Jeff Standridge:
Hey guys, Jeff Standridge here and welcome to another episode of Innovation Junkies Podcast.
Jeff Amerine:
This is Jeff Amerine, glad to be back. What are we going to cover today, Jeff?
Jeff Standridge:
Well, so we’ve been talking about strategy and structure. That was our last two episodes. And one of the things we need to really think about as we’re building strategy is to do some assessment of the external environment, really begin to analyze. And we can really do that at three different levels. One is what I would call the macro view of looking at some of the economic and market realities. The next level down is to look at some of the competitive realities that may exist. And then finally, at the talent realities that exist. And so why don’t we start at the top, market and economic realities?
Jeff Amerine:
Yeah, that’s a good place to start. And there are some good frameworks for what we call external analysis. You can look at Porter’s Five Forces. There are a variety of different things, but it’s the whole idea is to understand what is that market doing and who are the competitors that are in the market? What’s their positioning? What’s their pricing? What are they doing in terms of new product development? It’s assessing all those. What are the supply chain issues that are happening? It’s really understanding that you’re not operating in isolation and you do have competition. So you need to understand what else is going on in that market. What are some other examples of that, Jeff?
Jeff Standridge:
Well, so one is that competitive analysis, as you said, what are they doing? What are they not doing? What are we doing? What are we not doing? You know, where is the gap in the market from a customer perspective or from a market perspective? And so that really fills out the competitive analysis. We can actually start above that and say, what’s going on economically out there, like today, right? You know, one of the things that’s happening in the insurance commercial insurance premiums. And in some instances, as you’ve probably seen, personal homeowners and car insurance rates, folks are getting their premiums back for renewal and it’s gone up anywhere from 25 to 48%, sometimes 50%. And so having to educate the market to say, hey, look, the cost of goods has gone up. So repairs on automobiles, the cost of, repairs on homes and construction materials. transportation cost of actually getting those materials from the source to the actual physical location. And so looking at those market realities of we’re in a time of unprecedented inflation right at this particular moment and inflation of cost across a variety of different industries. And so what might that do to our ability to be successful in the coming marketplace?
Jeff Amerine:
And you couple with that, and the two are linked are interest rates because it’s going to change your internal hurdle rate for capital. But it’s an external issue that’s being leavened upon you. A lot of business models have failed, including for the banks based on their lack of agility and understanding what the rapid changes in interest rates were going to do.
Jeff Standridge:
Yeah, there are a number of, whether you’re talking about market and economic factors or you’re talking about competitive realities, there are a number of tools out there that you can use, but probably none other that’s any easier than just a general SWOT analysis. When it comes to the current economic and market realities, what are our strengths? What are our weaknesses? What are the opportunities that are out there and what are the threats that are out there? Same model could be used for… for competitive analysis. What are our strengths relative to our competitors? What are our weaknesses relative to our competitors? What opportunities or gaps in the market do we think might exist? And what potential threats do we have? Do we need to anticipate that could come in and steal market share from us, steal clients from us, what have you?
Jeff Amerine:
Yeah, for sure. And the threat box, a lot of times opportunities and threats are views as specifically external. But that threat box, you can take that a level deeper and think about that in terms of risk. Marketing customer risk, is it changing? Are there things happening with customers that are changing? You could look at financial risk, things like we just talked about that are financing rates are going up, interest rates are going up, it’s an inflationary environment. You could also look at technology or product risk. Are there things happening? New technology entrants that are changing. And then there’s other externalities like new environmental regulations, new legal issues, new compliance-oriented issues that can factor into it. And some of that stuff that we just discussed is also can go into a steeple model or Porter’s Five Forces. It’s just another framework that allows you to categorize how to think about these external issues.
Jeff Standridge:
Yeah, and some of these thought exercises, if you will, can be difficult. They’re not necessarily easy tasks, but they are critical tasks to stay on top of where we are within the relative industry. So if we talk about those marketing economic factors, we talk about competitive factors and competitive analysis, then we begin to think about maybe the core competencies of our organization and the competitive advantages of our company as a whole, what are we really, really good at as a company and what are we not so good at? You know, Jack Welch back in the day, and I’ve said this before on previous episodes, back in the 90s, 80s and 90s, they were doing one acquisition a day. And when Jack Welch took over, he said, you know what? If we can’t be at least number one or number two, in the industry in which we have a business unit or an organization or a company, we’re gonna jettison it. We’re gonna get out of that industry if we can’t be number one or number two because it’s distracting us. We’re not good at that. And so what are the core competencies of the organization? What are we really, really good at? What are we not so great at? What are we below average at? What do we really stink at perhaps? And then what… in those things that we’re really good at, what gives us competitive advantage? It’s not everything we do in that particular industry, but there’s something that we do that differentiates us from our competitors. What is that competitive advantage?
Jeff Amerine:
And sometimes it’s referred to as the right to win. You know, if you’re in a particular segment and you’re not a market leader, you’re not number one or number two, or you’re not on an ascendancy that’s gonna lead you there, you probably don’t have a right to win unless you do something different. So maybe you exit that. And this will also boil back into your make versus buy, your organic growth versus your acquire aspects of how to achieve that sustained organizational growth through a strategy. If you don’t understand, Should we make it? Can we hire the talent to get it? Or should we buy it? Or should we do an acquihire? You may have difficulty, but those are all the kinds of factors that go into this sort of thought process.
Jeff Standridge:
That’s exactly right. And then you get down to just your everyday leadership and employee population. Do you really have the skills in the organization today to exist in the future? Or what skills do you need to develop? What competencies at the end of it? These are not talking about organizational companies now. We’re talking about competencies of people. What knowledge, skills, and abilities do we need to develop down at the individual, associate, employee, leader, manager, and leader population in order to execute on this plan. Because without that, it’ll just be a plan on a piece of paper and not something that we can actually bring to fruition.
Jeff Amerine:
Absolutely. And you’ll get other trades that say, which are also external issues, but they relate to how you use your talent is how can AI and all the AI tools be force multipliers with the talent that we have? Perfect example of that is people are trying to decide, we know that we’ve got to know more about data analytics, but how far can we get with AI? What does that mean in terms of the type of talent that we need to hire? You know understanding that type of an externality which is sort of a macro level trend Is important as well how you hire and who you hire and what they’re going to do given the new tools that are available
Jeff Standridge:
Very good, very good. You know, as we start to land this plane, I wanna maybe get a little bit of information about what we’re gonna talk about in the next episode.
Jeff Amerine:
Sounds good.
Jeff Standridge:
And that is really about how do you adequately and properly communicate the strategic plan to the organization and how do you drive understanding across everyone within the organization so that people know where they fit within the strategy and the things that they need to do in order to be successful.
Jeff Amerine:
It’s sort of an internal resource audit, right?
Jeff Standridge:
There you go. So we’re gonna be talking about that and we invite you to join us for the next episode. This has been another episode of the Innovations Junkies Podcast and we always appreciate you for joining.
Jeff Amerine:
See you next time.