Strategy is a plan. This plan includes a well-founded situation analysis. But how do you achieve a precise situation analysis? What exactly is behind it and how can it benefit your company? And how much time should you plan for it?
In this episode, we provide answers to these questions and go into detail about the six points of the situation analysis, so that by the end of the episode you will know how to proceed and how it can bring clarity to your corporate strategy.
Shownotes:
- Christian Underwood on LinkedIn
- Prof. Jürgen Weigand on LinkedIn
- Digital Market Intelligence with cedura
- Trend management from trendone
Blog article 31
How does a precise situation analysis succeed?
Counter question: What is it actually and what is it supposed to do?
When developing a strategy, you should always take a close look at your starting point. What resources do you have at your disposal? What do you want to achieve in the future? And more importantly, how did you get to where you are today? From this perspective, you should look to the future and consider what it will take to be and remain relevant. Strategy is often confused with goals. However, they are two completely different things and you should be aware of that.
The question, "Imagine if your business ceased to exist tomorrow - would anyone miss it?" gets down to the nitty gritty. It requires reflection on whether you are really in the place you think you are. Is this position sustainable for the future?
In the majority of cases, it turns out that customers do remain loyal to companies, but only in the short term. In the medium and long term, many companies are replaceable by the competition. This is a profound insight that hurts.
Strategizing means dealing with the things you'd rather push away.
How do you proceed with a situation analysis?
A situation analysis is almost impossible on your own and requires a team. The first step is to gather internal and external data. This is not about big data, but about the relevant data. It is about answering the important questions for your own organization. In doing so, collect quantitative numbers and gather qualitative impressions from internal and external experts from the organization. It's important to think outside the box here and not get stuck in your own image.
Even if your company has been successful, a situation analysis is always useful, since success can rarely be carried into the future under the same parameters as from the past. Once this data has been collected, it must be analyzed soberly. In the process, brutal truths can emerge.
A situation analysis is divided into six different areas:
- Customers
A big part of the analysis is the customer side:
- Who are your own customers?
- How can they be addressed and what are their needs?
- Why are they customers?
- Who are the non-customers?
- What do the non-customers need?
To really understand customers, you need a lot of commitment. Because customers have a certain power that you have to face up to. When was the last time you were on site with your customers? Know what makes your customers tick. If you don't understand what makes them tick, what their preferences are and how they will change, you will lose your customers.
- Market
Relevant markets must be identified. Companies usually belong to specific sectors or industries. However, this is not the same as markets. An industry can have diverse markets. A market, on the other hand, can be served by diverse industries.
The term "relevant market" comes from competition policy and attempts to delineate who is active in a certain environment. From a company's point of view, it is important to consider in which markets one wants to be represented:
- Do you want to cover as much as possible of what the industry has to offer?
- Or should we focus on individual markets?
The definition of a relevant market has two dimensions:
- Products or services
- Geography (regional/national/international)
Once you have answered these questions, you may consider whether you can be profitable in these markets. Just being there is not everything.
- Competition
After you have analyzed which relevant markets exist and whether they can be profitable, the next question is: Who are your direct competitors? Understand who your competitors are and how profitable they are.
Remember that it doesn't do you any good to just create customer value. It has to be profitable in the end. Be aware that customer value is subjective. Customers decide whether something is useful or not.
- Future trends
There are a variety of trends - some technologically driven, others of a socio-cultural nature. Demography continues to play a role. Looking into the future means seeing which trends will continue and which will be newly generated.
Creating a trend radar helps to develop a strategic vision and look into the future.
Of course, predicting the future is difficult, but anticipating it is important. This means considering possible future scenarios and thinking ahead.
The Trend Radar from our colleagues at TRENDONE can help you to have a concrete guide to action in this process. Learn more about it here.
Trend research helps you to develop competitive and future intelligence without investing massively in your own resources.
- General environment (macro perspective)
Which factors are really relevant in one's own environment? The nature of the business is crucial to answering this question.
There are core drivers such as politics, geopolitics, sociocultural change or sustainability. The larger and more international a company is, the more relevance these factors have.
- Own reality
In order to pursue strategy and create a balance in the situation analysis, it is necessary to look at the outside as well as the internal circumstances.
Analyzing your own reality means not only looking in the mirror, but also having the mirror held up to you with all the unpleasant truths that you may have glossed over before. The profitability matrix, which you can find in detail in our book, helps you to think about how your company really earns money.
How long does it take you to do a situation analysis?
How much time you need for a situation analysis depends on how many resources you have and how complex your company is. Allow between four and twelve weeks for a thorough analysis.
Ideally, a situation analysis takes place before a strategy workshop so that the results can serve as input for the workshop. The interpretation of the data takes place together in the workshop.
Do the groundwork of the situation analysis and take enough time for it without getting lost in it. In our book "Hope is not a strategy" you will find a separate workflow to deal more intensively with the situation analysis.
Conclusion
Strategy is a plan. Think about the steps you will take, when you want to start the situation analysis, what you want to achieve with it and which questions it should answer. Then you can start right away.