| What is macro environment analysis and how important is it to strategy and strategy development? | Macro-environment means external forces and factors: Technology, market trends; social change; legislation, economic conditions. And these strongly influence (some say completely determine) the success or failure of ALL strategies!
Note: The managers do not control the outer ring. They only control their response! The response is part of a strategy. Not reading the macro-environment can lead to the demise of a company, see for instance Nokia.
“If you think that you can run an organization in the next 10 years as you've run it in the past 10 years you're out of your mind.” - Roberto C. Goizueta, ex-CEO of Coca-Cola |
| What is a good model to analyze macro-economic environment? | PESTEL |
| What does the PESTEL model stand for, and why is it useful? | P: Political
E: Economic
S: Social
T: Technological
L: Legal
E: Environment/Ecological
It covers the whole macro-economic environment |
| What are some common responses to external factors? | Not recognising them / avoiding them. |
| Where can we gain information for the PESTEL model analysis? | Either from formal or informal sources. |
| How do we find and view information, and what is the implications of this when analysing? What does "horizon scanning" have to do with anything? | When we view information, we typically "scan the horizon" with our radar, and we only deal with what we see.
PESTEL (and Horizon Scanning) don’t deal with what’s not seen or mis-seen. |
| What is the main issue with PESTEL model? | The main issue with PESTEL: Looking is easy, seeing is hard!
Sometimes we can well see something, but it is hard to recognise what we’re looking at, particularly if we haven’t seen it before. Often we look where it’s comfortable to look, but that is not where change is coming from.
PESTEL hence only deal with what we ourselves see, and does not deal with what is not seen. As a human, we have difficulty seeing the full picture and we might disregard important facts if we do not know anything about them. |
| What is a judgement bias and what is some examples of these? | A judgement bias is when our judgement is biased towards certain things.
1. Bandwagon effect - we do what the rest do
2. Anchoring bias - We are over-reliant on the first piece of information we hear. Like when negotiation salary, the first number is the anchor, and the final salary will be close around this amount.
3. Confirmation bias - We tend to listen only to information that confirms our preconceptions.
4. Availability heuristic - People overestimate the importance of information that is available to them.
5. Recency - The tendency to weigh the latest information more heavily than older data.
6. Outcome bias - Judging a decision based on outcome. Just because you won a lot in Vegas does not mean it was a good decision to gamble the money! |
| What is the Dunning-Kruger Effect | The Dunning–Kruger effect is a cognitive bias[2] whereby people with low ability, expertise, or experience regarding a certain type of a task or area of knowledge tend to overestimate their ability or knowledge. Some researchers also include in their definition the opposite effect for high performers: their tendency to underestimate their skills. |
| Why is PESTEL only the first step in the macro-environmental analysis? And what are the next steps? | PESTEL only creates a picture of the current macro situation. It does not tell anything of the future.
Hence, the next steps is assessing forecasting and foresigt depending on the level of uncertainty PESTEL creates. |
| What is foresights? what are some concepts and terms in this regard? | 1. Change drivers: factors that are causing change
2. ‘Weak signals’: early evidence of change
3. Trends /megatrends: patterns in change over time
4. Inflexion points: where the trend line shifts, big change happens in a short time |
| How good are point or range forecasts likely to be? | 1. There are many sources of change & uncertainty (See all parts of PESTEL)
2. Timing is hard to judge - You know something is coming, but you don’t know when, or how much.
3. When it comes, change comes in lumps. “There are decades where nothing happens, and there are weeks where decades happen.” - Vladimir Lenin
4. The future arrives unevenly in different places |
| What are the 4 levels of strategy under uncertainty? | Level 1: Clear-enough future (Single, dependable view of the future)
Level 2: Alternative futures (Limited set of known future outcomes)
Level 3: Range of futures (Range of possible future outcomes)
Level 4: True uncertainty (Not even a range of possible future outcomes)
Observations:
- Most future uncertainty situations are levels 2 or 3. But many managers and strategists see them either 1 or 4.
- Choose future-management toolkit that fits with the situation’s uncertainty level.
It’s better to be vaguely right than exactly wrong! |
| What are the 4 ways forecasting level 2 and level 3 uncertainty? | 1. Scenario planning
2. Point forecast
3. Scenarios |
| What is the purpose of forecasting and foresigt? | The purpose is to create strategy for the future on the basis of forecasting and foresigt. Forecasting and foresigt usually holds a base from the current picture (PESTEL model)
We pursue a high-quality point of view of the future (not a prediction) via scanning, sensemaking and scenarios to improve our strategy decisions today.
There are different types of future thinking based on uncertainty: from point forecasting to scenario planning.
Scenarios investigate plausible alternative future external environments, to force strategy thinking past “business-as-usual” or “change as expected” |
| What is the difference between diverge and converge foresigt strategy? | Convergent thinking focuses on finding one well-defined solution to a problem. Divergent thinking is the opposite of convergent thinking and involves more creativity. |
