Most business leaders operate with a very limited view of what’s happening in the world beyond what they know, much less how it impacts their business. It’s one of the reasons why most businesses react to change rather than exploit it. What I’m talking about is having situational awareness and good business acumen.
Let me ask you a simple question: How much time during a week, or a month, do you prioritize developing situational awareness?
Most leaders don’t have a clear answer to this question. The question is about addressing the following:
Most business leaders only focus on what they know. That is, what they know about their business; that’s it. You’re only seeing maybe 3 – 6 months ahead, operating with blinders on the side. The next two circles are about what’s going on outside your business that affects everything, like political, economic, sociological, and technological forces.
Any business leader who maneuvers around threats, seizes unseen opportunities, looks ahead and works backward, and strategizes is someone who is operating in all three circles. It’s someone who has great business acumen by prioritizing having situational awareness.
How do they develop this level of strategic thinking?
An advanced way to develop situational awareness is to do a PEST analysis, which stands for political, economic, social, and technological. This type of analysis is used to gauge external factors that could impact the performance of a company. A PEST analysis is a useful strategic planning tool that examines external factors affecting a business.
Here’s a list of questions for each component of PEST:
Political:
- What government policies or regulations impact our industry?
- Are there any upcoming elections that could affect our business?
- How stable is the current political environment?
- Are there any trade policies or restrictions relevant to our operations?
- What are the current tax policies affecting our business?
Economic:
- What’s the current state of the economy (growth rate, inflation, unemployment)?
- How are interest rates trending?
- What’s the economic outlook for our target market?
- Are there any significant changes in consumer spending patterns?
- How stable is the currency in our key markets?
Social:
- What demographic trends are relevant to our business?
- Are there any changes in lifestyle or consumer behavior affecting demand?
- What are the current attitudes towards our products or industry?
- How are education levels or cultural norms impacting our market?
- Are there any health-conscious trends affecting our business?
Technological:
- What new technologies are emerging in our industry?
- How is automation affecting our production or service delivery?
- What’s the rate of technological change in our sector?
- Are there any disruptive technologies that could impact our business model?
- How are changes in digital infrastructure (e.g., 5G, AI) affecting our operations?
When conducting a PEST analysis, it’s important to:
- Prioritize the factors most relevant to your specific business and industry.
- Consider both short-term and long-term impacts.
- Use reliable sources for your information and data.
- Regularly update your analysis as external factors can change quickly.
- Consider how these factors might interact with each other.
- Use the insights gained to inform your strategic planning and decision-making processes.
Developing situational awareness takes curiosity and a constant hunger for wanting to know. You have to read books, articles, and reports, and talk to people who specialize in the areas you’re curious about. Doing so will help you sharpen your business acumen, and help you bring external trends into your business.
With that said, ask yourself the following questions to get started:
- What is happening in the world today?
- What does it mean for others?
- What does it mean for us?
- What would have to happen first (for the results we want to occur)?
- What do we have to do to play a role?
- What do we do next?
Bottom line: Are you fascinated by change? Most leaders are not. Instead, they are fearful of it. You have to seek out change if you are to become a great leader. One of the most important jobs of every leader is staying ahead of what’s going on in the world. The only constant is change and you should be fascinated by it because you either drive it or become irrelevant by it.
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