Business Key Drivers PESTLED / PESTEL

Welcome to PESTLED360, the world’s first collaborative, data and artificial intelligence-driven methodology for collecting, analyzing, and nailing down business key drivers for your organization now and in the future. No organization exists in isolation from its surroundings. In fact, you are always part of the ocean you swim in. Understanding your external context and the global key drivers impacting your organization prepare you for change. We can identify both context and drivers with PESTLED360.

Are you confident in your strategic thinking and your organization’s internal innovation competencies and skills?
Have you identified what is coming in your business environment and have you prepared for it?
Do you have a roadmap for its short- and longer-term implications?

The PESTLED360 Framework for Business Key Drivers (also referred to as PESTEL)

PESTLED (or PESTEL) is short for the Political, Economic, Social, Technological, Legal, Environmental, and Demographic factors affecting you and defining your environment. Innovation 360 has used this framework in many assignments to scope the business key drivers.  Often it is misused as a framework for assessing a specific market or even an organization itself. In fact, thinking much more broadly produces the most value. PESTLED illuminates current influences, but more importantly, it alerts you to rapidly approaching changes and market dynamics across industries.

Examples of business key drivers PESTLED – PESTEL

A great example of disruption across industries is the way Uber instantly went from disrupting the taxi industry to holding a dominant position in the food delivery industry. Rising rapidly to handle 10 billion dollars US worth of business and devouring market share from rivals Postmates, Caviar, and DoorDash. It’s easy to see in retrospect. Managers in the food delivery industry experienced surprise due to their lack of attention to the events in the passenger transport industry.

Fragments of available data can often help build a barrier around your core value proposition as well as help to understand future possibilities. But you need to collect and put the data together and analyze the disparate bits of data to find relevance in their connections. Just as individual bricks cannot make a wall without mortar to hold them together, individual bits of data cannot show the whole picture. PESTLED is the mortar in the world of data. It illuminates connections in the data so you can begin to defend your market value.

It can be especially effective to conduct a PESTLED (or PESTEL) analysis on both a global level and a regional level, and to identify the key legal, political, and demographic drivers of each.

Business key drivers are often easy to identify, but their implications can be much harder to assess. To overcome this hurdle, involving as many stakeholders as possible can provide powerful results. This calls for interaction, creativity, and the articulation of many different opinions. Each force can have both positive and negative impacts, so it is important to understand the reasons why by drawing on a diverse set of stakeholders.

Using PESTLED360 to Build Scenarios based ion PESTLED / PESTEL

With the insight gained from a PESTLED analysis, scenario planning then helps to elaborate on different possibilities. Innovation 360 uses a six-step process.

Step one: Identify possible issues linked to the business key drivers the PESTLED analysis has brought forward―no more than two to three for the sake of clarity.

Second step: Specify a time frame―for instance, three years from now.

Third step: Define two or three extreme potential outcomes within the time frame. Combine the issues in all possible combinations. Then find a few combinations that are extra interesting for deeper investigation.

Fourth step: List all the stakeholders involved in each scenario based on the extreme potential outcomes. Look to understand their impact and the impact of each force or force on them. This could, for instance, be future competitors or collaborators, and the force could be competition from new entrants.

Fifth step: Finish by working backward to understand possible plots or evolvements that can signal that the scenario is about to happen.

Sixth step: Analyze what recommendations the scenario would mean. As time passes, the scenarios can be reiterated and adjusted when needed.

Let’s work through an example together.

Imagine you are on the leadership team of one of the top five executive jet rental companies, such as Netjets, GlobeAir, or Stratos Jet Charters. Your profits depend on maximizing asset usage, keeping crew costs low, and add-on express cargo.

This scenario plan is based on the following business key driversr:

• Elon Musk has finally built a functional electric jet.
• The cost structure is estimated to be as low as $0.09 per seat mile, or $260 per hour.
• Ticket prices will be one-third the current market rate, with an 80 percent reduction in emissions and noise, and
• Office-to-office time will be cut in half.

So, step one: Major players will not be able to compete in short-haul, but the new airline can’t handle all the demand on its own. Expect new entrants.

Second step: Let’s look ahead to three years, when regulatory hurdles may be worked out.

Third step: An extreme but not impossible outcome is that combustion engines may be outlawed due to environmental concerns.

Fourth step: This will be filled out with your fantasy stakeholders. This section can be quite lengthy in a real scenario plan.

Fifth step: Work backward into partnerships, new business models, or liquidation plans.

Strategic Initiatives

Understanding the outcomes of PESTLED360 allows organizations to delve into how these findings will shape their future strategies and what that could look like in the form of strategic initiatives. To prioritize Operational Strategic Initiatives (those necessary to execute now), they use Impact-Feasibility mapping, ensuring optimal resource usage. This is what we often refer to as incremental innovation.

On the other hand, we identify Innovation Strategic Initiatives (those we need to explore) as the breeding ground for innovation, usually equated with radical innovation.

These incremental and radical innovations range from services and products to business models and processes. Once you’ve put strategic initiatives in place, it’s crucial to comprehend your industry landscape, your innovation and growth aspirations, and your capabilities. This understanding helps you determine how to maintain your leading position today, tomorrow, and in the future. When you’ve added the strategic initiatives to both the incremental and radical buckets, and you’ve recognized your aspirations, capabilities, and competitive landscape, it’s time to gather ideas, experimentally test them, and progressively scale up what works. This iterative innovation process leads to the ultimate launch and commercial success.

In saying all this, sometimes it’s possible to jumpstart innovation and growth projects with business key drivers. At other times, you might initiate a renewal journey simply with an ideation session. Every tool in the Innovation 360 suite provides extensive methodology support and can perfectly adapt to suit your specific situation. They’re also customizable for both online and offline interactive usage.

“PESTLED360” is a proprietary toolkit used and accessible to our consultants, partners, and independent licensed practitioners in 45 countries. Access to this tool requires an IMGB Innovation Management Green Belt or higher. Read more about our accreditation programs here.

“PESTLED360” provides our practitioners with the world’s first interactive online-based data-driven analytic tool for collecting, analyzing, and uncovering what will impact you now and in the near-, mid-, and long-term market. Results provide input into “Scenarios360,” which helps take identified business key drivers to real scenarios to iron out what needs to be executed now and what needs to be explored now.