An environmental assessment is a critical part of any strategic planning process. Its purpose is to identify changes around your business that pose risks or opportunities for the business in light of its market position. The assessment follows the identification of Strengths and Weaknesses, creating the well-known SWOT Table.
Too often, leadership teams forget the critical next step to the SWOT assessment – identifying the core strategic issues and questions facing the business. Richard Rumelt, a renowned strategist, argues in Good Strategy/Bad Strategy that “A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge” and a fresh way to build new competitive strength. Without identifying the strategic issues and challenges/opportunities, you bypass the thinking that can lead to an overarching strategy – a coherence of interdependent moves that together build success.
For Walmart, the challenge in its early days was that a discount store required a population base of 100,000, way beyond the size of the remote, rural areas that Sam Walton wanted to serve. (Walton focused on rural areas as Sears was weak there.) How could Walmart offer discount prices in small towns? Walmart’s winning strategy was to build a shared, highly efficient distribution system that served 100,000 people across multiple (about 150) stores. The same trucks that delivered products to stores also picked up supplies. All purchasing was centralized, creating the same economies of scale available in larger cities. Data were integrated and central warehouses were eliminated, moving products closer to stores. The number of touches between the makers of products to the store shelf was significantly reduced versus traditional discount stores, creating efficiencies so great they could actually be picked up in our national productivity measures as the Walmart best-practice was copied.
Today, we are bombarded by forces that are leading to paradigm shifts: a pandemic, climate change, an election, a historic economic decline, a growing rift between China and the US. Yes, the “Times They Are a-Changin’.” That means your leadership team should rethink its SWOT and spend a lot more time and mental energy on its “So What?” post-SWOT deep thinking.
For example, the NYT on September 9th identified 7 ways that grocery shopping is changing:
- Fewer trips, better lists
- Online sales are bustling
- Oranges are the new snack
- The stores have wider or one-way aisles
- Store brands are gaining market share and brand choices are shrinking
- Frozen food is gaining in popularity – it’s no longer our “TV Dinners” offering
- Local is more popular (not to mention better for the environment)
These factors would raise different questions for the leadership of companies that provide grocery services depending on the niche(s) they serve:
- For Whole Foods: Now that competitors have adopted organic, how do we build on Amazon assets to differentiate? (Amazon drop-off site is a new plus.)
- The strategic issue for local independents: What services might we add to win higher-margin, more frequent purchases of customers who now go to larger groceries less often?
- For Kroger: How do I use our singular focus on groceries to regain share lost to Walmart and Target?
- For a wine store (losing share to bulk purchases at the grocery store): Might we partner with a local grocery store or restaurant to grab more market share?
When you do your SWOT, take a fresh set of eyes to factors changing around your business. If you somehow think your customers, competitors, and suppliers are going to basically pop back to the past, as a rubber band does when pulled, you’re delusional. Identify the changes and their implications in completing your SWOT.
Then engage in a strategy questions brainstorm, posing questions first and not answers. Here are some examples of the kinds of questions to raise:
- How might we overcome the limitation caused by (Fill in the Blank) limiting our growth?
- What might we do (perhaps deploying partnerships) that no one else could?
- What are the paradigms of our industry and how do they limit growth?
- What are the hidden assumptions of our current strategy that might be our demise?
- What would make our brand far more relevant?
- How will new technologies shape our opportunities?
- How do we overcome our competitors’ greatest strengths?
- What do our customers find frustrating yet take for granted?
- How can our customers’ customers better leverage or benefit from our strengths so we are specified in any Request for Proposal?
- If we started again knowing what we know, what would we do?
- What does not belong in our business?
- How do we turn our business into a platform, so that like Salesforce.com and Facebook we get network effects and very low marginal costs?
Give yourselves a few days after listing the questions for people to answer them on their own. Then gather to share answers. Sift, winnow, combine, and cull your answers until you have a few clear trajectories for your business to thrive—remember, a strategy has to be a coherent set of moves. If you end up with unconnected growth ideas, go back to the drawing board to make an integrated set of ideas (i.e., synergistic ideas – the combination is stronger than the value of the individual ideas) into a growth propeller.
Many leaders have been overwhelmed by the demands of the current COVID pandemic. But without a smart strategy, the future will only get worse.