John Gilleland, CEO of TerraPower, returned to his office after a lengthy meeting with potential investors. It was October 2012, and TerraPower was in the process of raising a $200M Series C round to finance the ongoing development of its next-generation nuclear reactor. Though early in the fundraising process, Gilleland noted that this most recent conversation was similar to conversations with other interested cleantech growth equity investors. The conversations circled around a common theme: "This is the biggest idea that's ever been presented at our partners' meeting. We love what you're doing, but it's not right for us as an investment." Outside of raising money from typical growth equity and infrastructure funds, Gilleland could partner with a government and/or form a joint venture with an existing nuclear power player. Reliance Industries as an investor in TerraPower could provide an entry point into the fast growing Indian market. At the same time, Gilleland and Gates had talked with China National Nuclear Corp. about a possible cooperation with TerraPower. Whom should Gilleland call next?
Authors :: William A. Sahlman, Ramana Nanda, Joseph B. Lassiter, James McQuade
Swot Analysis of "TerraPower" written by William A. Sahlman, Ramana Nanda, Joseph B. Lassiter, James McQuade includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gilleland Terrapower facing as an external strategic factors. Some of the topics covered in TerraPower case study are - Strategic Management Strategies, Change management, Competitive strategy, Disruptive innovation, Marketing, Supply chain, Venture capital and Finance & Accounting.
Some of the macro environment factors that can be used to understand the TerraPower casestudy better are - – geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies,
central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in TerraPower case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gilleland Terrapower, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gilleland Terrapower 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 TerraPower can be done for the following purposes –
1. Strategic planning using facts provided in TerraPower case study
2. Improving business portfolio management of Gilleland Terrapower
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 Gilleland Terrapower
Strengths TerraPower | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gilleland Terrapower in TerraPower Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Gilleland Terrapower in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Gilleland Terrapower 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 TerraPower 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.
Organizational Resilience of Gilleland Terrapower
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Gilleland Terrapower does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Finance & Accounting industry
– TerraPower firm has clearly differentiated products in the market place. This has enabled Gilleland Terrapower to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Gilleland Terrapower to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Gilleland Terrapower in the sector have low bargaining power. TerraPower has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gilleland Terrapower to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Gilleland Terrapower is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Gilleland Terrapower has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in TerraPower 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.
Analytics focus
– Gilleland Terrapower 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 William A. Sahlman, Ramana Nanda, Joseph B. Lassiter, James McQuade 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.
High switching costs
– The high switching costs that Gilleland Terrapower 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.
Ability to lead change in Finance & Accounting field
– Gilleland Terrapower 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 Gilleland Terrapower in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Gilleland Terrapower digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gilleland Terrapower 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.
Weaknesses TerraPower | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of TerraPower are -
High operating costs
– Compare to the competitors, firm in the HBR case study TerraPower 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 Gilleland Terrapower 's lucrative customers.
High cash cycle compare to competitors
Gilleland Terrapower 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study TerraPower, is just above the industry average. Gilleland Terrapower 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.
Low market penetration in new markets
– Outside its home market of Gilleland Terrapower, firm in the HBR case study TerraPower needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Gilleland Terrapower is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study TerraPower can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the TerraPower 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 Gilleland Terrapower has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, William A. Sahlman, Ramana Nanda, Joseph B. Lassiter, James McQuade suggests that, Gilleland Terrapower is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Gilleland Terrapower supply chain. Even after few cautionary changes mentioned in the HBR case study - TerraPower, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gilleland Terrapower vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study TerraPower, in the dynamic environment Gilleland Terrapower has struggled to respond to the nimble upstart competition. Gilleland Terrapower 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, Gilleland Terrapower 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 TerraPower, 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.
Opportunities TerraPower | 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 TerraPower are -
Learning at scale
– Online learning technologies has now opened space for Gilleland Terrapower 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.
Creating value in data economy
– The success of analytics program of Gilleland Terrapower has opened avenues for new revenue streams for the organization in the industry. This can help Gilleland Terrapower to build a more holistic ecosystem as suggested in the TerraPower case study. Gilleland Terrapower can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Gilleland Terrapower 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.
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 Gilleland Terrapower in the consumer business. Now Gilleland Terrapower can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Gilleland Terrapower to increase its market reach. Gilleland Terrapower 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.
Buying journey improvements
– Gilleland Terrapower can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. TerraPower 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.
Loyalty marketing
– Gilleland Terrapower 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.
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. Gilleland Terrapower can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Gilleland Terrapower 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gilleland Terrapower can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Gilleland Terrapower in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Gilleland Terrapower 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, TerraPower, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gilleland Terrapower can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats TerraPower External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study TerraPower are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gilleland Terrapower 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 TerraPower .
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 Gilleland Terrapower in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Gilleland Terrapower is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gilleland Terrapower 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.
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 Gilleland Terrapower.
Increasing wage structure of Gilleland Terrapower
– 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 Gilleland Terrapower.
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. Gilleland Terrapower needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Gilleland Terrapower 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 Gilleland Terrapower business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Gilleland Terrapower 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Gilleland Terrapower with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study TerraPower, Gilleland Terrapower 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 .
Weighted SWOT Analysis of TerraPower 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 TerraPower 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 TerraPower 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 TerraPower 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 TerraPower 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 Gilleland Terrapower needs to make to build a sustainable competitive advantage.
