The three founders of a London-based, start-up smoothie company must decide between three growth options: expansion of the existing product line into Europe, extension of the brand into other product categories, or continued organic growth within the United Kingdom.
Swot Analysis of "Innocent Drinks" written by William A. Sahlman, Dan Heath includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Innocent Smoothie facing as an external strategic factors. Some of the topics covered in Innocent Drinks case study are - Strategic Management Strategies, Entrepreneurial management, Growth strategy and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Innocent Drinks casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, increasing energy prices, cloud computing is disrupting traditional business models, increasing commodity prices, increasing household debt because of falling income levels, technology disruption,
increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Innocent Drinks case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Innocent Smoothie, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Innocent Smoothie 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 Innocent Drinks can be done for the following purposes –
1. Strategic planning using facts provided in Innocent Drinks case study
2. Improving business portfolio management of Innocent Smoothie
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 Innocent Smoothie
Strengths Innocent Drinks | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Innocent Smoothie in Innocent Drinks Harvard Business Review case study are -
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Innocent Smoothie digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Innocent Smoothie 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.
Effective Research and Development (R&D)
– Innocent Smoothie 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 Innocent Drinks - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Innocent Smoothie 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.
Organizational Resilience of Innocent Smoothie
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Innocent Smoothie does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Innocent Smoothie has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Innocent Smoothie 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.
Strong track record of project management
– Innocent Smoothie is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Innocent Drinks firm has clearly differentiated products in the market place. This has enabled Innocent Smoothie to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Innocent Smoothie to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Innocent Drinks 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.
Innovation driven organization
– Innocent Smoothie is one of the most innovative firm in sector. Manager in Innocent Drinks Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Innocent Smoothie is present in almost all the verticals within the industry. This has provided firm in Innocent Drinks 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.
Cross disciplinary teams
– Horizontal connected teams at the Innocent Smoothie 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.
Analytics focus
– Innocent Smoothie 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, Dan Heath 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.
Weaknesses Innocent Drinks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Innocent Drinks are -
Interest costs
– Compare to the competition, Innocent Smoothie 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.
Slow decision making process
– As mentioned earlier in the report, Innocent Smoothie 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. Innocent Smoothie 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.
Low market penetration in new markets
– Outside its home market of Innocent Smoothie, firm in the HBR case study Innocent Drinks needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Innocent Drinks 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 Innocent Smoothie 's lucrative customers.
High cash cycle compare to competitors
Innocent Smoothie 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.
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 Innocent Smoothie supply chain. Even after few cautionary changes mentioned in the HBR case study - Innocent Drinks, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Innocent Smoothie 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 Innocent Drinks, in the dynamic environment Innocent Smoothie has struggled to respond to the nimble upstart competition. Innocent Smoothie has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Innocent Smoothie 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 - Innocent Drinks should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– After analyzing the HBR case study Innocent Drinks, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Capital Spending Reduction
– Even during the low interest decade, Innocent Smoothie 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.
High bargaining power of channel partners
– Because of the regulatory requirements, William A. Sahlman, Dan Heath suggests that, Innocent Smoothie 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.
Opportunities Innocent Drinks | 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 Innocent Drinks are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Innocent Smoothie is facing challenges because of the dominance of functional experts in the organization. Innocent Drinks 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.
Loyalty marketing
– Innocent Smoothie 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 Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Innocent Smoothie can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Innocent Smoothie can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Innocent Smoothie can use these opportunities to build new business models that can help the communities that Innocent Smoothie operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Better consumer reach
– The expansion of the 5G network will help Innocent Smoothie to increase its market reach. Innocent Smoothie 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
– Innocent Smoothie can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Innocent Drinks 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.
Using analytics as competitive advantage
– Innocent Smoothie 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 Innocent Drinks - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Innocent Smoothie to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Innocent Smoothie in the consumer business. Now Innocent Smoothie can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Innocent Smoothie in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship 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, Innocent Smoothie 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, Innocent Drinks, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Innocent Smoothie has opened avenues for new revenue streams for the organization in the industry. This can help Innocent Smoothie to build a more holistic ecosystem as suggested in the Innocent Drinks case study. Innocent Smoothie can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Innocent Smoothie 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.
Threats Innocent Drinks External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Innocent Drinks are -
Stagnating economy with rate increase
– Innocent Smoothie 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.
Shortening product life cycle
– it is one of the major threat that Innocent Smoothie is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Innocent Smoothie needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Innocent Smoothie 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 Innocent Smoothie 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.
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.
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 Innocent Smoothie.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Innocent Drinks, Innocent Smoothie 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 .
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.
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 Innocent Smoothie in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Innocent Smoothie in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Innocent Smoothie business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Innocent Smoothie 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.
Weighted SWOT Analysis of Innocent Drinks 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 Innocent Drinks 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 Innocent Drinks 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 Innocent Drinks 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 Innocent Drinks 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 Innocent Smoothie needs to make to build a sustainable competitive advantage.
