Creating Value Through Business Model Innovation SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Creating Value Through Business Model Innovation
This is an MIT Sloan Management Review article. Companies, the authors argue, are increasingly turning toward business model innovation as an alternative or complement to product or process innovation. Drawing on extensive research they conducted over the course of the last decade, the authors define a company's business model as a system of interconnected and interdependent activities that determines the way the company "does business"with its customers, partners and vendors. In other words, a business model is a bundle of specific activities -an activity system -conducted to satisfy the perceived needs of the market, along with the specification of which parties (a company or its partners) conduct which activities, and how these activities are linked to each other. Business model innovation can occur in a number of ways: (1) by adding novel activities, for example, through forward or backward integration, (2) by linking activities in novel ways, or (3) by changing one or more parties that perform any of the activities. Changes to business model design can be subtle, the authors note; even when they might not have the potential to disrupt an industry, they can still yield important benefits to the innovator. The authors offer a number of examples of business model innovation and pose six questions for executives to consider when thinking about business model innovation: 1. What perceived needs can be satisfied through the new model design? 2. What novel activities are needed to satisfy these perceived needs? 3. How could the required activities be linked to each other in novel ways? 4. Who should perform each of the activities that are part of the business model? 5. How is value created through the novel business model for each of the participants? 6. What revenue model fits with the company's business model to appropriate part of the total value it helps create?
Swot Analysis of "Creating Value Through Business Model Innovation" written by Raphael Amit, Christoph Zott includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Activities Model facing as an external strategic factors. Some of the topics covered in Creating Value Through Business Model Innovation case study are - Strategic Management Strategies, Innovation, Technology and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Creating Value Through Business Model Innovation casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, there is increasing trade war between United States & China,
supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Creating Value Through Business Model Innovation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Creating Value Through Business Model Innovation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Activities Model, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Activities Model 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 Creating Value Through Business Model Innovation can be done for the following purposes –
1. Strategic planning using facts provided in Creating Value Through Business Model Innovation case study
2. Improving business portfolio management of Activities Model
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 Activities Model
Strengths Creating Value Through Business Model Innovation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Activities Model in Creating Value Through Business Model Innovation Harvard Business Review case study are -
Analytics focus
– Activities Model 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 Raphael Amit, Christoph Zott 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 Activities Model 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 Activities Model in the sector have low bargaining power. Creating Value Through Business Model Innovation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Activities Model to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Activities Model 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 Creating Value Through Business Model Innovation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Activities Model is one of the leading recruiters in the industry. Managers in the Creating Value Through Business Model Innovation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Activities Model
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Activities Model 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
– Activities Model has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Activities Model 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.
Superior customer experience
– The customer experience strategy of Activities Model in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Activities Model has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Creating Value Through Business Model Innovation 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)
– Activities Model 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 Creating Value Through Business Model Innovation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Activities Model 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 Activities Model is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Creating Value Through Business Model Innovation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Creating Value Through Business Model Innovation 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.
Weaknesses Creating Value Through Business Model Innovation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Creating Value Through Business Model Innovation are -
Lack of clear differentiation of Activities Model products
– To increase the profitability and margins on the products, Activities Model needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Creating Value Through Business Model Innovation, in the dynamic environment Activities Model has struggled to respond to the nimble upstart competition. Activities Model has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Activities Model supply chain. Even after few cautionary changes mentioned in the HBR case study - Creating Value Through Business Model Innovation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Activities Model vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Activities Model 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.
Low market penetration in new markets
– Outside its home market of Activities Model, firm in the HBR case study Creating Value Through Business Model Innovation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Activities Model 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 - Creating Value Through Business Model Innovation should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Activities Model 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 operating costs
– Compare to the competitors, firm in the HBR case study Creating Value Through Business Model Innovation 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 Activities Model 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Activities Model needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Increasing silos among functional specialists
– The organizational structure of Activities Model is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Activities Model needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Activities Model to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Activities Model 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. Activities Model 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.
Opportunities Creating Value Through Business Model Innovation | 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 Creating Value Through Business Model Innovation are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Activities Model is facing challenges because of the dominance of functional experts in the organization. Creating Value Through Business Model Innovation 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.
Leveraging digital technologies
– Activities Model 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.
Learning at scale
– Online learning technologies has now opened space for Activities Model 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Activities Model can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Activities Model 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 Activities Model to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Activities Model 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.
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. Activities Model can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Activities Model 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Activities Model 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.
Using analytics as competitive advantage
– Activities Model 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 Creating Value Through Business Model Innovation - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Activities Model to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Activities Model 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 Activities Model 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.
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. Activities Model 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. Activities Model 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 Creating Value Through Business Model Innovation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Creating Value Through Business Model Innovation are -
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 Activities Model.
Environmental challenges
– Activities Model 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. Activities Model 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.
Consumer confidence and its impact on Activities Model 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Activities Model 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 Creating Value Through Business Model Innovation .
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Activities Model 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.
Stagnating economy with rate increase
– Activities Model 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.
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. Activities Model 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.
High dependence on third party suppliers
– Activities Model 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Activities Model with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Activities Model needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
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 Activities Model in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Creating Value Through Business Model Innovation 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 Creating Value Through Business Model Innovation 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 Creating Value Through Business Model Innovation 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 Creating Value Through Business Model Innovation 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 Creating Value Through Business Model Innovation 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 Activities Model needs to make to build a sustainable competitive advantage.