Eliminate Your Blind Spots – Part 2: The Environmental Scan
In my most recent blog – Part 1 of this series – I discussed external factors that can affect your business, both positively and negatively. Having an awareness of these external influences is the first step in being prepared to meet them head-on when they come. And they will come! But it’s possible to do some forecasting and take a proactive approach to elements that are out of your control.
Don’t Be Blindsided
The focus of most businesses is primarily internal – on those elements of business that are within its control such as staff, processes, finances, and company culture. But all aspects of your business – from your strategic plan to day-to-day operations – can be impacted if you are blindsided by unanticipated external changes.
Your company’s stability and profitability are dependent on being able to respond to these changes. Conducting an environmental scan can prepare your business to not only roll with external disruptions but to be in a position to take advantage of unexpected opportunities.
The Environmental Scan
An environmental scan is a process of gathering, analyzing, and interpreting data about the outside world – the broad environmental context within which your business operates — that enables you to forecast threats or opportunities. One of the most widely used methods is the PESTEL, or PESTLE, analysis which focuses on six categories of data.
- (P)olitical: Government policy, actions, and political stability often influence the economy and impact organizations within a certain industry or business in general.
- (E)conomic: Economic growth or decline, changes in interest and inflation rates, or shifts in other economic conditions may impact supply and demand for a company’s or industry’s product of service.
- (S)ocial: Emerging trends, demographic and population shifts, and other changes in the socio-cultural market environment can change consumers’ needs and wants.
- (T)echnological: Technological innovation, new products or services, and rates of adoption of change can quickly evolve and impact particular markets or industries. Changes in technology have impacted literally every industry over the last ten years and will obviously continue to do so.
- (E)nvironmental: Ecological and environmental factors can affect many aspects of a company’s or industry’s operations. Some examples include access to renewable resources, weather events and climate change, corporate/social responsibility initiatives, and consumer demand for sustainable products and environmentally-sound practices.
- (L)egal: Changes to labor laws, consumer protection regulations, health and safety requirements and other legal requirements at local, state or federal levels can impact business practices and costs.
Steps for Conducting a PESTEL Analysis
- Identify the factors within each PESTEL category that may impact your business. This will likely require some brainstorming, perhaps a look back at the history of what has impacted your business, or even consulting an expert in some of these six areas.
- Determine the likely implications to your business of the external factors you’ve identified. Assess the impact of each by asking and answering some questions. How will these factors affect my business specifically? Will the impact be positive or negative? Will the business be affected short- or long-term? What is the significance to the business overall – will it increase, decrease, or not change staff needs, operations, revenues, etc? Will the effects of these external factors likely require a modification to the strategic plan?
- Rate from low to high the probability that the identified risks or opportunities may occur. And rate the potential impact to your business – whether positive or negative – from low to high.
Once you’ve completed the PESTEL analysis, take additional action by further analyzing and interpreting the results of your environmental scan with a SWOT assessment. Determine and list the specific Strengths, Weaknesses, Opportunities, and Threats that apply to your business, relative to the findings of your environmental scan. Then put plans in place, including adjusting your strategic plan if appropriate. This will better prepare your business to respond to and manage changes in the external world in which it operates.
It’s recommended that organizations conduct environmental scans at least annually to ensure that you stay current on external factors that can impact your company, empowering you to weather threats that may come your way and positioning your business to perhaps take advantage of opportunities ahead of your competitors. It’s also a great analysis to perform when developing or revising your strategic plan. This process is not just for large corporations. Small to medium-sized businesses, without the revenue, brand recognition, or resources of larger companies may be more susceptible to the effects of external factors.
I’d welcome the opportunity to help you assess the external factors that may impact your business success and develop a proactive approach to addressing them. Contact me to schedule a one-hour, complimentary review of your financial situation or book a time that works for you at www.Calendly.com/Rick-126.