In February 2016, Kathy Hannun--a project leader at X, Alphabet Inc.'s so-called "moonshot factory--had to prepare a recommendation for the senior leadership of X regarding the future of Foghorn, a project she was leading to develop a carbon-neutral process for converting sea water into fuel. Recognizing the blueprint for projects at X--(1) addressing a huge problem with a (2) radical solution using (3) breakthrough technology--Hannun had to decide whether to recommend killing the project. Despite the technical feasibility of the Foghorn process, its expected cost per gallon of fuel produced was signficiantly higher than the established "kill metric"--the maximum unit cost that Hannun and colleagues had set for continuing the project. The case provides an opportunity to examine the management of radical innovation and the challenges associated with assessing early stage ideas. Topics covered include the importance of experimentation and failure as well as the management of opportunity costs in solving large problems.
Authors :: Robert S. Huckman, Karim R. Lakhani, Kyle R. Myers
Topics :: Technology & Operations
Tags :: Project management, Research & development, Social enterprise, Technology, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis
Swot Analysis of "X: The Foghorn Decision" written by Robert S. Huckman, Karim R. Lakhani, Kyle R. Myers includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Foghorn Hannun facing as an external strategic factors. Some of the topics covered in X: The Foghorn Decision case study are - Strategic Management Strategies, Project management, Research & development, Social enterprise, Technology and Technology & Operations.
Some of the macro environment factors that can be used to understand the X: The Foghorn Decision casestudy better are - – increasing transportation and logistics costs, there is backlash against globalization, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices,
supply chains are disrupted by pandemic , increasing energy prices, etc
Introduction to SWOT Analysis of X: The Foghorn Decision
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in X: The Foghorn Decision case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Foghorn Hannun, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Foghorn Hannun 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 X: The Foghorn Decision can be done for the following purposes –
1. Strategic planning using facts provided in X: The Foghorn Decision case study
2. Improving business portfolio management of Foghorn Hannun
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 Foghorn Hannun
Strengths X: The Foghorn Decision | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Foghorn Hannun in X: The Foghorn Decision Harvard Business Review case study are -
Successful track record of launching new products
– Foghorn Hannun has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Foghorn Hannun 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.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Foghorn Hannun digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Foghorn Hannun 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.
High switching costs
– The high switching costs that Foghorn Hannun 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.
Low bargaining power of suppliers
– Suppliers of Foghorn Hannun in the sector have low bargaining power. X: The Foghorn Decision has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Foghorn Hannun to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Foghorn Hannun 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 Foghorn Hannun is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in X: The Foghorn Decision Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Foghorn Hannun is one of the leading recruiters in the industry. Managers in the X: The Foghorn Decision are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Foghorn Hannun 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 Robert S. Huckman, Karim R. Lakhani, Kyle R. Myers 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.
Cross disciplinary teams
– Horizontal connected teams at the Foghorn Hannun 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 X: The Foghorn Decision 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.
Highly skilled collaborators
– Foghorn Hannun 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 X: The Foghorn Decision HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Foghorn Hannun has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Foghorn Hannun to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Foghorn Hannun is present in almost all the verticals within the industry. This has provided firm in X: The Foghorn Decision 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.
Weaknesses X: The Foghorn Decision | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of X: The Foghorn Decision are -
Interest costs
– Compare to the competition, Foghorn Hannun 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the X: The Foghorn Decision 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 Foghorn Hannun has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Foghorn Hannun 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.
Slow decision making process
– As mentioned earlier in the report, Foghorn Hannun 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. Foghorn Hannun 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.
No frontier risks strategy
– After analyzing the HBR case study X: The Foghorn Decision, 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.
High operating costs
– Compare to the competitors, firm in the HBR case study X: The Foghorn Decision 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 Foghorn Hannun 's lucrative customers.
Slow to strategic competitive environment developments
– As X: The Foghorn Decision HBR case study mentions - Foghorn Hannun 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.
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 Foghorn Hannun supply chain. Even after few cautionary changes mentioned in the HBR case study - X: The Foghorn Decision, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Foghorn Hannun vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Robert S. Huckman, Karim R. Lakhani, Kyle R. Myers suggests that, Foghorn Hannun 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.
Increasing silos among functional specialists
– The organizational structure of Foghorn Hannun is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Foghorn Hannun needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Foghorn Hannun to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Foghorn Hannun 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 - X: The Foghorn Decision should strive to include more intangible value offerings along with its core products and services.
Opportunities X: The Foghorn Decision | 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 X: The Foghorn Decision are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Foghorn Hannun can use these opportunities to build new business models that can help the communities that Foghorn Hannun operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Buying journey improvements
– Foghorn Hannun can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. X: The Foghorn Decision 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 Foghorn Hannun in the consumer business. Now Foghorn Hannun can target international markets with far fewer capital restrictions requirements than the existing system.
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. Foghorn Hannun can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Foghorn Hannun 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.
Loyalty marketing
– Foghorn Hannun 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Foghorn Hannun 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, X: The Foghorn Decision, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Foghorn Hannun is facing challenges because of the dominance of functional experts in the organization. X: The Foghorn Decision 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Foghorn Hannun can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Foghorn Hannun 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.
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. Foghorn Hannun 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 Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Foghorn Hannun 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. Foghorn Hannun 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.
Manufacturing automation
– Foghorn Hannun 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.
Threats X: The Foghorn Decision External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study X: The Foghorn Decision are -
High dependence on third party suppliers
– Foghorn Hannun 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.
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 Foghorn Hannun.
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. Foghorn Hannun can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Foghorn Hannun is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Foghorn Hannun needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Foghorn Hannun can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Regulatory challenges
– Foghorn Hannun 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study X: The Foghorn Decision, Foghorn Hannun 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, Foghorn Hannun 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 X: The Foghorn Decision .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Foghorn Hannun with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Foghorn Hannun 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.
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 Foghorn Hannun in the Technology & Operations sector and impact the bottomline of the organization.
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. Foghorn Hannun needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Weighted SWOT Analysis of X: The Foghorn Decision 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 X: The Foghorn Decision 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 X: The Foghorn Decision 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 X: The Foghorn Decision 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 X: The Foghorn Decision 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 Foghorn Hannun needs to make to build a sustainable competitive advantage.
