Designing for superior business performance

A guide for technology, creative and startup leaders

"Nothing is more expensive than a missed opportunity.”
H. Jackson Brown, Jr.

Choice 2: Where we play - opportunities and threat assessment

In this chapter

1. Why do you care about understanding the forces that drive change in the external environment.

2. Introduce which forces affect the external environment.

3. Introduce the PESTELG tool for completing an assessment of your where to play environment

4. Conduct assessment and discover opportunities and threats

5. Evaluate opportunities and threats - are they valuable and feasible?

Introduction - where opportunities and threats come from

Your where to play environment is subject to constant and sometimes substantial change. Changes in the external environment modify consumer expectations, needs, priorities and desires which in turn may impact the demand for the value your business provides. Changes also have potential impacts upon production costs, feasibility and cost of supply. Presently, rising inflation, interest rates and energy costs are affecting many people and businesses globally. So too, the huge waves of change including Artificial intelligence, 5G, Internet of Things, Big data and other technologically advances. What is needed is a method to keep track of all these changes so as to respond to new opportunities and mitigate short and longer term threats.
Opportunity and threats are consequence of changes made by government, regulatory bodies, law, economic, social, technological and environment influences. Early opportunities identification enable your business and value proposition to skate to where the future needs and demand are likely to be. Threats are those conditions that threaten your value proposition's profitability, supply or production costs or even the viability of the entire business. The earlier opportunities and threats are identified and managed, the better business performance is likely to be.

Introduction - Why search for opportunities and threats?

In his book Good Strategy, Bad Strategy: The Difference and Why it matters, Prof Richard Rumelt laments his experience interviewing global leaders in the electronics industry. In summary, he states that he interviewed more than 20 different leaders about who the leader was in their market. All could identify who the market leader was. He then asked, how the market leader established that position. All were able to identify that there was a new opportunity in the market and the leader had seized that opportunity, got it right, and now enjoys a market leading position. Professor Rumelt, then asked them about their own strategy, which he describes was mostly a lot of activity-based doorknob polishing. He asserts not one leader indicated they were searching for the next emergent opportunity in their environment, despite just identifying that as the path to market leadership.

This section provides a method for assessing business environments (Arena) using a structured and repeatable approach to discover opportunities and threats. It is important to remind ourselves the purpose is not write a stunning looking industry analysis report as some of the consulting industry participants are keen on doing but instead the purpose is for us to make our environment assessments to:

1. Discover and respond to opportunities in your environment or a new fertile environment.

2. Demonstrate and be responsive to challenges your customers in different environments are experiencing.

   For example, if your business provides solutions to motor vehicle manufacturers. Being able to demonstrate your understanding and the responsiveness of your business to the challenges faced by those motor vehicle manufacturer clients might better position your business as an empathetic and understanding partner.

   External assessment need not be limited to just your where to play choice(s).

3. Mitigate threats occurring in the environments you currently operate in.

The purpose of any business is, of course to solve a problem and in doing so create a customer. Continuous changes in the external environment are where new problems are created for existing and potentially new customers and where new business opportunities and threats emerge. The internet, for example, has been an external factor with a profound impact on business opportunities and threats.

Why business leaders can miss opportunities and threats?

Business leaders can miss opportunities and threats from the external environment by

1. Being too internally focused . An internal focus can drive internal productivity, improving cost and quality but does not generate new opportunities or grow awareness of external / competitive opportunities and threats. Business leaders must look outward for opportunities and threats, or run the risk of the business value proposition(s) becoming less relevant.

   

2. Lacking a methodology to discover them. You have almost certainly participated in or know someone who has participated in a strategic planning session where the group brainstorms their opportunities and threats. This is unstructured, too often driven by short term, internal and top of mind / immediate concerns. Instead, you can use a well understood tool in every strategist toolbox.

Questions an external assessment enables you to answer

• What is going on in the external environment?

• What are the most significant challenges or unmet needs [that could be] arising?

  • For those we serve

  • For those we could serve but have not yet

  • For those who supply us

  • For those we partner with

  • For our business

  • For our team

• What solutions are there for these challenges / unmet needs?

• How good are these solutions? Do they have gaps? Are there opportunities or threats in those gaps?

• Are those opportunities for / or threats relevant to your business?

Introducing PESTELG

The PESTELG framework allows you as a strategist aiming to maximize business performance, to conduct a complete review of the factors that create new challenges, desires, needs and problems in the external environment. It these factors and their implications that create opportunities or threats.
These factors are:

Political - Assess trends or events in government policy that could affect demand of your value proposition(s), supply availability or costs including cost of labour.

Economic - Assess trends or events in the Economic situation / state including interest rates, inflation, growth versus recession, currency exchange rate, employment rate

Social - Assess the influence of social, lifestyle and demographic considerations (e.g., aging population, immigration, family size, housing choices), Lifestyle trends, Consumer beliefs/concerns attitudes related to working conditions, equality, justice etc on the demand for the products and services in your arena along with supply and production costs.

Technological - Assess technology trends and emerging technologies, to identify opportunities to improve cost-effectiveness or quality of production and technology impacts on your value proposition(s) (value delivered by your business).

Environmental - Assesses the trends, events and implications from weather extremes, pollution / waste management, temperature changes (carbon emissions), natural disasters, Stewardship of natural resources (like fresh water) on the future expectations for the demand and supply for the products / services your business produces or could produce.

Legal - Assess trends, events and implications from legal forces that define what a business or its’ customers or suppliers can or cannot do e.g., Licensing, permits, labour laws, intellectual property, industry regulation. Legal events may have an impact on demand for the types of products or services provided or that could be provided by the business or influence the availability of supply or cost of production.

Global - Assess trends occurring globally e.g., Outsourcing, Multi-lateralism, responses to global climate change, trade tensions / sanctions. How might these event affect demand for the types of product / services supplied or potentially supplied by the business or affect the availability of supply or the cost of production.

Conducting your assessment

Continue on to the Next section to start with an assessment of what political factors could influence current and future demands for your value proposition or the cost to deliver it. You can do this for each of your where to play arena(s), or return the Guide home to choose a different option.

Continue . . .

Advance your strategy productivity

Define, refine and implement your strategy faster, easier and better