Using PEST, SWOT and scenario planning in a crisis

The Covid-19 crisis is an unprecedented event, the exact impact of which is impossible to foresee. However, those organisations that have dealt with the crisis best are those that had robust strategies in place for dealing with the unpredictable.

There are a multitude of different tools available to help organisations consider and prepare for potential futures that should form part of business and strategy planning. These are vital for building resilience, as Econsultancy’s Developing Future Strategy: Long-Term Thinking for Marketers report notes: “Long-term future thinking can make the difference between whether an organisation thrives and survives or is swept away.”

Although planning for the long term is vital for resilience, there are additional tools that organisations can use to quickly understand the immediate environment and what measures they can take in response to a crisis.

This briefing will explain how to use analysis models such as PEST and SWOT, and how to undertake scenario planning in a crisis.

This is an edited excerpt from Econsultancy’s Learning from a Crisis Best Practice Guide.

PEST and SWOT analysis models

PEST (political, economic, social, technological) analysis – This relatively simple tool can help organisations look at the macro factors that dominate the market in order to better understand the key external drivers that will have the most direct impact on their marketplace.

SWOT (strengths, weaknesses, opportunities, threats) analysis – This grid allows organisations to understand their exposure to these factors in order to mitigate risks and spot opportunities.

While companies would not have been in a position to have predicted the Covid-19 crisis and put a specific contingency plan in place, many will have updated their analysis as the pandemic developed. The PEST analysis would be a statement of fact about the virus for each aspect. The SWOT analysis allows the company to assess how they may respond.

For example, as a result of many physical businesses being shuttered, there has been a shift of consumers online. This has led to an increase in areas such as online personal trainers, ordering of gym equipment, uptick in online educational/training courses, home entertainment subscriptions and home delivery services.

While some companies were able to react quickly and started supplying their products to those at home through creating partnerships with other suppliers, others identified opportunities to create new revenue streams.

Pret a Manger launched its first retail range in May with three organic coffee products going on sale on Amazon.co.uk and in Pret shops with a view to launching more products for at-home consumers. Pret’s UK managing director Clare Clough was quoted as saying: “This marks the first time that our customers can make their favourite Pret coffee at home.”

For other companies, thriving during the Covid-19 crisis meant looking at their strengths in the market and how they could use these to support the supply chain in order to continue providing services to those at home.

Figure 1: Example PEST for café chain

example PEST for coffee chain

Source: Econsultancy

Figure 2: Example SWOT for café chain

example SWOT for cafe chain

Source: Econsultancy

Ben Carter, Global Director of Restaurants and Strategic Partnerships at Just Eat, describes how the food delivery company responded to some of these challenges in order to protect restaurants:

“We wanted to support our restaurants so they could continue to operate safely, and to enable those that wanted to offer takeaway and delivery, but had never done it before, to achieve that quickly,” he says. “One of the first things we did is introduce a restaurant support fund where we applied a commission reduction for 30 days, waived sign up fees and put in more resource to enable us to get more restaurants on board. In the UK we added several thousand new restaurants.”

The PEST and SWOT analysis models can help companies consider how best to adapt to their product, service delivery and any key elements of marketing for the current situation, as Just Eat has. It also will help them understand any resourcing or financial impact.

Opportunity to clean house

At a time of great change, the pandemic crisis in 2020 may have provided brands a chance to undertake what marketing commentator Mark Ritson has called a “spring clean”, which involves reconsidering both the brand and product mix. In his article for Marketing Week, he describes the current period as the “perfect window to tighten the brand portfolio once and for all”, as organisations are compelled to focus on their most profitable brands and products.

Such spring cleaning of brand, process and systems will improve agility in the face of future crisis. “One of the things that really set us up for success was previously we had undertaken a massive clean up to remove any unnecessary complexity,” says Robin Carswell, Chief Technology Officer at pale green dot, of the food supplier’s pivot from B2B to D2C. “Not having to worry about legacy systems or processes allowed us to respond much more quickly,” he continues.

As the current situation evolves and economies move into the recovery phase, organisations should continuously review and update their analysis models, as well as undertaking more advanced scenario planning.

Developing future strategy

Planning for the future is essential to the resilience of an organisation. This is not because the future is predictable – as seen with the Covid-19 crisis, unprecedented events can and will happen. Instead, planning for the future is important because considering the long term should drive companies to build in the tools and agility to adapt to shifts in the environment and potential future crises.

Planning for the unknown

Before they reached the antipodes, Europeans had no reason to believe that swans could be any other colour but white. That was until Dutch explorer Willem de Vlamingh spotted a black swan in Western Australia. Having seen black swans, those in Europe were forced to revise their beliefs around the possibility of their existence.

Author of The Black Swan: The Impact of the Highly Improbable, Nassim Nicholas Taleb, has turned this 17th century swan discovery into a way of describing a particular kind of unforeseen, outlier event that has a massive impact.

Whether the Covid-19 crisis was a black swan is debated, but the advice Taleb offers within the book can be applied to this crisis and those that may hit in the future.

Taleb says that organisations should build in “robustness” and resilience against negative events, while maintaining the ability to benefit from positive black swan events. Understanding where organisations may have areas of vulnerability and seeking to build in reliance will help organisations survive major shifts.

Figure 3 illustrates the process of developing a future strategy and the relevant tools needed at each stage.

Figure 3: Future thinking process and toolkit

future thinking process and toolkit

Source: Econsultancy

Change creates opportunities

“During hard times, a structural break in the economy is an opportunity in disguise. To survive – and, eventually, to flourish – companies must learn to exploit it.” – Richard P Rumelt.

Times of great disruption are known to create new opportunities as competitive landscapes shift and customer behaviour changes. As individuals and organisations move from crisis management to future planning, success will depend on the ability to understand and respond to the new and evolving environment.

However, in another Marketing Week article by Mark Ritson, he highlights how today’s marketers would do well to focus on the unchanging consumer and their unchanging desires. Jeff Bezos has said something similar, stating that he is more interested in what is not going to change in those 10 years, rather than what is, because “you can build a business strategy around things that are stable in time”.

For a full toolkit for building a future-focused strategy, refer to Econsultancy’s Developing Future Strategy: Long-Term Thinking for Marketers report.

Scenario planning

Ben Carter, Global Director of Restaurants and Strategic Partnerships at Just Eat, highlights the importance of having frameworks for managing risk. “We have a risk register which we review on a regular basis, which shows during times like these why frameworks and being able to role play scenarios like these is vital,” he says.

“We had done some scenario planning but not any role play. There were things that snuck up that we were not expecting, but because of Just Eat’s nature, we were able to adapt very quickly.”

Carter says that while having a business continuity plan and a disaster recovery process is essential, these must accompany flexibility and agility. “You need to look at what the data is showing, look at the macro trends and what your business data is showing and don’t be afraid to pivot from it and change.”

He gives an example from City Pantry, Just Eat’s B2B food delivery business, which had to stop doing business when offices shut. “One of the things we did early on, two weeks into the crisis, was to launch pantry packages,” Carter says. “These give employers the ability to keep engaging with their employees by sending packages such as BBQ kits, fresh fruit and vegetables. We saw a real latent demand in employers wanting to keep engaged with their employees. They had the budget set aside to feed them, but were not able to, but wanted to do something, which we enabled.”

Figure 4 illustrates a scenario planning framework designed to help plan for and adapt to changes in resources and revenue. This approach to scenario planning can be applied to a variety of situations, with organisations adapting the x and y axes based on their specific requirements e.g. employee shortages, issues in the supply chain. However, with the current fall in consumer demand and many organisations cutting spending, revenue and resource shortages may be a useful lens to consider strategy during and on exiting the Covid-19 crisis.

Figure 4: Scenario planning based on indicators

scenario planning based on indicators

Source: Econsultancy

The Business Model Canvas

With the Covid-19 crisis disrupting routes to market, access to key resources, activities or customer relationships, many organisations have had to reconsider their business models. Econsultancy’s Digital Shift describes one of the most useful and well known tools that can be used to reconsider or reinvent a business model, Alexander Osterwalder’s Business Model Canvas, which splits a business model into nine constituent parts.

This simple tool is hugely valuable for organisations looking to pivot or explore alternative business models. The canvas centres around the value proposition box. Defining the value proposition enables business owners to be clear about what value they are bringing to customers. In the pale green dot example on the following page, this would be the fresh, quality produce.

The right-hand side of the canvas focuses on customers, defining the key customer segments, the relationships a business can have with them and the channels through which it does this. The opposite side draws out what the business does to create its value to customers. Revenues and costs flow from customer- and activity-based elements.

Figure 5: The Business Model Canvas

business model canvasSource: Business Model Alchemist / CC BY-SA

The canvas allows marketers to not only analyse current business models for strengths and weaknesses, but also to rapidly explore new models, opportunities for pivoting or how to extend into a new customer segment.

The tool can also be used to understand how new efficiencies enabled by digital technology could be utilised in creation or delivery of value or, as has become of particular importance during this crisis, explore different routes to market and new customer relationships.

Consider channels

One of the key challenges of the Covid-19 crisis has been the particular impact it has had on the middle right quadrant of the business model canvas; customer relationships and channels. MIT Sloan Management Review suggests three proactive response strategies that match an organisation’s products and infrastructure to customer need:

Strategy 1: Same Products, Different Channel e.g. restaurants offering at-home dinner kits or takeaway options.

Strategy 2: Same Infrastructure, Different Products e.g. perfume giant LVMH swapping to make hand sanitiser.

Strategy 3: Same Products, Different Infrastructure e.g. employee leasing schemes, such as Aldi temporarily ‘borrowing’ McDonald’s staff while the physical restaurants are shuttered.

These strategies are explored more fully in Section 4 of Econsultancy’s Learning from a Crisis Best Practice Guide.

This briefing is an edited excerpt from Econsultancy’s Learning from a Crisis Best Practice Guide.

The post Using PEST, SWOT and scenario planning in a crisis appeared first on Econsultancy.

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