Case Study Description of 2016 Patagonia Eco Innovation Case Competition
This case study examines the tensions that arise when Patagonia simultaneously pursues sustainability and quality objectives embedded within its mission statement to "Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis." Specifically, this case study focuses on Patagonia's Durable Water Repellent (DWR) problem--DWR is a highly effective chemical treatment used to waterproof jackets (supporting the quality objective) but has by-products that are toxic and persist in the environment (undermining the sustainability objective). This case presents Patagonia's (and the industry's) challenges, its history trying to resolve the problem, including research, its temporary solution to use a less harmful but less effective option in C6, and its investment in Beyond Surface Technologies through $20 Million & Change, amongst others. The case also discusses external issues such as competitors and their efforts, pressure from Greenpeace, governmental involvement, and chemical industry actions. At the higher level, the case focuses on the question of how companies like Patagonia drive innovation down the supply chain to chemical and material suppliers, as well as how they think about innovation/disruption across the entire system, all the while grappling with internal tensions between performance, durability, and their commitment to cause no unnecessary environmental harm.
Authors :: Dara O'Rourke, Robert Strand
Topics :: Leadership & Managing People
Tags :: Social enterprise, Social responsibility, Sustainability, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis
Swot Analysis of "2016 Patagonia Eco Innovation Case Competition" written by Dara O'Rourke, Robert Strand includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Patagonia Dwr facing as an external strategic factors. Some of the topics covered in 2016 Patagonia Eco Innovation Case Competition case study are - Strategic Management Strategies, Social enterprise, Social responsibility, Sustainability and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the 2016 Patagonia Eco Innovation Case Competition casestudy better are - – increasing commodity prices, wage bills are increasing, technology disruption, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, there is backlash against globalization,
increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of 2016 Patagonia Eco Innovation Case Competition
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in 2016 Patagonia Eco Innovation Case Competition case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Patagonia Dwr, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Patagonia Dwr 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 2016 Patagonia Eco Innovation Case Competition can be done for the following purposes –
1. Strategic planning using facts provided in 2016 Patagonia Eco Innovation Case Competition case study
2. Improving business portfolio management of Patagonia Dwr
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Patagonia Dwr
Strengths 2016 Patagonia Eco Innovation Case Competition | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Patagonia Dwr in 2016 Patagonia Eco Innovation Case Competition Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Patagonia Dwr 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.
High brand equity
– Patagonia Dwr has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Patagonia Dwr to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Patagonia Dwr digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Patagonia Dwr 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 Patagonia Dwr 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.
Operational resilience
– The operational resilience strategy in the 2016 Patagonia Eco Innovation Case Competition 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.
Ability to recruit top talent
– Patagonia Dwr is one of the leading recruiters in the industry. Managers in the 2016 Patagonia Eco Innovation Case Competition are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Patagonia Dwr in the sector have low bargaining power. 2016 Patagonia Eco Innovation Case Competition has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Patagonia Dwr to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Leadership & Managing People industry
– 2016 Patagonia Eco Innovation Case Competition firm has clearly differentiated products in the market place. This has enabled Patagonia Dwr to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Patagonia Dwr to invest into research and development (R&D) and innovation.
Ability to lead change in Leadership & Managing People field
– Patagonia Dwr 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 Patagonia Dwr in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Patagonia Dwr 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 2016 Patagonia Eco Innovation Case Competition - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Patagonia Dwr has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Patagonia Dwr 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.
Highly skilled collaborators
– Patagonia Dwr 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 2016 Patagonia Eco Innovation Case Competition HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses 2016 Patagonia Eco Innovation Case Competition | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of 2016 Patagonia Eco Innovation Case Competition are -
Capital Spending Reduction
– Even during the low interest decade, Patagonia Dwr 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.
Increasing silos among functional specialists
– The organizational structure of Patagonia Dwr is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Patagonia Dwr needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Patagonia Dwr to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study 2016 Patagonia Eco Innovation Case Competition, is just above the industry average. Patagonia Dwr 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.
Skills based hiring
– The stress on hiring functional specialists at Patagonia Dwr 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Patagonia Dwr 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.
No frontier risks strategy
– After analyzing the HBR case study 2016 Patagonia Eco Innovation Case Competition, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study 2016 Patagonia Eco Innovation Case Competition, in the dynamic environment Patagonia Dwr has struggled to respond to the nimble upstart competition. Patagonia Dwr has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Patagonia Dwr, firm in the HBR case study 2016 Patagonia Eco Innovation Case Competition needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As 2016 Patagonia Eco Innovation Case Competition HBR case study mentions - Patagonia Dwr 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Dara O'Rourke, Robert Strand suggests that, Patagonia Dwr 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Patagonia Dwr is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study 2016 Patagonia Eco Innovation Case Competition can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities 2016 Patagonia Eco Innovation Case Competition | 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 2016 Patagonia Eco Innovation Case Competition are -
Better consumer reach
– The expansion of the 5G network will help Patagonia Dwr to increase its market reach. Patagonia Dwr 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.
Manufacturing automation
– Patagonia Dwr can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Patagonia Dwr 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. Patagonia Dwr 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.
Using analytics as competitive advantage
– Patagonia Dwr 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 2016 Patagonia Eco Innovation Case Competition - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Patagonia Dwr to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Patagonia Dwr can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. 2016 Patagonia Eco Innovation Case Competition 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.
Leveraging digital technologies
– Patagonia Dwr 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.
Building a culture of innovation
– managers at Patagonia Dwr 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 Leadership & Managing People segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Patagonia Dwr 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, 2016 Patagonia Eco Innovation Case Competition, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Patagonia Dwr 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Patagonia Dwr 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 Patagonia Dwr to hire the very best people irrespective of their geographical location.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Patagonia Dwr to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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 Patagonia Dwr in the consumer business. Now Patagonia Dwr can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Patagonia Dwr can use these opportunities to build new business models that can help the communities that Patagonia Dwr operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Threats 2016 Patagonia Eco Innovation Case Competition External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study 2016 Patagonia Eco Innovation Case Competition are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Patagonia Dwr in the Leadership & Managing People industry. The Leadership & Managing People 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.
Consumer confidence and its impact on Patagonia Dwr 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 Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Patagonia Dwr can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Patagonia Dwr.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study 2016 Patagonia Eco Innovation Case Competition, Patagonia Dwr may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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. Patagonia Dwr 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.
Increasing wage structure of Patagonia Dwr
– 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 Patagonia Dwr.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Patagonia Dwr 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 2016 Patagonia Eco Innovation Case Competition .
Regulatory challenges
– Patagonia Dwr 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 Leadership & Managing People industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Patagonia Dwr with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Patagonia Dwr has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Patagonia Dwr needs to keep up with the evolution of technology in the Leadership & Managing People 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.
High dependence on third party suppliers
– Patagonia Dwr 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.
Weighted SWOT Analysis of 2016 Patagonia Eco Innovation Case Competition 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 2016 Patagonia Eco Innovation Case Competition 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 2016 Patagonia Eco Innovation Case Competition 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 2016 Patagonia Eco Innovation Case Competition 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 2016 Patagonia Eco Innovation Case Competition 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 Patagonia Dwr needs to make to build a sustainable competitive advantage.