We’ve achieved a lot, haven’t we?
We have used the Business Model Canvas to collaboratively consider many of the most vital factors for identifying our business model.
By doing so, we’ve put the customer at the heart of our thinking, ensuring a compelling and feasible value proposition from which we can delight our customers and make a profit.
We’ve itemized many factors critical to our business’s successful operations.
Congratulations!
For example, our business might rely on a third party - some businesses rely heavily on Google and Facebook to reach their audiences.
Or, perhaps we rely on a staff member with the critical knowledge the business faces.These are the things we need to consider to move on.
So how can we identify these external factors? We’ll look at a couple of models for doing so in this final section of our course. First – the SWOT analysis.
Use the SWOT Analysis
You may have heard of the SWOT analysis before. It is a commonly recognized model for assessing your business in the broader context of your market.
It has four main elements:
Strengths - The organization’s internal positive, tangible, and intangible attributes within its control. They tell you about the advantages you will have.
Weaknesses - Internal factors within the organization’s control that detract from its ability to attain the desired goal. These areas are things you can identify and improve.
Opportunities - External attractive factors that represent the reason for an organization to exist and develop. These could exist in the environment and might propel the organization forward.
Threats - These external factors are potentially beyond the organization’s control and could place its mission or operation at risk. Recognizing them can help create contingency plans to address them if they occur. You can classify them by their severity and probability of occurrence.
Equally, strengths and opportunities are more positive and could be described as helpful; while weaknesses and threats take a more negative aspect - they are described here as harmful. This is a visual way of reviewing the factors in the SWOT.
The left side focuses on positives and the right on negatives.
Doing a SWOT analysis can be very straightforward, but its strengths lie in its flexibility and simple application. It has several advantages:
It’s a simple four-box framework.
It facilitates an understanding of the strengths and weaknesses of the organization.
It encourages the development of strategic thinking.
It enables senior managers to focus on strengths and build opportunities.
It can enable an organization to anticipate future business threats and take action to avoid or minimize their impact.
Have a look at a blank template (you can download the pdf version of the SWOT template here):
Your Turn! Use the SWOT Analysis for Our Business Case
Try doing a SWOT analysis for The Founders Reading Guild. Use the template and try to complete it as best you can.
Once you’ve finished, you can review our version of the SWOT analysis to compare it with yours.
Scan Your Environment
Let’s look at another strategic method to prepare your business for success.
It’s not easy to systematically assess your business model environment for potentially disruptive threats or to seize opportunities that can improve or reinvent your business model. Nevertheless, it’s something every company should learn how to do.
For example, business models in healthcare must comply with regulations. Technology has enabled innovative business models to flourish and cater to new ways to consume films or music in the entertainment industry. Just like an architect who must work with the constraints and advantages of a piece of land, the entrepreneur (or intrapreneur) must pay attention to the business environment to succeed.
The business model environment is organized into four areas:
Market forces
Key trends
Industry forces
Macro-economic trends
These areas surround the Business Model Canvas as they influence the kind of business model that will be designed. Unlike the BMC blocks (on which you have full control), external forces represent design constraints you have to work with.
We’ll run through these fields one by one with some suggestions for how to complete them. This might be the typical order you would follow:
Here are a few questions you could ask to help you focus:
Technology trends - Which emerging technologies are peripheral customers or competitors adopting?
Regulatory trends - Is the government debating any new regulations that may impact your category?
Socioeconomic trends - How would you characterize income and wealth distribution in your market?
Societal trends - Describe key societal trends. Which shifts in cultural or societal values affect your business model?
An example might be a business recognizing that its target audience has changed its attitude toward sustainability. So the company may face significant pressure to manufacture their product more sustainably.
Competitors - Who are the dominant players in your particular sector? What are their competitive advantages or disadvantages? Are there any new entrants to the market?
Stakeholders in the market - Who are the other players in the market? Are there any you need to influence?
Suppliers in the market - What new suppliers exist who may be helpful alternatives to you?
Industry norms - What business model traditions do substitute products stem from (e.g., high-speed trains versus airplanes, mobile phones versus cameras, Skype versus long-distance telephone companies)?
Here’s an example of this in practice - Ford, Volvo, General Motors, and other car manufacturers have been slowly investing in electric cars for some time now. When Tesla suddenly appeared on the scene, this would have been a significant new competitor entering the market. Were they not keeping their eye on their industry, they might not have accelerated their investment in this area.
Issues in the economic market - How is the economy changing? Can you anticipate a change in consumer confidence?
Change in market dynamic for your category - Is your category likely to experience change/pressure due to changes in the market?
Needs and demands of customer changing - What are the crucial issues affecting the customer landscape? Which peripheral segments deserve attention? Where are the biggest unsatisfied customer needs?
An example of this might be to look at the skills shortage in the UK post-Brexit. Many companies rely on a steady stream of staff to provide their service - like coffee shops and pubs. A significant shortage of people to fill these roles will lead to reduced customer service and probably rising salary costs.
Economic - How easy is it to obtain the necessary resources to execute your business model (e.g., attract exceptional talent)? How costly are these resources?
Cost of living - Could consumers have less disposable income to spend?
Global market condition - Are there any global economic factors to consider?
Capital markets - Will you be able to raise the funds you need to grow?
Interest rates – How costly will it be to borrow money?
An obvious example of this would be the recent impact of the Covid-19 pandemic on global supply chains. As a result, many resources were in short supply, and the global shipping system reduced the ability to transport resources even when they had been sourced.
There is no magic recipe to keep up with the market and macroeconomic forces. However, you can do your research and stay informed by reading the Financial Times, for example.
Let’s Recap!
Once you have your Business Model Canvas in place, you also need to think more broadly about the environment in which your business will operate.
SWOT analysis is a commonly recognized model that can enable an organization to see its strengths, weaknesses, threats, and opportunities to implement the right strategies.
A business can be affected by environmental forces such as key trends, market forces, industry forces, and macroeconomic forces.
Great job working on the strategic vision for our business idea! Let’s take it one step further and challenge what we’ve been working on throughout the course.
