Are you confident in your strategic thinking, and your organization’s internal innovation competencies and skills?
Have you identified what is coming in your business environment and have you prepared for it?
Do you have a roadmap for its short- and longer-term implications?
Welcome to PESTLED360, the world’s first collaborative, data and artificial intelligence-driven methodology for collecting, analyzing, and nailing down what you need to know about your organization now and in the future. No organization exists in isolation from its surroundings. In fact, you are always part of the ocean you swim in. Understanding your external context and the global key drivers impacting your organization prepare you for change. We can identify both context and drivers with PESTLED360.
The PESTLED Framework
PESTLED is short for the Political, Economic, Social, Technological, Legal, Environmental, and Demographic factors affecting you and defining your environment. Innovation 360 has used this framework in many assignments. Often it is misused as a framework for assessing a specific market or even an organization itself. In fact, thinking much more broadly produces the most value. PESTLED illuminates current influences, but more importantly, it alerts you to rapidly approaching changes and market dynamics across industries.
A great example of disruption across industries is the way Uber instantly went from disrupting the taxi industry to holding a dominant position in the food delivery industry, rising rapidly to handle 10 billion dollars US worth of business and devouring market share from rivals Postmates, Caviar, and DoorDash. It’s easy to see in retrospect, but managers in the food delivery industry were taken by surprise because they weren’t paying enough attention to what was happening in the passenger transport industry.
Fragments of available data can often help build a barrier around your core value proposition as well as help to understand future possibilities. But you need to collect and put the data together and analyze the disparate bits of data to find relevance in their connections. Just as individual bricks cannot make a wall without mortar to hold them together, individual bits of data cannot show the whole picture. PESTLED is the mortar in the world of data. It illuminates connections in the data so you can begin to defend your market value.
It can be especially effective to conduct a PESTLED analysis on both a global level and a regional level, and to identify the key legal, political, and demographic drivers of each.
Global key drivers are often easy to identify, but their implications can be much harder to assess. To overcome this hurdle, involving as many stakeholders as possible can provide powerful results. This calls for interaction, creativity, and the articulation of many different opinions. Each force can have both positive and negative impacts, so it is important to understand the reasons why by drawing on a diverse set of stakeholders.
Using PESTLED to Build Scenarios
With the insight gained from a PESTLED analysis, scenario planning then helps to elaborate on different possibilities. Innovation 360 uses a six-step process.
Step one: Identify possible issues linked to the driving force or forces the PESTLED analysis has brought forward―no more than two to three for the sake of clarity.
Step two: Specify a time frame―for instance, three years from now.
Step three: Define two or three extreme potential outcomes within the time frame. Combine the issues in all possible combinations. Then find a few combinations that are extra interesting for deeper investigation.
Step four: List all the stakeholders involved in each scenario based on the extreme potential outcomes. Look to understand their impact, and the impact of each force or forces on them. This could for instance be future competitors or collaborators and the force could be competition from new entrants
Step five: Finish by working backward to understand possible plots or evolvements that can signal that the scenario is about to happen.
Step six: Analyze what recommendations the scenario would mean. As time pass the scenarios can be reiterated and adjusted when needed.
Let’s work through an example together.
Imagine you are on the leadership team of one of the top five executive jet rental companies, such as Netjets, GlobeAir, or Stratos Jet Charters. Your profits depend on maximizing asset usage, keeping crew costs low, and add-on express cargo.
This scenario plan is based on the following key global driver:
- Elon Musk has finally built a functional electric jet.
- The cost structure is estimated to be as low as $0.09 per seat mile, or $260 per hour.
- Ticket prices will be one-third the current market rate, with an 80 percent reduction of emissions and noise, and
- Office-to-office time will be cut in half.
So, step one: Major players will not be able to compete on short haul, but the new airline can’t handle all the demand on its own. Expect new entrants.
Step two: Let’s look ahead to three years, when regulatory hurdles may be worked out.
Step three: An extreme but not impossible outcome is that combustion engines may be outlawed due to environmental concerns.
Step four: This will be filled out with your fantasy stakeholders. This section can be quite lengthy in a real scenario plan.
Step five: Work backward into partnerships, new business models, or liquidation plans.
With an understanding of the PESTLED outcomes, organizations can then explore how those findings will impact future strategy and what that would like in terms for strategic initiatives. Operational Strategic Initiatives (those initiatives that need to be executed now) are prioritized by using Impact-Feasibility mapping, making sure to optimize resource usage. This is what we call incremental innovation.
Alternatively, Innovation Strategic Initiatives (those that need to be explored) are the hunting ground for innovation, which typically is what we call radical innovation.
Incremental and radical innovations can be anything from services and products to business models and processes. With strategic initiatives in place, you also need to understand your industry landscape and your aspirations and abilities for innovation and growth―thereby determining how to stay on top today, tomorrow, and in the future. Once you have the strategic initiatives added to the incremental bucket and the radical bucket and know your aspirations and abilities and the landscape of the competition. It is then time to collect ideas, test them by doing experiments, and scale up what’s working in an iterative innovation process, ultimately launching and creating commercial success.
With all of this said, sometimes you can kick-start innovation and growth projects with the key drivers and other times you might start a renewal journey with just an ideation session. All the tools in the Innovation 360 suite are made in such a way that there is extensive methodology support, so they can be combined to perfectly match your situation and customized for online and offline interactive usage.
“PESTLED360” is a proprietary toolkit used and accessible to our consultants, partners, and independent licensed practitioners in 45 countries. Access to this tool requires an IMGB Innovation Management Green Belt or higher, read more about our accreditation programs here.
“PESTLED360” provides our practitioners with the world’s first interactive online-based data-driven analytic tool for collecting, analyzing, and uncovering what will impact you now and in the near-, mid-, and long-term market. Results provide input into “Scenarios360,” which help take identified key drivers to real scenarios to iron out what needs to be executed now and what needs to be explored now.