Very
few companies take into account long-term trends or trends that have no direct
impact on their core business in their (strategic) planning. Nevertheless, big
political, societal or environmental changes do have a direct or indirect
impact on virtually all businesses. Analyzing these trends and their effect on
one’s business can reveal innovation opportunities, as well as potential
threats to your business.
In
my previous book “The impact of megatrends on your business” I explained in
depth how these type of trends can affect industries and how corporations can
use these trends to improve the success of their business. For the ones that
haven’t read the book I hereby give a short summary, since this exercise also
provides an example of how, with relatively few resources, we can build a
market view that enhances our decision making process.
There
are in fact numerous ways in which companies already prepare for the
opportunities linked to long-term trends. We previously discussed the
introduction of the Nano, the cheapest car on earth developed by Tata Cars,
specially designed to serve the rising middle class in India. A more
sophisticated example is technology giant Cisco’s ‘Health Telepresence center’,
a small mobile room in which people can consult doctors from a distance, as a
response to the challenges linked to the ageing population as well as the
increasing ‘war for talent’ (an indication for the fact that there will be less
doctors per patient in the future) .
There
are examples of how companies can be threatened if they do not take long-term
trends into account as well. Take Ford, who almost went out of business early
in its existence, for sticking to its standard models while consumers were
increasingly desiring custom made models. Coca Cola was boycotted for many
years throughout India, losing millions of dollars in lost turnover, for its
spoilage of water in one of its plants in Kerala, a region that is increasingly
challenged by water shortage (this lead Coca Cola to review its manufacturing
process in order to more efficient with its usage of water –it since even won
sustainability awards with its newly designed practices).
Other
companies like Siemens reorganized in a way in which each business unit is
focusing on resolving challenges linked to megatrends.
What
these examples demonstrate is that megatrends ultimately affect all businesses,
and lead to opportunities to innovate, or to prepare for new threats. But how
exactly do you take these megatrends into account in your strategy? There is
surely not just one single, optimal way of doing this. But let me just explain
the most easy one here.
The
most easy way to start is to organize internal brainstorm sessions around a
number of (mega)trends. Take about ten people in your team or your organization,
preferable with a mix of gender and level of seniority, and have them select a
number of trends they believe would have the biggest impact on your business.
You could for instance use post-its to let people make this selection:
In
a second phase you ask the participants to discuss their choices and select
three trends that form the biggest opportunity for your company, as well as the
three that form the biggest threat:
In
the last stage you ask the participants to brainstorm on ideas of how the
company should react to the opportunity or threat, and make a selection of the
best or most impactful idea:
The
exercise above is a brainstorm exercise in its most simple form, but it can
already lead to some revealing ideas and conclusions. This will particularly be
the case if you break down the participants in smaller groups of four to five
people and let them do the exercise autonomously. Comparing and discussing the
end result is very often an enlightening experience!
This
exercise can also take more sophisticated forms. For instance, in the second
phase of the exercise above you could ask the participants to look for
relationships between the trends they selected, and build a true story
explaining how these relate to your business environment. Or you could take
Alexander Osterwalders’ business model canvas as a starting point, designing
the processes of your industry and subsequently map the trends that are
affecting the different components of your business model:
Such
a megatrend assessment will lead to ideas for innovation, but it can also
become a good indication of where your business is heading in the long run. By
analyzing and mapping how your client segments would be impacted by megatrend
you can have a sound view of how healthy your prospects are –especially if you
map the weight of these clients in your overall business as well, like in the
example here under:
In
this simplified example one can see that the biggest client segment is
threatened by a number of trends. This would naturally lead to a number of
questions: how will this affect our business? Is there any way we can help our
clients in segment 1 preparing or countering the threats emerging from these
trends? Should we try to be less reliant on these clients, and focus on developing
clients in segment 4?
You
see that developing such a view will make you understand your clients even
better, which in turn might lead to more meaningful discussions with them, and
eventually reposition your sales messages and your products or services to
serve them better and increase your future performance.
To
assess the impact of megatrends on your business and determine how (or if) you
should react to them, you can map them according to how impactful they are on
your core business –for instance on the X-axis- and the level at which you (or
your industry) have some kind of impact on these trends, for instance on the Y
axis. The resulting picture will bring the trends in four segments, each
leading to different conclusions as to how to react to each trend:
Aware
Trends
in the bottom left segment have no direct impact on your core business, and you
don’t have any type of impact on them. You can afford to neglect them, although
it might be worthwhile to keep monitoring their evolution. For instance: a
retail chain specialized in local food might not evidently be impacted by the
globalization trend. However, it needs to monitor this trend since it might
lead to new forms of competition in the future.
Monitor
Trends
in the bottom-right segment will affect your core business, but there is very
little you can do to influence them. You should however monitor them closely to
prepare your business to their effects. The most obvious examples of trends in
this segment are the ones that are likely leading to changes in regulations in
your industry, like the ones that will result from climate change.
Action
Trends
in the top-right segment will affect your core activities and you can actively
influence them. These trends require immediate action or preparation (dependent
on the timeframe of these trends), but chances are high that you –as well as
your competitors- are already doing something with them, since they form
obvious opportunities in your industry. A good example is how pharmaceutical
companies prepare for the ageing population trend.
Influence
The trends contained in the upper-left segment
undoubtedly offer the biggest opportunities for your company. These are trends
that are not directly affecting your core business, but on which you exercise
some kind of influence. Since these trends will most probably affect other
companies or industries in their core business, the influence you have on them
will give you the chance to position your company favorably, or to develop new
products and services for these companies. As an example, look at the way the
scarcity of natural resources might relate to mobile telecommunication
operators. The core business of these operators is to offer connectivity, so
even if mobile telephones are full of components made of materials that are
getting scarcer, this is not directly affecting their core business (they could
still offer connectivity using old phones, for instance). However, they could build
a new business for green phones, or phones designed on a cradle-to-cradle
principle, hereby countering the threat resource scarcity poses, uncovering and
serving a completely new client base, and build a completely new ecosystem of
mobile phone providers.
There
are of course many other ways to map megatrends as a way to draw conclusions
from them. One such way would have a timeline of the development of these
trends, showing the urgency with which you need to respond (or not) to the
effects of these trends.
Regardless
of how you organize this exercise or the way you map the trends, the most
important thing to keep in mind in order to make this exercise successful is to
keep an open mind with regard of the trends you include in it. If you only
include the most obvious trends, the ones with a direct impact on your business,
you are most probably not going to end up with revolutionary ideas that will
dramatically improve your competitive position. It is only by investigating
trends that have an indirect impact, on your customers or on markets peripheral
to yours, that this exercise will truly unleash fruitful insights for your
business.
Did this example debunk the myths about
market intelligence?
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