Soon after European settlers arrived at new locations, they began to chop down trees. This was very labor-intensive and wore out expensive axes at a terrible rate. The benefits from clearing the trees were instantaneous: The settlers could produce lumber for housing and prepare the land for planting crops.
When some Native American tribes moved into an area, they banded a section of forest cutting a piece of bark around the tree. Banding kills a tree without being labor-intensive and consumes knives at a slow rate. Then they patiently waited the requisite number of years until the forest fell down, which enriched the soil and made it more productive. In the interim, they planted crops in a previously banded, now felled, forest. They thought, scheduled and planned ahead.
The contrast is startling. More startling is that businesses today are just as different in their methodologies and efficiencies in dealing with their environments. One business, like the Europeans, will face an immediate problem, and in good Yankee style, solve it by throwing resources at it a reactionary approach.
Perhaps low-quality supplies are delivered to your firm, which undermines the quality of your product and the timeliness of your delivery. You solve the problem by paying a premium for another vendor to provide your supplies expeditiously, on their terms (read expensively).
Another business might take years to develop supplier certification programs or training programs a proactive approach. This firm would minimize the likelihood of the panic, expense and resulting negative effects experienced by the reactionary firm.
Think of your environment in three levels external, industry and operating environments moving from the remote parameters to those closer to your organization. In this column, I will address the remote environment, its importance and how you break it down and gather data about it.
Consider five facets: technological, social/demographic, economic, political and ecological. You must systematically understand these environments and their ramifications on suppliers, customers and internal operations.
Technological. Imagine that your firm finds a simple solution to a problem that haunts your industry. It might be invented in-house, acquired by license or brought to you by a possible joint-venture partner. You may now have access to the solution to an industry-wide problem. However, only by identifying the need and monitoring the availability of this technology can you be first to market. Firms more typically will find that their competitors already have moved ahead with such new technology.
Social/demographic. Consider two competing firms that introduce super-premium ice creams simultaneously. At first, the strengthening economy helps drive up demand and supports both of their marketing decisions. But later, the social and demographic trends of health consciousness diminish demand. If, say, Ben & Larry were to monitor these social trends while, say, Doug & Hoss did not, Ben & Larry would likely respond by decreasing capacity in the U.S. accordingly and expanding geographically into other high-income, high-demand areas.
Economic. Monitoring the economy is essential. When some U.S. firms entered Russia, they discovered the ruble was not convertible to the dollar. To extract profits, they purchased local quality goods, such as premium vodka or caviar, exported them to the U.S. and sold them at a profit. Those who monitored the economic situation were able to quickly respond. Others still have their profits tied up in the ruble.
Political. As political situations change, you must keep abreast so that you can prepare for any negative consequences, as well as grasp opportunities before your competition does. Monitoring zoning news can reveal future retail locations; keeping an eye on plans for new road locations can reveal future plant or warehouse locations; surveying federal trade negotiations can reveal export opportunities. Often, political situations are combined with economic and ecological opportunities.
Ecological. The U.S. government has negotiated with Brazil and China to reduce greenhouse emissions in exchange for preferential treatment by the U.S. on certain treaties. To help these governments reduce emissions, the U.S. has promised assistance, including access to U.S. technologies, subsidies for insurance and financing to exporters and trade missions. For one of my clients in Pittsburgh, the awareness of and planning for the confluence of environmental forces has resulted in a very low-risk, multimillion-dollar annual opportunity.
Lance Kurke, Ph.D., is president of Kurke & Associates, Inc., a Pittsburgh-based strategic planning firm. He is president of the CEO Club of Pittsburgh and serves on the faculty of the business school at Duquesne University, where he teaches strategic planning and leadership. He also is an adjunct professor at Carnegie Mellon University. Reach him at (412) 281-2930 or at firstname.lastname@example.org.