This note examines the pros and cons of two ways to build new ventures. The former is called causal or predictive, because it depends on accurate predictions and clear goals. The latter is effectual or nonpredictive, and it is extremely stakeholder-dependent and means-driven. It is very tempting to jump to the conclusion that the latter is the better way since it is overwhelmingly preferred by expert entrepreneurs. But is that really so?
Swot Analysis of "New Venture Performance" written by Saras Sarasvathy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Effectual Nonpredictive facing as an external strategic factors. Some of the topics covered in New Venture Performance case study are - Strategic Management Strategies, Innovation, Managing uncertainty, Venture capital and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the New Venture Performance casestudy better are - – central banks are concerned over increasing inflation, increasing energy prices, technology disruption, there is backlash against globalization, there is increasing trade war between United States & China, increasing transportation and logistics costs, increasing household debt because of falling income levels,
wage bills are increasing, geopolitical disruptions, etc
Introduction to SWOT Analysis of New Venture Performance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in New Venture Performance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Effectual Nonpredictive, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Effectual Nonpredictive 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 New Venture Performance can be done for the following purposes –
1. Strategic planning using facts provided in New Venture Performance case study
2. Improving business portfolio management of Effectual Nonpredictive
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 Effectual Nonpredictive
Strengths New Venture Performance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Effectual Nonpredictive in New Venture Performance Harvard Business Review case study are -
Diverse revenue streams
– Effectual Nonpredictive is present in almost all the verticals within the industry. This has provided firm in New Venture Performance 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.
Organizational Resilience of Effectual Nonpredictive
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Effectual Nonpredictive does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Effectual Nonpredictive has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in New Venture Performance 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.
Operational resilience
– The operational resilience strategy in the New Venture Performance Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Highly skilled collaborators
– Effectual Nonpredictive 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 New Venture Performance HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Effectual Nonpredictive is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Effectual Nonpredictive 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 Saras Sarasvathy 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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– New Venture Performance firm has clearly differentiated products in the market place. This has enabled Effectual Nonpredictive to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Effectual Nonpredictive to invest into research and development (R&D) and innovation.
Ability to lead change in Innovation & Entrepreneurship field
– Effectual Nonpredictive 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 Effectual Nonpredictive in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Effectual Nonpredictive has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Effectual Nonpredictive has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Effectual Nonpredictive digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Effectual Nonpredictive has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High switching costs
– The high switching costs that Effectual Nonpredictive 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.
Weaknesses New Venture Performance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of New Venture Performance are -
Capital Spending Reduction
– Even during the low interest decade, Effectual Nonpredictive 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.
Low market penetration in new markets
– Outside its home market of Effectual Nonpredictive, firm in the HBR case study New Venture Performance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As New Venture Performance HBR case study mentions - Effectual Nonpredictive 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study New Venture Performance, is just above the industry average. Effectual Nonpredictive 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.
Slow decision making process
– As mentioned earlier in the report, Effectual Nonpredictive 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. Effectual Nonpredictive 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study New Venture Performance, in the dynamic environment Effectual Nonpredictive has struggled to respond to the nimble upstart competition. Effectual Nonpredictive has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the New Venture Performance 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 Effectual Nonpredictive has relatively successful track record of launching new products.
Need for greater diversity
– Effectual Nonpredictive 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.
Lack of clear differentiation of Effectual Nonpredictive products
– To increase the profitability and margins on the products, Effectual Nonpredictive needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study New Venture Performance, 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.
Skills based hiring
– The stress on hiring functional specialists at Effectual Nonpredictive 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.
Opportunities New Venture Performance | 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 New Venture Performance are -
Better consumer reach
– The expansion of the 5G network will help Effectual Nonpredictive to increase its market reach. Effectual Nonpredictive 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
– Effectual Nonpredictive can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. New Venture Performance 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.
Developing new processes and practices
– Effectual Nonpredictive can develop new processes and procedures in Innovation & Entrepreneurship 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.
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. Effectual Nonpredictive 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. Effectual Nonpredictive 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.
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. Effectual Nonpredictive can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Effectual Nonpredictive has opened avenues for new revenue streams for the organization in the industry. This can help Effectual Nonpredictive to build a more holistic ecosystem as suggested in the New Venture Performance case study. Effectual Nonpredictive can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Effectual Nonpredictive can use these opportunities to build new business models that can help the communities that Effectual Nonpredictive operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Learning at scale
– Online learning technologies has now opened space for Effectual Nonpredictive 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.
Manufacturing automation
– Effectual Nonpredictive 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.
Loyalty marketing
– Effectual Nonpredictive 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.
Building a culture of innovation
– managers at Effectual Nonpredictive 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Effectual Nonpredictive 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Effectual Nonpredictive can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats New Venture Performance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study New Venture Performance are -
Stagnating economy with rate increase
– Effectual Nonpredictive 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.
Increasing wage structure of Effectual Nonpredictive
– 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 Effectual Nonpredictive.
High dependence on third party suppliers
– Effectual Nonpredictive 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study New Venture Performance, Effectual Nonpredictive 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 .
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. Effectual Nonpredictive needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Environmental challenges
– Effectual Nonpredictive 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. Effectual Nonpredictive can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Consumer confidence and its impact on Effectual Nonpredictive 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.
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. Effectual Nonpredictive can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Effectual Nonpredictive is facing in Innovation & Entrepreneurship 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 Effectual Nonpredictive 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Effectual Nonpredictive 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 New Venture Performance .
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. Effectual Nonpredictive 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.
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 Effectual Nonpredictive in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Weighted SWOT Analysis of New Venture Performance 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 New Venture Performance 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 New Venture Performance 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 New Venture Performance 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 New Venture Performance 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 Effectual Nonpredictive needs to make to build a sustainable competitive advantage.