophe has opened avenues for new revenue streams for the organization in the industry. This can help Nephila Catastrophe to build a more holistic ecosystem as suggested in the Nephila: Innovation in Catastrophe Risk Insurance case study. Nephila Catastrophe 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 Nephila Catastrophe in the consumer business. Now Nephila Catastrophe can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Nephila Catastrophe can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nephila Catastrophe 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. Nephila Catastrophe 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.
Leveraging digital technologies
– Nephila Catastrophe 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nephila Catastrophe 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, Nephila: Innovation in Catastrophe Risk Insurance, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Nephila Catastrophe can develop new processes and procedures in Finance & Accounting 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.
Threats Nephila: Innovation in Catastrophe Risk Insurance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nephila: Innovation in Catastrophe Risk Insurance are -
Technology acceleration in Forth Industrial Revolution
– Nephila Catastrophe has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Nephila Catastrophe needs to keep up with the evolution of technology in the Finance & Accounting 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.
Regulatory challenges
– Nephila Catastrophe 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 Finance & Accounting industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nephila Catastrophe in the Finance & Accounting industry. The Finance & Accounting 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.
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 Nephila Catastrophe business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Nephila Catastrophe 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.
Increasing wage structure of Nephila Catastrophe
– 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 Nephila Catastrophe.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nephila Catastrophe can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Nephila: Innovation in Catastrophe Risk Insurance, Nephila Catastrophe may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
High dependence on third party suppliers
– Nephila Catastrophe 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.
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. Nephila Catastrophe 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.
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.
Stagnating economy with rate increase
– Nephila Catastrophe can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Nephila Catastrophe with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Nephila: Innovation in Catastrophe Risk Insurance 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 Nephila: Innovation in Catastrophe Risk Insurance 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 Nephila: Innovation in Catastrophe Risk Insurance 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 Nephila: Innovation in Catastrophe Risk Insurance 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 Nephila: Innovation in Catastrophe Risk Insurance 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 Nephila Catastrophe needs to make to build a sustainable competitive advantage.
