Andreessen Horowitz (a16z), a venture capital firm launched in 2009, has quickly broken into the VC industry's top ranks, in terms of its ability to invest in Silicon Valley's most promising startups. The case recounts the firm's history; describes its co-founders' motivations and their strategy for disrupting an industry in the midst of dramatic structural change; and asks whether a16z's success to date has been due to its novel organization structure. a16z's 22 investment professionals are supported by 43 recruiting and marketing specialists-an "operating team" that is an order of magnitude larger than that of any other VC firm. Furthermore, the operating team aims to not only assist a16z portfolio companies, but also to be broadly helpful to all parties in the Silicon Valley ecosystem, including search firms, journalists, PR agencies, and Fortune 500 executives. The bet: by providing "no-strings-attached" help to ecosystem partners, the partners might someday reciprocate by steering founders seeking funding to a16z. The case closes by asking whether a16z should seek to double its scale over the next years.
Swot Analysis of "Andreessen Horowitz" written by Thomas R. Eisenmann, Liz Kind includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that A16z A16z's facing as an external strategic factors. Some of the topics covered in Andreessen Horowitz case study are - Strategic Management Strategies, Disruptive innovation, Financial management, Venture capital and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Andreessen Horowitz casestudy better are - – challanges to central banks by blockchain based private currencies, increasing commodity prices, there is backlash against globalization, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation,
wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Andreessen Horowitz
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Andreessen Horowitz case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the A16z A16z's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which A16z A16z's 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 Andreessen Horowitz can be done for the following purposes –
1. Strategic planning using facts provided in Andreessen Horowitz case study
2. Improving business portfolio management of A16z A16z's
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of A16z A16z's
Strengths Andreessen Horowitz | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of A16z A16z's in Andreessen Horowitz Harvard Business Review case study are -
Innovation driven organization
– A16z A16z's is one of the most innovative firm in sector. Manager in Andreessen Horowitz Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– A16z A16z's 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
– A16z A16z's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Andreessen Horowitz 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.
Effective Research and Development (R&D)
– A16z A16z's 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 Andreessen Horowitz - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For A16z A16z's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. A16z A16z's 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.
Organizational Resilience of A16z A16z's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that A16z A16z's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– A16z A16z's is one of the leading recruiters in the industry. Managers in the Andreessen Horowitz are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the A16z A16z's 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.
Low bargaining power of suppliers
– Suppliers of A16z A16z's in the sector have low bargaining power. Andreessen Horowitz has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps A16z A16z's to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Andreessen Horowitz firm has clearly differentiated products in the market place. This has enabled A16z A16z's to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped A16z A16z's to invest into research and development (R&D) and innovation.
Ability to lead change in Innovation & Entrepreneurship field
– A16z A16z's 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 A16z A16z's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- A16z A16z's 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 A16z A16z's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Andreessen Horowitz Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Andreessen Horowitz | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Andreessen Horowitz are -
Slow decision making process
– As mentioned earlier in the report, A16z A16z's 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. A16z A16z's 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 cash cycle compare to competitors
A16z A16z's 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.
Interest costs
– Compare to the competition, A16z A16z's 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.
Skills based hiring
– The stress on hiring functional specialists at A16z A16z's 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Andreessen Horowitz, in the dynamic environment A16z A16z's has struggled to respond to the nimble upstart competition. A16z A16z's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of A16z A16z's products
– To increase the profitability and margins on the products, A16z A16z's needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though A16z A16z's 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 - Andreessen Horowitz should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Andreessen Horowitz 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 A16z A16z's 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Andreessen Horowitz 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 Andreessen Horowitz can leverage the sales team experience to cultivate customer relationships as A16z A16z's is planning to shift buying processes online.
Need for greater diversity
– A16z A16z's 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.
Slow to strategic competitive environment developments
– As Andreessen Horowitz HBR case study mentions - A16z A16z's 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.
Opportunities Andreessen Horowitz | 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 Andreessen Horowitz are -
Low interest rates
– Even though inflation is raising its head in most developed economies, A16z A16z's 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.
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 A16z A16z's in the consumer business. Now A16z A16z's 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. A16z A16z's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– A16z A16z's can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Buying journey improvements
– A16z A16z's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Andreessen Horowitz 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.
Building a culture of innovation
– managers at A16z A16z's 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 Innovation & Entrepreneurship segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, A16z A16z's is facing challenges because of the dominance of functional experts in the organization. Andreessen Horowitz 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 A16z A16z's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– A16z A16z's 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 Andreessen Horowitz - to build a competitive advantage using analytics. The analytics driven competitive advantage can help A16z A16z's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for A16z A16z's 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.
Better consumer reach
– The expansion of the 5G network will help A16z A16z's to increase its market reach. A16z A16z's 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.
Leveraging digital technologies
– A16z A16z's 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. A16z A16z's 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. A16z A16z's 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.
Threats Andreessen Horowitz External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Andreessen Horowitz are -
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.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. A16z A16z's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
High dependence on third party suppliers
– A16z A16z's 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.
Technology acceleration in Forth Industrial Revolution
– A16z A16z's has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, A16z A16z's needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
Shortening product life cycle
– it is one of the major threat that A16z A16z's is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. A16z A16z's 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Andreessen Horowitz, A16z A16z's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Environmental challenges
– A16z A16z's 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. A16z A16z's can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Consumer confidence and its impact on A16z A16z's 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.
Regulatory challenges
– A16z A16z's 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 Innovation & Entrepreneurship industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, A16z A16z's 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 Andreessen Horowitz .
Increasing wage structure of A16z A16z's
– 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 A16z A16z's.
Weighted SWOT Analysis of Andreessen Horowitz 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 Andreessen Horowitz 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 Andreessen Horowitz 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 Andreessen Horowitz 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 Andreessen Horowitz 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 A16z A16z's needs to make to build a sustainable competitive advantage.