Harvard Case - Retaining entrepreneurial spirit during hypergrowth at sportswear brand On (A)
"Retaining entrepreneurial spirit during hypergrowth at sportswear brand On (A)" Harvard business case study is written by Alyson Meister, Valerie Keller-Birrer. It deals with the challenges in the field of Entrepreneurship. The case study is 5 page(s) long and it was first published on : Aug 15, 2023
At Fern Fort University, we recommend On adopt a multi-pronged approach to navigate hypergrowth while preserving its entrepreneurial spirit. This strategy involves a combination of organizational restructuring, financial discipline, and fostering a culture of innovation.
2. Background
On Running, a Swiss sportswear brand, experienced rapid growth fueled by its innovative running shoes and strong brand identity. However, this rapid growth brought challenges: maintaining its entrepreneurial culture, managing operational complexities, and ensuring financial stability. The case study focuses on Caspar Coppetti, On?s CEO, who is tasked with navigating this hypergrowth phase while preserving the company?s core values.
3. Analysis of the Case Study
Strategic Framework: We will analyze the case through the lens of the Growth-Share Matrix (Boston Consulting Group) and the Organizational Structure framework.
- Growth-Share Matrix: On?s running shoes are currently in the ?Star? quadrant, experiencing high market growth and strong market share. However, the expansion into new product categories like apparel and the international market presents potential ?Question Marks? requiring careful resource allocation.
- Organizational Structure: On?s current flat structure, while conducive to entrepreneurial spirit, may become inefficient as the company scales. A more hierarchical structure with clearly defined roles and responsibilities could be necessary.
Financial Analysis:
- Profitability: On?s strong sales growth needs to be translated into sustainable profitability.
- Cash Flow: Managing cash flow will be crucial for funding expansion, particularly in the early stages of new product launches.
- Capital Structure: On?s current low debt levels provide flexibility, but a potential IPO or debt financing could be considered for future growth.
Operational Challenges:
- Manufacturing Processes: Scaling production to meet increasing demand while maintaining quality standards is a key challenge.
- Distribution: Expanding distribution networks internationally requires strategic partnerships and efficient logistics.
- Technology and Analytics: Leveraging data analytics to understand consumer preferences and optimize marketing campaigns is essential for continued growth.
4. Recommendations
1. Organizational Restructuring:
- Implement a Hybrid Structure: Maintain a flat structure for core product development and innovation, while introducing a hierarchical structure for operations, finance, and marketing to manage larger teams and processes.
- Empower Regional Teams: Grant regional teams more autonomy in decision-making and product customization to cater to local market preferences.
- Formalize Leadership Development: Implement structured training programs for emerging leaders to develop their skills and foster a culture of mentorship.
2. Financial Discipline:
- Financial Planning and Forecasting: Develop robust financial models to project future growth, cash flow needs, and potential investment opportunities.
- Capital Budgeting: Prioritize investments in areas with the highest ROI, such as manufacturing capacity expansion, marketing campaigns, and technology infrastructure.
- Debt Management: Explore debt financing options for strategic acquisitions or large-scale projects, while maintaining a healthy debt-to-equity ratio.
3. Fostering Innovation:
- Dedicated Innovation Teams: Establish dedicated teams focused on researching and developing new products and technologies.
- Open Innovation: Encourage collaboration with external partners, universities, and startups to leverage diverse perspectives and expertise.
- Culture of Experimentation: Create a culture that encourages experimentation, learning from failures, and iterating on ideas.
5. Basis of Recommendations
Core Competencies: These recommendations align with On?s core competencies in innovation, product design, and brand building.
External Customers: The recommendations aim to meet the evolving needs of customers by offering a wider range of products, personalized experiences, and faster delivery.
Competitors: By focusing on innovation, efficiency, and customer satisfaction, On can maintain a competitive edge in the rapidly growing sportswear market.
Attractiveness: The recommendations are expected to lead to increased profitability, market share, and brand value for On.
Assumptions: We assume that On will continue to invest in its core competencies, maintain a strong brand identity, and adapt to changing market trends.
6. Conclusion
On?s success depends on its ability to navigate hypergrowth while preserving its entrepreneurial spirit. By implementing the recommended organizational restructuring, financial discipline, and fostering a culture of innovation, On can achieve sustainable growth and maintain its competitive advantage in the global sportswear market.
7. Discussion
Alternatives:
- Maintaining a Flat Structure: This could lead to inefficiencies and communication breakdowns as the company scales.
- Aggressive Debt Financing: While this could accelerate growth, it could also increase financial risk.
Risks:
- Loss of Entrepreneurial Culture: The restructuring process could stifle innovation and creativity if not managed carefully.
- Financial Overextension: Investing too heavily in new product categories or international expansion could strain resources.
Key Assumptions:
- Continued strong demand for On?s products.
- Successful implementation of organizational changes.
- Efficient management of financial resources.
8. Next Steps
Timeline:
- Year 1: Implement organizational restructuring, develop financial models, and prioritize key investments.
- Year 2: Launch new product categories, expand international distribution, and establish dedicated innovation teams.
- Year 3: Evaluate the effectiveness of the implemented strategies and make adjustments as needed.
By taking these steps, On can navigate hypergrowth while maintaining its entrepreneurial spirit and achieving long-term success.
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Case Description
On Wednesday 15 September 2021, about 100 On team members were going to jog to the NYSE to mark the running shoe brand's first day as a publicly traded company. One of few unicorns in Switzerland, On had been founded in January 2010 by running enthusiasts David Allemann and Caspar Coppetti, together with former professional athlete Olivier Bernhard. It was one of the fastest-growing global sports brands. In a decade, On had grown from a small start-up, operating out of an old church, to a multinational company employing almost 900 people. It was known across the world, not least thanks to tennis star Roger Federer, who had joined On as an investor and partner. Culture, or "spirit" as it was called at On, was particularly important for the running shoe company. The origin story of On defined the company and was still deeply reflected in present and future aspirations. It had all started with a crazy idea to glue pieces of garden hose to an old sneaker. The highly entrepreneurial mindset - referred to as "explorer spirit" - permeated the company's DNA and was one of the key reasons for its success. The five partners believed it was crucial to maintain that spirit as the organization grew. By going public, the company aimed to secure funding for further global expansion. The funds raised would give the company the resources it needed to fulfil its dreams and help it reach the size required to play in the big league and compete with global players like Nike or Asics. The IPO was a major milestone for On but being a public company would also come with new obligations and increased expectations, from both the public and shareholders. The five partners were aware of the potential risk this represented to the company's culture.
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