What are the external forces, patterns, and trends impacting your ideas?
A solution and business model are designed to create value and operate within a specific context. But what is that context?
Before diving in to explore potential solutions and business models, I find a lot of value in doing a couple of critical things.
The first is to zoom out to see the system. Pausing to zoom out to see the whole system we’re working in gives us a better perspective, which often results in us seeing things in new ways.
The next is to zoom in on your organisational context. This applies equally to doing innovation in established organisations as a startup.
We do this to understand how external forces are likely to impact us directly, the constraints, and where things are trending. These insights help us design and iterate our solution and business model.
There are a few tools that are useful for this, like Porter’s 5 Forces, PESTLE, and DEEPLIST – but my favourite is the Business Model Environment tool from Business Model Generation by Alexander Osterwalder & Co.
This tool was designed to use with the Business Model Canvas, but I’ve found it works just as well with the Lean Canvas.
The Business Model Environment tool helps us identify and map the context we’re operating in. This model looks at four types of external forces. I’ll outline the four forces and the elements that make them up.
Market Forces
What are the market forces in your context? This is mostly focused on your customers – their needs, expectations, and behaviours.
Market Issues. What market trends are you observing?
Market Segments. What are the most important customer segments? Which segments are emerging, growing, or shrinking?
Needs & Demands. What do customers want? Where is demand increasing or shrinking? Is there unmet demand?
Switching Costs. Is it easy for customers to switch to new solutions? What are the barriers? (These might include money, time and attention, regulation, etc)
Revenue Attractiveness. How competitive is the market? What are customers willing to pay? What solutions have margin?
Macroeconomic Forces
What are the macroeconomic forces in your context? This includes regional, national, and global economies.
Global Market Conditions. What’s the general market sentiment? What’s the current unemployment rate? Are economies growing, shrinking, or stagnating?
Capital Markets. How easy is it to get access to the funding you need? How expensive is funding currently? Where is the cost of capital trending?
Commodities & Other Resources. How easy is it to access the resources you need? What is the talent market like? Where are prices trending?
Economic Infrastructure. How good is public infrastructure in your context? (This might include health, education, transportation, trade, and access to the market.)
Industry Forces
What are the industry forces in your context? These include the different stakeholders who have an impact on your organisational context.
Competitors (Incumbents). Who are the established organisations? What segments do they focus on? What are their strengths and weaknesses? How does their pricing and business model work?
New Entrants (Insurgents). Who are the new organisations entering the market? What segments do they focus on? What are their strengths and weaknesses? How does their pricing and business model work?
Substitute Products & Services. What are the other solutions available that might be an alternative to yours? How easy is it for customers to switch? Think about alternatives in a broad sense. They might even be from another industry, category, or market.
Suppliers & Other Value Chain Actors. What other suppliers in the industry is your solution dependent on? What industry trends are you observing?
Stakeholders. Who are the other stakeholders influencing your industry? What agendas are you observing?
Key Trends
What are the key trends you’re observing that impact your context?
Technology Trends. What are the major technology trends? Which of these are opportunities, and what are the threats? What technologies are your customers adopting?
Regulatory Trends. What are the regulatory trends you’re observing that impact your industry and market? How might they impact you? How might they impact your customers?
Societal & Cultural Trends. What are the societal and cultural trends you’re observing? How might they impact you? How might they impact your customers’ expectations and behaviours?
Socioeconomic Trends. What are the socioeconomic trends you’re observing? What are the changes in demographics? How high are wage growth, the cost of living, and disposable income?
Take Action
A business model is designed and operates within a specific context. The Business Model Environment tool helps us identify and map what that context is.
GenAI
GenAI is a powerful tool for this. It’s worth using the deep research mode and make sure it’s using and citing credible sources. Perplexity Pro is my tool of choice.
If you’ve already invested time in giving your genAI tool context on your organisation and idea, you’ll get impressive results quickly. Doing generic research online or with your genAI tool will give you generic insight that’s not actionable.
I recommend using genAI as a brainstorming partner for this. Prompting it to interview you to draw out your thinking is a powerful way to help you get more clarity and build context for your tool at the same time.
Using the Spaces or Projects feature to upload more of your research and thinking that’s not commercially sensitive or has personally identifiable data also makes the results a lot more targeted relevant.
It’s worth prompting it to preference credible external data sources so you don’t find yourself in a referential loop of an echo chamber.
In some cases, especially if I’m writing a report, I’ll spend days working through this. Digging into different angles, checking sources, trying to resolve apparent contradictions. Using genAI, what used to take weeks of research can be done in hours or days.
If you’re only doing this for your own learning and insights, you can learn a lot in 45-60 minutes.
Your Business Model Environment
Take 45-60 minutes to capture your understanding of these external forces and how they relate to your organisational context.
Feel free to jump around as things come to mind. If you can’t answer these points, it’s an indicator of risk, and highlights areas where you probably need to do some more research.
Don’t ignore the additional questions that come up – they probably point to risk areas and assumptions where you need to do more research. Make a note of them as they arise.
Market Forces
What are the market forces in your context? This is mostly focused on your customers – their needs, expectations, and behaviours.
Macroeconomic Forces
What are the macroeconomic forces in your context? This includes regional, national, and global economies.
Industry Forces
What are the industry forces in your context? This includes the different stakeholders that have an impact on your organisational context.
Key Trends
What are the key trends you’re observing that impact your context?
Coaching Questions
Here are some coaching questions I often ask when working with people on their Business Model Environment analysis
- What are the key trends, and how have they been changing over time?
- What do these forces and trends mean for your organisation?
- Where did you find this action challenging? Why?
- What additional research do you need to do?
- What are the riskiest assumptions that you’ve identified? Why? Have you updated your Assumptions Log?
What I’ve Learnt
I’ve done dozens of these environments analyses. On my own startups and working with clients. Using genAI, what was extremely time intensive can be accelerated and for a more comprehensive result.
The Value is in the Process
Like many things – especially research – there’s value in the output, but there’s even more value in the process. The questions and critical thinking to not just accept information at face value but dig into it really helps build clarity and understanding of the nuances.
Realistic Expectations
This is secondary research. It’s foundational and useful, but not enough. It’s also worth remembering that some sources will have reporting or selection bias and other biases and skews. Nothing should be taken as absolute or as infallible evidence.
This research is about understanding what’s going on and how these forces and trends might impact our context so we can make more informed decisions.
I find headline numbers and stats are interesting and provide insights on where to focus, but they can also be deceptive if taken literally. There’s always nuance and preconditions below these headline insights.
The findings guide our direction for targeted primary customer research and market testing. Also known as the real world.
Primary Research
A good environment analysis gives us a better perspective, which often results in us seeing things in new ways. It generates fresh thinking with assumptions to test.
The only way to reliably test our thinking is to interact with the people will buy and use our solution.
Targeted customer research, market testing, and ideally selling before building are the steps that build on the foundations of a good environment analysis… to reduce risk and increase the chances of a successful solution and business model.
Solve Problems That Matter
In my book Solve Problems That Matter, I go into a lot more detail on all of the things I’ve covered in this post… and plenty more.
It’s a playbook with actions and worksheets to help you take a human-centred design and living systems approach to design, build, and launch your idea.
Ideas that customers and teams love, make money, and do great things for people and our planet… all while increasing wellbeing.
Let’s Collaborate
At Dynamic4, we specialise in leadership, design, and innovation with a focus on purpose and wellbeing. We do that by working alongside leaders and their teams to navigate complexity and solve problems that matter.
This draws on my 30+ years of bringing together strategy, design, and tech to lead, design, and deliver strategic change in financial services, digital & tech, health & fitness, and building startups/social enterprises.
What do we actually do? Key ways we help is through coaching & advice, innovation sprints, and designing & delivering leadership, design thinking & innovation programs.
Our approach builds personal, team, and organisational capability to solve problems that matter with more:
🌿 Confidence to navigate complexity and solve problems that matter for your teams, customers, shareholders – and build momentum with more certainty and less risk while increasing your wellbeing
❤️ Clarity to empathically engage your stakeholders, make better decisions, and collaborate to create solutions that your teams and customers love, make money, and do great things for people and our planet
🎯 Purpose that drives progress on your goals and creates meaningful value that you’re proud of for all stakeholders – and build the relationships, workflows, rhythms, and habits for success
Ready to have fun collaborating to solve problems that matter?
