When running a business, it’s crucial to be aware of any external factors that could impact future operations, profitability and even regulatory compliance. One way to identify these factors is to conduct a PESTLE analysis.
PESTLE — an acronym for political, economic, social, technological, legal and environmental — is a comprehensive assessment that gives businesses valuable insights into their external environment. The process involves reviewing and accounting for everything from demographics to financial futures to environmental concerns to new regulations and more. This thorough analysis allows business leaders to better strategize to overcome present or future challenges.
While it’s a complicated process, the data you can glean can prove invaluable — if recent months have taught us nothing else, we’ve learned that it’s essential for businesses to adopt a proactive mindset to survive. To help you conduct an effective PESTLE analysis, review the following tips shared by a panel of Business Journals Leadership Trust members who have experience with the process.
1. Neutral information from diverse sources
Make sure that your information is accurate and objectively neutral. Much of a PESTLE analysis has to do with data such as interest rates, population growth, demographic reports and local policies. However, some of the analysis focuses on sustainability, automation and innovation. Pulling information from credible and diverse sources puts you in a position to make realistic anticipations. – Kimberly Davids, The Weitz Company, LLC
2. Updated data
The most critical elements of a successful PESTLE analysis are the timeliness and quality of all inputs and periodic review. When it comes to assessing external impacts on your organization, it does no good to analyze old or incomplete information or to make a decision based upon stale information. This means creating a dedicated team tasked with staying up to date on developments and informing management. – John Palter, Palter Sims Martinez PLLC
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3. Relevant data
Relevance is key to the data and framework. Due to the extensive nature of this analysis, it is important to ensure all factors are relevant for generating accurate results that are valid for implementation. – Rachel Namoff, Arapaho Asset Management
4. A focus on improving customer experience
The most crucial component is linking the results with customers’ behaviors and deriving methods to improve their experience. Many organizations focus on collecting the facts but fail to note a valid reason behind it. This defeats the whole purpose of a comprehensive analysis. Businesses need to derive the do’s and don’ts and develop future strategies based on the findings of the analysis. – Alina Clark, CocoDoc
5. An ‘assumption check’
To have a meaningful PESTLE analysis that supports future planning, it is important not to oversimplify the amount of data used for investigating the six external factors. Recognize early on that the data used is based on a set of assumptions, and make sure you are comfortable with those assumptions before proceeding — especially if critical decisions will be made based on the analysis. – Shannon Block, Skillful a Markle Initiative
6. A look at macro-environmental factors
A PESTLE analysis has never been more important, as there are many factors that will drive consumer demand or confidence. When analyzing your results, take into account any macro-environmental factors that may have impacted your results as well as pre-planning around any large events that are scheduled to take place during the year. – Jessica Hawthorne-Castro, Hawthorne Advertising
