Environmental analysis just simple physics?

Every object continues in its state of rest, or of uniform motion in a straight line, unless compelled to change that state by external forces acted upon it.” (Holzner, “Physics for Dummies”)

That’s pretty much the long and short of what the science of Physics is all about, I guess.

It also helps explain how environmental forces impact our strategic decisions. What might be considered the first rule of strategic planning is that the organization does not exist in a vacuum. It is part of a very dynamic environment, and what makes that environment dynamic in the first place is the constant interaction of a set of environmental forces (or “factors” if you prefer that term). These are sometimes called macro-environmental forces, and they’ll affect your strategic decisions anywhere on the globe you operate. It’s also worth noting that these forces are ultimately beyond our control.

Different authors label these different ways, but my favorite acronym for the forces of the environment is PEST. PEST stands for:

Political/Legal Forces

These deal with any laws that currently affect our strategy or those that might be passed that could affect it. It also refers to how litigious (sue-happy) our particular environment is, too. Good luck finding an environment these days that isn’t litigious, by the way.

Economic Forces

These forces relate to what’s going on in the economy. Is unemployment up or down? Are interest rates up or down? How eager is the banker to lend or not lend? Is a particular commodity or raw material rising or falling in price?

Socio-cultural Forces

Socio-cultural forces simply deal with the human side of strategy. Specifically, they deal with demographics and psychographics, which are sometimes described as who buys (demographics) and why they buy (psychographics). These forces also deal with culture, values, etc. For example, tattoos didn’t used to be that common, appealing only to certain demographics for certain reasons. Now the culture widely accepts such body art. Similarly, once 2/3 of the population smoked, and now smoking is largely frowned upon.

Technological Forces

Something “digital” may come to mind when thinking about technology, but the truth is that technology is any innovation that makes doing a task easier or more efficient. The Internet was certainly the marvel of our generation, just as nanotechnology will be for the next generation, but fire, the wheel, the steam engine, the printing press, the repeating rifle, penicillin, you name it, anything that offered an improvement is a technological innovation and would be categorized as a technological force.

So…?

So while we don’t have to like it, we do have to deal with these environmental forces as we’re doing our planning. You may have a grand strategy in mind, but a change in any of these forces could prove otherwise. Think about how your organization has been affected by a change in one or more of these forces in the past few years. On the positive side, though, just knowing what changes may come as a result of these forces at work can give you an advantage, so a good idea is to become a constant student of what’s going on with regard to them in your world. You may find you can spot an opportunity or a threat well ahead of your competition by just knowing where to look.

 Inside of every problem lies an opportunity.” – Robert Kiyosaki, Rich Dad, Poor Dad