Strategic Workshops - strategic analysis - macro-environment

Arie de Geus, author of The Living Company, said:

"The only way to sustain competitive advantage is to ensure that your organization is learning faster than the competition."

Strategic analyis is part of this learning process.

To understand the macro-environment, we use PESTLE (see strategy development process article). Let’s consider some demographic data. I’ll use a UK example, though it applies to much of Western Europe and North America. Around 40% of the UK population is aged over 50. If I am a builder, how does that impact me? Well clearly, I should be considering building houses that match the requirements of older people - such as:

more bungalows
smaller (children left home)
support facilities
in-built electronic monitoring - eg a wrist watch type device that monitors blood pressure and pulse, alerting medical services when appropriate (the ambulance now arrives before your heart attack!)

Armed with this knowledge, I may choose to seek partnerships with medical technology companies. This is a simple example using demographics. Let’s stick with our builder. P is for Politics and this includes the extension of the European Union which opens up the possibility of acquiring highly skilled labour from eastern Europe at competitive wage rates - or expanding into other countries. E is for environment and lots of scope here for builders in how they build and how the built house is run. But let’s not forget the L - legal; there may be new health and safety legislation or restrictions on certain materials.

Arab Dhow

I once saw on the wall of a client in Dubai a poster showing an Arab dhow and under it the words:

"We cannot change the direction of the wind, but we can set our sails to take advantage of it."

Strategic analysis opens our eyes to threats. But I think the emphasis should be on opportunities. We should create a "positive crisis within the organisation" - a real sense of anxiety that we may miss out on exciting opportunities if we don’t move quickly.

An interesting example of strategic analysis and its power to transform how firms compete is The Long Tail by Chris Anderson. Here he captures the essence of his message:

"The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon’s book sales come from outside its top 130,000 titles. Consider the implication: If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is larger than the market for those that are. In other words, the potential book market may be twice as big as it appears to be, if only we can get over the economics of scarcity."

Whereas department stores and one-stop-shops were once seen as the future, niche marketing is the current flavour.

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