Context is Everything
“Without context, words and actions have no meaning at all”
- Gregory Bateson, Author
Winning businesses make conscious choices about the customers they serve, the value they create for those customers, how they create revenue and how they organise themselves to make it happen.
Therefore, before making some of these strategic choices, businesses need to have the right context:
Are there distinct segments of customers in the market with differing needs and, if so, which ones do we want to focus on?
What do the distinct segments need and how much value do they place on those needs?
How do current and emerging competitors compete for those segments?
Can we deliver something that’s different to the competition?
How would we price that offer?
What capabilities do we need to create?
What is the best way to integrate people, process and technology to make it happen?
In addition, because every marketplace evolves – and often rapidly – winning businesses also need to understand not just today’s picture but also form a view as to how key elements of that picture are likely to evolve over time:
How are customer needs likely to evolve?
How is the competitive landscape likely to evolve?
How will suppliers to the industry change
How will evolving technology change the offer or the way in which it is delivered?
Will regulatory change strengthen or weaken demand?
Will macro-economic factors change demand or supply?
This appears to be a long list of questions to consider but, many of the answers are already known by experienced industry participants and the remaining gaps can typically be resolved quickly through additional research or at the very least by forming reasonable hypotheses that need to be confirmed later.
The key of course, with this work is to focus on the big things that will impact the strategic choices that you need to make. I have seen too many planning exercises that turn into their own industries, distracting internal resources for months of time and creating ‘telephone directories’ of stuff that just gathers dust.
This is not the purpose of the exercise. The purpose is to gather insight on those things that truly matter and get it into a one-page summary.
The simple framework I use to synthesise the key insights is the SWOT Framework:
Internal Strengths and Weaknesses
External Opportunities and Threats
Internal Strengths
This element describes things internal to your business that you do relatively well.
This could be a skill such as sales or customer service, it could be an asset such as a unique product or a technology platform or it could be a relationship with a unique distribution channel or supplier.
Internal Weaknesses
Conversely, there are going to be some things internal to your business that you believe are a relative disadvantage.
For example, you might be relatively weak at marketing, you might have a gap in your product portfolio, lack a technology platform or have a gap in your distribution.
In overall terms, I find the most effective perspective to take with Internal Strengths and Weaknesses is to compare yourselves to the best in class players in your industry. It’s unlikely that a single competitor will have it all but perhaps you admire Competitor A’s Marketing, Competitor B’s Product and Competitor C’s distribution reach?
External Opportunities
Now we need to turn the mirror outwards and look at the industry more broadly.
Are there under-served segments in the market? Are new suppliers emerging that will enable you to change the product or the price-point? Is regulatory change going to change customer dynamics?
External Threats
The final element of a SWOT analysis is Threats – everything that poses a risk to either your company itself or its likelihood of success or growth.
This could include things like emerging competitors, changes in regulatory law, financial risks, and everything else that could jeopardize the future of your company or project.