#31 What a precise situation analysis can do for your corporate strategy

Strategy is a plan. Part of that plan is a solid situation analysis. But how do you get a precise situation analysis right? What exactly is behind it, and what can it do for your company? And how much time should you set aside for it? In this episode we answer these questions and walk through the six elements of the situation analysis, so that by the end you know exactly how to go about it and how it can bring clarity to your corporate strategy.

Christian Underwood on LinkedIn Prof. Jürgen Weigand on LinkedIn Digital Market Intelligence with cedura Trend management by trendone

Blog article 31

How do you get a precise situation analysis right?

A question in return: what exactly is it, and what is it supposed to deliver?

When you develop a strategy, always take a close look at your starting point. What resources do you have available? What do you want to achieve in the future? And far more important: how did you get to where you are today? That's the angle from which you should look ahead and consider what it takes to be relevant and stay relevant. Strategy is often confused with goals. But these are two completely different things, and you should be aware of that. The question "Imagine your company no longer existed tomorrow. Would anyone miss it?" gets to the heart of the matter. It forces you to reflect on whether you really are where you think you are. Is that position viable for the future? In most cases it turns out that customers do stay loyal, but only in the short term. Over the medium and long term, many companies can be replaced by the competition. That's a deep insight, and it hurts. Doing strategy means dealing with the things you would rather push aside.

How do you approach a situation analysis? Going it alone is virtually impossible; you need a team for this. The first step is gathering internal and external data. This isn't about big data, it's about the relevant data. It's about answering the questions that matter for your own organization. Collect quantitative figures and capture qualitative impressions from internal and external experts inside the organization. It's important to look beyond your own horizon here and not stay stuck in your self-image. Even if your company has been successful, a situation analysis is always worthwhile, because success rarely carries over from the past into the future under the same conditions. Once the data has been collected, it has to be analyzed soberly. Brutal truths can come out of that. A situation analysis breaks down into six areas:

Customers

A large part of the analysis is the customer side:

Who are your customers? How can you reach them, and what needs do they have? Why are they customers? Who are the non-customers? What do the non-customers need?

Really understanding your customers takes serious effort. Customers hold a certain power, and you have to face it. When was the last time you were on site with your customers? Know what drives them. If you don't understand how they think, what their preferences are and how those will change, you will lose them.

Market

You have to identify the relevant markets. Companies usually belong to specific sectors or industries. But that isn't the same as markets. An industry can have a range of markets. A market, in turn, can be served by a range of industries. The term "relevant market" comes from competition policy and tries to define who is active in a given environment. From a company's perspective, the question is which markets you want to be present in:

Should you cover as much as possible of what the industry has to offer? Or should you focus on individual markets?

Defining a relevant market has two dimensions:

Products or services Geography (regional/national/international)

Once you've answered these questions, you can consider whether you can also be profitable in these markets. Just being there isn't enough.

Competition

After analyzing 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. Keep in mind that simply creating customer value gets you nowhere. In the end it also has to be profitable. Be aware that customer value is subjective. Customers decide whether something creates value or not.

Future trends

There is a wide range of trends, some driven by technology, others sociocultural in nature. Demographics still play a role here. Looking to the future means seeing which trends will hold and which new ones will emerge.

Building a trend radar helps you develop strategic foresight and look ahead. Predicting the future is hard, of course, but anticipating it matters. That means considering possible future scenarios and thinking ahead. The trend radar from our colleagues at TRENDONE can give you a concrete guide for this process.Hereyou can learn more about it. Trend research helps you build competitive and future intelligence without investing massively in your own resources.

The general environment (macro perspective)

Which factors in your environment are truly relevant? The type of company determines the answer to this question. There are core drivers such as politics, geopolitics, sociocultural change and sustainability. The larger and more international a company is, the more relevant these factors become.

Your own reality

To do strategy and create balance in the situation analysis, you need to look at both the outside world and your internal reality. Analyzing your own reality doesn't just mean looking in the mirror. It also means letting someone hold the mirror up to you, with all the uncomfortable truths you may have glossed over before. The profitability matrix, which you'll find in detail inour book, helps you think through where your company actually makes its money.

How long does a situation analysis take?

How much time you need for a situation analysis depends on the resources you have and how complex your company is. Plan on four to twelve weeks for a solid analysis.

Ideally, a situation analysis takes place before a strategy workshop, so the results can serve as input for the workshop. The data is then interpreted together in the workshop. Do the groundwork of the situation analysis and give yourself enough time for it without getting lost in it. In ourbook "Hope Is Not a Strategy"you'll find a dedicated workflow for digging deeper into the situation analysis.

Conclusion

Strategy is a plan. Think through the steps you'll take, when you want to start the situation analysis, what you want to achieve with it and which questions it should answer. Then you're ready to go.