Could a small, employee-owned company meet its ambitious growth goals without compromising its high-involvement culture? LightWorks Optics, based in Orange County, California, made highly sophisticated optical components for defense aeronautics, space exploration, and commercial applications. Early in its history, LightWorks had set up an employee stock ownership plan, or ESOP, under which employees gradually built up equity in the closely held firm. In 2007, the three founders indicated that they hoped to sell their shares to the ESOP trust in a leveraged buyout in 2012. In order for that to happen, the company needed to improve its revenue and profitability significantly; that, in turn, would require that it bring in more contracts, especially ones requiring high-volume production. But, LightWorks had to pay attention to its core capabilities and what it could, and could not, do effectively. Moreover, the company prided itself on its culture of ownership-one in which all employees had a stake in the business and a voice in its decisions. Could the president, Dan Barber, and his top management team reach a consensus on how to expand production without losing the benefits of a culture of ownership?
Authors :: Anne T. Lawrence, Anthony I. Mathews, Erik Noyes
Swot Analysis of "LightWorks Optics" written by Anne T. Lawrence, Anthony I. Mathews, Erik Noyes includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lightworks Optics facing as an external strategic factors. Some of the topics covered in LightWorks Optics case study are - Strategic Management Strategies, Compensation, Entrepreneurship, Motivating people, Organizational structure and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the LightWorks Optics casestudy better are - – central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , wage bills are increasing, increasing commodity prices, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies,
there is increasing trade war between United States & China, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of LightWorks Optics
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in LightWorks Optics case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lightworks Optics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lightworks Optics 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 LightWorks Optics can be done for the following purposes –
1. Strategic planning using facts provided in LightWorks Optics case study
2. Improving business portfolio management of Lightworks Optics
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 Lightworks Optics
Strengths LightWorks Optics | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lightworks Optics in LightWorks Optics Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the LightWorks Optics Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Superior customer experience
– The customer experience strategy of Lightworks Optics in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Lightworks Optics 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.
Low bargaining power of suppliers
– Suppliers of Lightworks Optics in the sector have low bargaining power. LightWorks Optics has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lightworks Optics to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Lightworks Optics 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 Anne T. Lawrence, Anthony I. Mathews, Erik Noyes 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.
Cross disciplinary teams
– Horizontal connected teams at the Lightworks Optics 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.
Training and development
– Lightworks Optics has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in LightWorks Optics 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)
– Lightworks Optics 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 LightWorks Optics - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Lightworks Optics
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lightworks Optics does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Lightworks Optics has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lightworks Optics to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– LightWorks Optics firm has clearly differentiated products in the market place. This has enabled Lightworks Optics to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Lightworks Optics to invest into research and development (R&D) and innovation.
Ability to lead change in Innovation & Entrepreneurship field
– Lightworks Optics 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 Lightworks Optics in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses LightWorks Optics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LightWorks Optics are -
Lack of clear differentiation of Lightworks Optics products
– To increase the profitability and margins on the products, Lightworks Optics needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Lightworks Optics 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.
Increasing silos among functional specialists
– The organizational structure of Lightworks Optics is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Lightworks Optics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lightworks Optics to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Lightworks Optics 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study LightWorks Optics, is just above the industry average. Lightworks Optics 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study LightWorks Optics, in the dynamic environment Lightworks Optics has struggled to respond to the nimble upstart competition. Lightworks Optics has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study LightWorks Optics 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 Lightworks Optics 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Anne T. Lawrence, Anthony I. Mathews, Erik Noyes suggests that, Lightworks Optics 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 star products
– The top 2 products and services of the firm as mentioned in the LightWorks Optics 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 Lightworks Optics has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study LightWorks Optics 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 LightWorks Optics can leverage the sales team experience to cultivate customer relationships as Lightworks Optics is planning to shift buying processes online.
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 Lightworks Optics supply chain. Even after few cautionary changes mentioned in the HBR case study - LightWorks Optics, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lightworks Optics vulnerable to further global disruptions in South East Asia.
Opportunities LightWorks Optics | 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 LightWorks Optics are -
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. Lightworks Optics 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. Lightworks Optics 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lightworks Optics is facing challenges because of the dominance of functional experts in the organization. LightWorks Optics 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lightworks Optics to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lightworks Optics to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Lightworks Optics 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.
Loyalty marketing
– Lightworks Optics 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 Lightworks Optics 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.
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. Lightworks Optics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lightworks Optics 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, LightWorks Optics, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Lightworks Optics can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. LightWorks Optics 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
– Lightworks Optics 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 LightWorks Optics - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lightworks Optics to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lightworks Optics can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lightworks Optics 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.
Creating value in data economy
– The success of analytics program of Lightworks Optics has opened avenues for new revenue streams for the organization in the industry. This can help Lightworks Optics to build a more holistic ecosystem as suggested in the LightWorks Optics case study. Lightworks Optics can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats LightWorks Optics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study LightWorks Optics are -
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. Lightworks Optics can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Lightworks Optics 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.
High dependence on third party suppliers
– Lightworks Optics 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 Lightworks Optics business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Lightworks Optics has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Lightworks Optics 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.
Consumer confidence and its impact on Lightworks Optics 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.
Stagnating economy with rate increase
– Lightworks Optics 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 Lightworks Optics
– 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 Lightworks Optics.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lightworks Optics with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Lightworks Optics 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. Lightworks Optics can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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.
Shortening product life cycle
– it is one of the major threat that Lightworks Optics 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 Lightworks Optics 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.
Weighted SWOT Analysis of LightWorks Optics 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 LightWorks Optics 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 LightWorks Optics 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 LightWorks Optics 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 LightWorks Optics 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 Lightworks Optics needs to make to build a sustainable competitive advantage.
