Tips for strategic planning – How to take an idea and turn it into a business opportunity
When it comes to strategic business planning, it’s important to understand that strategy and planning are two different things. Strategy guides planning, not the other way around.
Yet, too many pharmacy owners complicate the strategic planning process and struggle to find the time to work on the most important concepts at the heart of their business idea. They tend to get wrapped up in internal activities like operations because they have direct responsibility and influence over them. They are so impatient to get things going that they leap to the doing and don’t see the value in taking the time to research the business environment.
Strategic planning without data is like driving with your eyes closed
Industry analysis or environmental scanning is a proven process and technique to monitor the business environment at a given point in time. In the strategic planning process, conducting a macro and micro environmental analysis plays an important role to assess a company's operating environment and identifies opportunities and threats for the company and the business idea.
The macro environment (or external environment) refers to all forces that are part of the larger society and affect the micro environment. It includes demographics, economy, natural forces, technology, politics, and culture.
Micro environment (or near environment) refers to the forces that are close to the business and affect its ability to serve its customers. It includes concepts such as the company itself, its suppliers, marketing, any intermediaries that help to sell, promote, and distribute goods or services, customer markets, competition and the public.
Use a framework to guide your environmental analysis
In the macro environment the PEST analysis is a well-known analytical tool to evaluate key external factors. PEST stands for Political, Economic, Social, and Technological factors generally considered as external environmental factors that are not controllable by the organization but have enormous influence and impact on the internal or micro environment.
For the micro environment, using the Porter’s Five Forces approach describes five competitive forces of the micro environment of the market because they directly impact the company’s ability to serve its customers and make a profit.
Getting started with a macro environment PEST analysis
How do outside factors affect your pharmacy business? This is the one question every business owner needs to answer. Otherwise, they may face unexpected consequences.
When considering political factors, be sure to think about policies, environmental issues, and laws or regulations. For economic factors, consider the impact of taxes, minimum wage and the current state of the economy. Social factors are determined by the people. You’ll be considering how your customers, target market, and buying habits affect profits and purchases. Technological questions focus on technology related to your business idea, such as the tech you use daily, and how advancements provide a competitive edge.
Depending on your particular business it might be a good idea to consider using a PESTLE analysis. A PESTLE analysis is an extension of the PEST model and includes Legal and Environmental factors that could have a direct or long-lasting impact on the organization.
How to use Porter’s Five Forces
The competitive forces model (Porter's Five Forces) is an important tool used in strategic analysis to analyze the competitiveness in an industry. This model helps a business understand the risks in the industry it is operating in and decide how it wants to execute its strategies in response to competition.
The basic idea of the competitive forces starts with the notion that competition is often looked at too narrowly, and the five forces say that, yes, you are competing with your direct competitors, but you are also in a fight for profits with a broader extended set of competitors, customers who have bargaining powers, suppliers who can have bargaining power, new entrants who might come in and grab a piece of the action, and substitute products or services that essentially place a constraint or a cap on your profitability and growth.
Questions to ask yourself:
- What is the relationship of underlying economic drivers that are going to really shape the profit potential of this business idea and then armed with that insight, what do you do about it?
- How do you try to ease the constraint that is holding back profitability?
- How can you position yourself to insulate from some of the head winds of those forces?
- Where are the constraints, which if you relax, might allow you to find a really strong competitive position?
- How many competitors are there? Is a high number posing a threat? If so, how do they pose a threat? If it's a small number and it creates and opens up an opportunity, how is it an opportunity? Is the industry growing quickly or slowly? Is that a threat or an opportunity for your company? This is important because of high competitive intensity or a whole lot of competitors with which to compete determine the attractiveness.
So, the five forces is a holistic way of looking at any business idea and understanding the structural underlying drivers of profitability and competence.
Planning won’t make the hurdles go away but at least you’ll see them coming
Throughout this information gathering and thinking, focus on identifying opportunities and threats for your business. By understanding what shapes the overall market and what determines profitability, you can craft a strategy that plays to the strengths of your business and accounts for the weaknesses. Using a framework will provide a structure to discover the opportunities and threats your business proposition will and might encounter.
Be thorough as you analyze your business plan to be sure that you carefully consider all the possibilities within each type of threat and whether that particular threat poses a large danger or a small danger. How will you deal with the speed bumps? On the other hand, the opportunity you’ve identified could be much greater than the threat. What's your contingency plan to deal with extraordinary success?
Gerry Spitzner helps pharmacists and healthcare practitioners to develop winning business management strategies for their practice so they can focus on patient-centred care. An entrepreneurial thinker, speaker, workshop leader, writer, and business development advisor; he is an optimist with a curiosity for improving life and business results who believes in helping people achieve leadership, professional and business success.