Case Study Description of SolarCity: Rapid Innovation
Between 2010 and 2012, SolarCity experienced tremendous growth in an industry that was generally perceived to be struggling. Many other solar start-ups were failing-Solyndra, which had received a $535M loan from the U.S. government, was the highest profile failure, declaring bankruptcy in September, 2011. Lyndon Rive noted, "Investors have been burned so badly from the solar sector. We've faced that stigma while selling our company to investors." Despite that burn, however, SolarCity went forward with an initial public offering (IPO) in December of 2012 at an IPO price of $8.00 per share. By end of the second quarter, 2014, SolarCity operated in 15 states and the District of Columbia and boasted 140,000 customers. It controlled 36 percent of the residential solar market but had never posted a profit-in 2013 it had a net loss of almost $152 million. SolarCity's growth, however, drove the stock price up, hitting a high of $86.14 in February 2014. The company's continued lack of positive accounting earnings, yet impressive stock returns, left analysts and industry observers wondering: Was SolarCity already making money on installations like the Partnership Flip Model or was the company's share price primarily a bet on the future with lower solar installations costs? This case describes SolarCity's business model and summarizes key issues in the solar industry. It looks at tax equity financing, detailing the Partnership Flip Model which SolarCity used for about two thirds of the funds it had raised by 2014. The Partnership Flip Model is represented in an Excel spreadsheet that students manipulate to understand the implications of various factors.
Swot Analysis of "SolarCity: Rapid Innovation" written by Stefan Reichelstein, Davina Drabkin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Solarcity Solar facing as an external strategic factors. Some of the topics covered in SolarCity: Rapid Innovation case study are - Strategic Management Strategies, Branding, Financial management, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the SolarCity: Rapid Innovation casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing energy prices, increasing transportation and logistics costs, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies,
talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of SolarCity: Rapid Innovation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SolarCity: Rapid Innovation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Solarcity Solar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Solarcity Solar 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 SolarCity: Rapid Innovation can be done for the following purposes –
1. Strategic planning using facts provided in SolarCity: Rapid Innovation case study
2. Improving business portfolio management of Solarcity Solar
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 Solarcity Solar
Strengths SolarCity: Rapid Innovation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Solarcity Solar in SolarCity: Rapid Innovation Harvard Business Review case study are -
Training and development
– Solarcity Solar has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in SolarCity: Rapid Innovation 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.
Organizational Resilience of Solarcity Solar
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Solarcity Solar does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Solarcity Solar digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Solarcity Solar 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.
Sustainable margins compare to other players in Finance & Accounting industry
– SolarCity: Rapid Innovation firm has clearly differentiated products in the market place. This has enabled Solarcity Solar to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Solarcity Solar to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the SolarCity: Rapid Innovation 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.
Superior customer experience
– The customer experience strategy of Solarcity Solar in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Solarcity Solar 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 Solarcity Solar is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SolarCity: Rapid Innovation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Solarcity Solar in the sector have low bargaining power. SolarCity: Rapid Innovation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Solarcity Solar to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Solarcity Solar is present in almost all the verticals within the industry. This has provided firm in SolarCity: Rapid Innovation 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.
Highly skilled collaborators
– Solarcity Solar 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 SolarCity: Rapid Innovation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Finance & Accounting field
– Solarcity Solar 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 Solarcity Solar 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
– Solarcity Solar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses SolarCity: Rapid Innovation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SolarCity: Rapid Innovation are -
No frontier risks strategy
– After analyzing the HBR case study SolarCity: Rapid Innovation, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Solarcity Solar needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring
– The stress on hiring functional specialists at Solarcity Solar 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.
Capital Spending Reduction
– Even during the low interest decade, Solarcity Solar 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.
Increasing silos among functional specialists
– The organizational structure of Solarcity Solar is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Solarcity Solar needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Solarcity Solar to focus more on services rather than just following the product oriented approach.
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 Solarcity Solar supply chain. Even after few cautionary changes mentioned in the HBR case study - SolarCity: Rapid Innovation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Solarcity Solar vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the SolarCity: Rapid Innovation 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 Solarcity Solar has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Stefan Reichelstein, Davina Drabkin suggests that, Solarcity Solar 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 cash cycle compare to competitors
Solarcity Solar 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.
Aligning sales with marketing
– It come across in the case study SolarCity: Rapid Innovation 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 SolarCity: Rapid Innovation can leverage the sales team experience to cultivate customer relationships as Solarcity Solar is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study SolarCity: Rapid Innovation, in the dynamic environment Solarcity Solar has struggled to respond to the nimble upstart competition. Solarcity Solar has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities SolarCity: Rapid Innovation | 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 SolarCity: Rapid Innovation are -
Learning at scale
– Online learning technologies has now opened space for Solarcity Solar 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.
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. Solarcity Solar can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Solarcity Solar 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.
Buying journey improvements
– Solarcity Solar can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. SolarCity: Rapid Innovation 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Solarcity Solar 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, SolarCity: Rapid Innovation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Solarcity Solar 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 Finance & Accounting segment.
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. Solarcity Solar 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. Solarcity Solar can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Using analytics as competitive advantage
– Solarcity Solar has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study SolarCity: Rapid Innovation - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Solarcity Solar to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Solarcity Solar 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.
Creating value in data economy
– The success of analytics program of Solarcity Solar has opened avenues for new revenue streams for the organization in the industry. This can help Solarcity Solar to build a more holistic ecosystem as suggested in the SolarCity: Rapid Innovation case study. Solarcity Solar can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Solarcity Solar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Solarcity Solar in the consumer business. Now Solarcity Solar can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Solarcity Solar 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 Solarcity Solar to hire the very best people irrespective of their geographical location.
Threats SolarCity: Rapid Innovation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SolarCity: Rapid Innovation are -
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 Solarcity Solar.
Stagnating economy with rate increase
– Solarcity Solar 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.
High dependence on third party suppliers
– Solarcity Solar 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.
Shortening product life cycle
– it is one of the major threat that Solarcity Solar is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Solarcity Solar 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 SolarCity: Rapid Innovation, Solarcity Solar 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 .
Consumer confidence and its impact on Solarcity Solar 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.
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 Solarcity Solar business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Solarcity Solar has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Solarcity Solar 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
– Solarcity Solar 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.
Increasing wage structure of Solarcity Solar
– 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 Solarcity Solar.
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. Solarcity Solar needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Solarcity Solar 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 SolarCity: Rapid Innovation .
Weighted SWOT Analysis of SolarCity: Rapid Innovation 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 SolarCity: Rapid Innovation 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 SolarCity: Rapid Innovation 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 SolarCity: Rapid Innovation 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 SolarCity: Rapid Innovation 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 Solarcity Solar needs to make to build a sustainable competitive advantage.
