Planning Strategically LL558D Week 3 Part 2

1. Planning StrategicallyLL558DWeek 3 Part 2 Text: Strategic Planning for Public and Private Organizations (3rd Edition) • Readings: Chapter 5 “Assessing the Environment….” p. 123– p. 136 top Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

2. Introduction • It’s necessary to compare 3 factors in order to identify strategic issues and develop a strategic plan that is an appropriate fit: • The core nature and driving values of the organization • The vision, mission, values and mandates statements • The stakeholder analysis • The current environment • STEEP analysis • Analysis of competitive environment, client expectations, and other factors. • The strengths and weaknesses of your organization to operate in this environment • SWOC analysis • In this second half of Week 3, we will provide further explanation of the STEEP analysis to supplement the text. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

3. Key Questions • What techniques do we use to anticipate future opportunities and threats in order to develop strategies that will carry us into the future? • What is a STEEP analysis? • How do we use a STEEP analysis to understand an organization’s current and future external environment in order to understand future opportunities or problems? • How do the results of a STEEP analysis impact the vision and mission statements of an organization? Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

4. Key Concepts • Techniques for anticipating the future • Scanning • Forecasting • Case-based reasoning • Scenario building • STEEP Analysis Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

5. Techniques for Strategic Planning/ Management As part of strategic planning and strategic management, “collectively we must look at our prospects” (YorickBlumenfeld, Scanning the Futurep. 7) Examples of techniques: • Scanning • Forecasting • Case-based reasoning • Scenario building • STEEP, SWOC/ SWOT • There are many techniques to help us plan a strategy without depending on a crystal ball or a consultant from Hogwarts. • All of the techniques contribute to risk assessment at various levels • Problem for all of the techniques: There is no one correct way to apply each technique. Each involves more art than science, so multiple techniques are often brought into play • Each involves the need to gather information through methods that include studies of demographics, market trends, political patterns, and other forms of research appropriate to the field involved. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

6. Scanning • Scanninginvolves reviewing contemporary sources for indications of emerging trends and future impacts. Examples: • Media reports (TV, newspapers, blogs, CNN, ZDNET) • Lists of research projects recently funded by major grant agencies such as National Science Foundation • Corporate white papers or news conferences • Sometimes we scan with specific questions in mind (“What are the new trends for our community’s youth?”), but sometimes we just look around at what’s on the horizon. • Organizations (example Forrester Research) that sell research have staff who ferret out sources, scan the results and draw general conclusions • Financial analysts use scanning to gain unique insights about certain markets or corporate trends that their competitors might not have • Service agencies use scanning to make sure their service offerings are keeping up with community needs Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

7. Caution: Some terms to keep an eye on • Causal relation: The occurrence of one event brings about the occurrence of the other • Correlation: A relation existing between phenomena or things or mathematical or statistical variables in which they tend to vary, be associated, or occur together in a way not expected on the basis of chance alone Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

8. Examples of Tools for Scanning Any source of reliable information is a tool for scanning.For example: • The AARP Newsletter is a must for anyone dealing with baby boomers. • Keep up-to-date in latest concerns about health care, seniors as volunteers, baby-boomer retirement interests, etc. • Newspapers or online news sources: The NY Times,TheChicago Tribune, news websites. • National Public Radio (locally Chicago Public Radio) provides in-depth coverage of a wide variety of issues. Search their website to find and replay programs. • Bloggers often do our scanning for us! Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

9. Forecasting Both forecasting and foresightingattempt to assess future conditions based on projections from the past and present. • Forecasting emphasizes predictability, mathematical analysis • As forecasting methods become more developed, they should become more accurate in predicting future states. • Foresighting generally is considered to be “a process by which one comes to a fuller understanding of the forces shaping the long-term future which should be taken into account in policy formulation, planning and decisionmaking.…” • Foresight involves qualitative and sometimes quantitative means for monitoring indicators of evolving trends and linking the analysis to policy implications.…" (Martin and Irvin, 1989) • A strong theme in foresighting is that large aspects of the future cannot be predicted, and so “pinpoint accuracy" is not a key goal Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

10. Case-based Reasoning • CBR describes how people reason about the future based on cases in the past without imposing rules of behavior or other highly structured determining patterns • It describes the process of solving new problems based on the solutions of similar past problems. • This technique is similar to reasoning by analogy and to legal reasoning using precedents. • CBR has become a mainstay of the attempt to make computers reason as people do. See http://en.wikipedia.org/wiki/Case-based_reasoning for further information on CBR and computing. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

11. Scenario Building • Bryson strongly recommends using brainstorming sessions in which the planners and their staff envision possible scenarios to capture values, goals, wishes, “must haves,” etc. • Allowing opportunity to explore visionary “what if…?” scenarios gives staff permission to think outside the box • Creating vision scenarios provides a chance to dream-walk through possible future situations if certain factors are allowed • The process of walking through a scenario is like exploring a world – or being in a movie • In the process, we discover hidden opportunities and creative alternatives to current approaches and policies The value of scenario building by a planning group:It allows the group to explore contradictory forces and complex interactions without real-world cost. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

12. Cautions • All of these techniques can backfire because predicting can create a “bandwagon effect” • A scenario or prediction (especially if presented by a prominent or charismatic individual) can become a self-fulfilling prophecy if everyone climbs on board • We need to avoid any version of planning that pushes us toward ready-made or obvious answers • We must be wary of scenarios that: • Frighten us and cause a stampede in one direction out of fear • Move us out of a misplaced sense of competition or quest for glory • Push us to act based on a misinterpreted sense of purpose or dedication • Mislead us with a dream scenario is so attractive that we forget to check its feasibility Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

13. STEEP Analysis • STEEP analysis is a method of sorting indications of emerging trends into broad categories • Social • Technological • Environmental • Economic • Political When a development or trend doesn’t fit neatly into a category, use the “best fit” • The STEEP analysis; • Identifies and examines external drivers that currently or in the near future will influence your plans • These factors must be taken into consideration for a strategy to work. Some factors, if ignored, will doom you to failure. • STEEP provides a broad, external analysis of: • The business or service area in which you now operate and/ or plan to operate. • The society as a whole as it impacts your organization and its stakeholders. • The STEEP categories can also be adapted to scrutinize internal factors as well • SWOC analysis is internal or specific to your organization. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

14. STEEP By Any Other Name… • Variations on the STEEP include (but are not limited to): • PEST: Political, Economic, Social, and Technological • PESTLE/PESTEL: Political, Economic, Sociological, Technological, Legal, Environmental • PESTLIED: Political, Economic, Social, Technological, Legal, International, Environmental, Demographic • STEEPLE: Social/Demographic, Technological, Economic, Environmental, Political, Legal, Ethical • SLEPT: Social, Legal, Economic, Political, Technological Note: Bryson folds his discussion of the STEEP under the general heading of “External Environmental Assessments.” (pp. 130 – 136) • This approach allows him more flexibility in selecting the headings for each part of his discussion. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

15. STEEP Distinctions • STEEP is a categorizing tool with a memorable acronym that helps us get our thoughts organized: "Here are 5 important categories of consideration – don't leave one out.” • In our world, virtually all problems have STEEP aspects. • What do we do if an issue appears to fit under more than one category? Example: Are health care regulations a political inevitability or a social need? • The STEEP headings suggest that it is productive to distinguish primary and secondary characteristics of a problem and categorize accordingly. • These categories do not reflect metaphysical truths about the universe. They are merely useful tools. • Should we add a few categories, such as Psychological or Religious (Spiritual) or Ethics/Moral considerations? • Some versions use these as subcategories of “Social” considerations. • We must beware of being trapped by our own categories. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

16. Major Drivers: Sub-categories • Economic • Capitalism • Socialism • Communism • Social: • Emotional (connected to national character or frame of mind (STEEEP) • Fears – protection of jobs • Ethics; norms of the culture • Environmental • Ideals: nature is to be valued in its own right vs. • Practical: Protect Nature so that humanity can survive (Example: The need to protect resources such as rivers, fossil fuels • Religious • Drive to establish and protect the one true faith • Moral considerations • Political • Trade agreements • Political rivalries among nations Lewis University LL558D. Reminder: These slides are not intended to replace your own notes. 16

17. Bryson’s Contribution • In Strategic Planning for Public and Non-Profit Organizations, Chapter 5, Bryson puts his emphasis on identifying • Forces and trends B. Key resource controllers C. Actual or potential competitors • Bryson discusses forces and trends but breaks out elements that are more frequently seen as sub-categories of the basic STEEP analysis (pp. 133 – 135): • Social and organizational complexity (131) • Reform and Reinvention of governments, with increased interaction among public, private and non-profit sectors (131 – 132) • Continuation of Technological Change (132) • Diversity of Workforce, clientele and citizenry (132) • Individualism, personal responsibility and civic republicanism (133) • Quality of life and environmentalism (133) • Struggles for legitimacy and changes in the American Dream (133 - 134) • Culture of fear (134) • Emphasis on learning (135) • Transitions and continuity vs. revolution (135) Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

18. Macro and Micro Forces In effect, Bryson is breaking out macro and micro forces that can be found in all of the STEEP categories. Forces for change are complex and reflect layered relationships. The division into Macro and Micro is also an organizing tool, but it works only if we keep it in perspective. • Social • Macro: Unrest due to unequal opportunities across races • Sub-force: Power of organizations such as NAACP or a union • Technological • Macro: Digital convergence for media; wireless digital combination of voice, video, data, text, and financial transfer in new applications, devices, networks • Sub-force: Interoperability (The ability of information systems to operate with compatible communication protocols, hardware, software, across multiple machines from multiple vendors). Lewis University LL558D. Reminder: These slides are not intended to replace your own notes. 18

19. Performing a STEEP Analysis • The STEEP and SWOC are challenging and sometimes meet resistance • They force each plan writer to drill down about the general information everyone thinks they know already. • Some constitutants will not be pleased to have their thinking challenged. • Nonetheless, these analyses are vital because they let us know where the organization stands and identify potential risks. They are the bedrock upon which a plan is built. Securing research Planners generally have choices for securing needed research: • A committee of stakeholders can perform this analysis in depth if they have time, skills and resources. • Planners (generally also through a small committee) can secure external sources of information (paid or free). • For very small organizations, the planners depend on themselves to scan and research, applying their own knowledge and perhaps assigning one or more employees to tap internal expertise. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

20. STEEP Example: Analysis for SF Books, Inc. SF Books, Inc. is a specialty new and used bookstore in crisis. Under its current game plan, it will go bankrupt. It needs a strategy to take it into the future. A STEEP analysis is vital here: • Social: • All bookstores are hurting because society has replaced books with other forms of entertainment. • Mid-town retail stores in general face reduced walking traffic as people go to the malls instead. Worse, this bookstore is in an area where parking is limited. • The clientele for this bookstore (interested largely in self-help) have followed the trend of turning to the Internet for information • The area’s reading population is shrinking. Their age profile is moving into the senior market, so their focus has shifted to issues for seniors. • Other area residents are students focused on college. • Public opinion and social attitudes toward self-help books have changed – they are no longer considered trendy. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

21. STEEP for SF Books, Inc. (2) Technological: • The impact of emerging digital book technologies is very high, replacing books on paper. • Internet and online alternative sources of information reduce need for paper books. • High tech inventory systems such are used by competitors to reduce and monitor costs. • Individuals tend to sell books online (eBay, Amazon) rather than come in and trade for new books. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

22. STEEP for SF Books, Inc. (3) Economic: • The entire bookstore market is in a shambles. Large competitors such as Borders are struggling against Amazon. Small stores are failing everywhere. • Current economic downturn (levels of disposable income and income distribution) works against consumers buying books. • Unemployment makes the labor supply easy to get at a low salary, but labor costs are high due to regulations • Current low interest rates could make it possible for the store to afford a loan, but the store’s credit standing has been going down. • The store’s global market is important, but recent skyrocketing shipping costs have virtually dried up that opportunity • Basic costs have gone up with fuel costs (electricity, heating/cooling, etc.) • The landlord could get more money from another retailer when lease expires. Therefore, he is not open to lease negotiations. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

23. STEEP for SF Books, Inc. (4) Environmental: • The bookstore wants to be “green” in terms of its use of utilities. • The cost of disposing of unused, unwanted old books is prohibitive. • Cost of bags for purchases is an issue. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

24. STEEP for SF Books, Inc. (5) Political: • The state and town governments are raising sales taxes. • The state and town governments are in upheavals over corruption, the future of the party in power is unclear, but we cannot count on either party keeping taxes the same for the near future • Regulation of Internet trade could demand that stores collect taxes on Internet sales. This is relevant because the store depends on Internet sales to make up for lack of walk-in customers • Cross-border have damaged sales to the Far East, formerly a major used book market. • Legislation governing business practices for employees has made supporting employees expensive. Fewer employees means that the owners are doing all the work with one or two helpers. They are all getting tired. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

25. SF Books, Inc: Triple Bottom Line • The owners of SF Books are dedicated to the idea that the bottom line for their bookstore needs to go beyond cash alone. • They do not have stockholders, so they can set their own standards for success. • However, they do have debts which must be paid. • SF Books would like to contribute more value to its surrounding community, but cannot afford to buy research into the nature and demographics of the changing area in which it is located. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

26. SWOC vs. STEEP SWOT: Strengths, Weaknesses, Opportunities, Threats STEEP information impacts the SWOC (SWOT) analysis • SWOC is more focused on your own organization, while STEEP looks at the wider picture. • Partial example for SF Books: STEEP tells us that the increase in shipping rates hits all bookstores. • A Strength for this bookstore is that it is a brick and mortar establishment that could possible rebuild a neighborhood clientele if it understands the population changes. • A Weakness is that this store is small, so unlike Amazon and other large competitors it has no leverage with shipping companies. It also lacks technology and does not have cash to upgrade. • An Opportunity is to develop community relationships. • A Challenge is to find a new balance of revenue sources. • A Threat is that it will go bankrupt if revenues don’t increase. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

27. Writing a Plan: Proper Wording Creates Clarity General topic STEEP SWOC • Meeting community needs for inexpensive entertainment • Regulatory compliance regulations • “We have opportunity to fill a niche need for elder care by offering .… • Strength: We have compliance measures in place…. • Challenge: We must meet compliance without cost overruns……” • Threat: Loss of accreditation or licenses… • “Illinois towns have increasing need for social services for families caring for aging parents.” • “In US healthcare system, there are increasing regulations. We anticipate that in the current political climate these regulations will continue to grow during the next 5 years.” Note: Part of monitoring the plan going forward is to continue watching the STEEP in case of radical changes – for example a new administration in Washington or sudden changes in fuel costs. Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

28. Some References Online • There are many explanations of the STEEP technique. Here is one from MBA Boost: http://www.mbaboost.com/content/177/ • Here is an example of STEEP analysis attempted for Starbucks. It would be better if each point had a word or two more of explanation: http://www.123helpme.com/view.asp?id=152586 • Another example analysis: http://www.wmra.gov.uk/documents/Planning%20and%20Regional%20Spatial%20Strategy/RSS%20Revision/RSS%20Revision%20Phase%202/A3%20Steep%20Analysis.pdf Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.

29. Challenge • Think about the environment in which you are now working for a degree and developing your career. • Create a STEEP analysis for yourself. What does this analysis tell you about your current career path? Lewis University LL558D. Reminder: These slides are not intended to replace your own notes.