Implementing and developing ISO management systems
Looking at the external world
Having originally undertaken a 4 year apprenticeship in the Merchant Navy I didn’t finish my degree until I was 24 and the first firm I joined, as a freshly minted graduate, was a diamond tool manufacturing company called Van Moppes-IDP based in Gloucester. The MD there was a lovely guy called Ian Marsh. As the name hints, Van Moppes was a Dutch firm where, legend had it, that the company was relocated to Gloucester about six weeks before the outbreak of the second world war. Someone had been clever enough to realise that diamond tool production would be critical to the war effort and the firm had been moved lock stock and barrel just in time.
Sadly, since then, no one had been clever enough to invest any money in the plant or machinery whatsoever. My job was to work as an internal change agent implementing new technology. And as part of Ian’s new strategic planning team one of our first jobs was to undertake a SWOT analysis. Being an engineering graduate, not a business studies graduate, I had no idea what a SWOT analysis was. Ian duly informed me; Strengths Weaknesses Opportunities and Threats analysis. I went away and did my best and we collated and debated our own ideas which then fed into the business plan.
But for a long time I felt that the ideas we had were somehow just pulled out of a hat of our own thinking there was no real structure to the analysis.
Many years later I went back to school and did a master’s degree in business where I learned about what was then PEST or STEP analysis (Political, Economic, Sociological and Technical) to which was later added Environmental and Legislative developing the acronym into what is now commonly called PESTEL analysis.
The point is, things happen at the Political, Economic, Sociological (Cultural), Technical, Environmental and Legislative levels which are completely beyond the control of the organisation but may well significantly impact the organisation. This impact may create an opportunity or a threat.
Interest rates have risen recently. You could assign this change to a Political or an Economic box, I actually don’t care, the key is to use the framework to make you think. Interest rates are completely beyond the control of any individual company and the impact on the company is going to be different depending on whether you’re cash rich or laden with debt.
The Net Zero agenda is rising. This is completely beyond the control of any individual company and the impact will be different depending on your stance with regard to climate change. You may see it is an opportunity, you may see it as a threat.
You can use the PESTEL framework to apply the same thinking to all components of the model in order to identify things in the external world that may, for you, create opportunities or threats.
Another tool I was exposed to as part of my business studies was Porter analysis sometimes called The Five Forces analysis. You may, or may not, have heard of Porter analysis but you have almost certainly heard of the term “competitive advantage”. A term coined by Michael Porter, a Harvard professor, who reworked an economics model and called it his 5 forces model. The five forces are:
- Inter industry rivalry
- The threat of new entrants
- The threat of substitute products
- The power of suppliers
- The power of customers
The Porter model is focused on your industry specifically, providing a framework that allows you to think through the external competitive environment. However, whereas, unlike the PESTEL analysis where you have no influence over the outcomes of the different components of the model, with Porter analysis there is sometimes an opportunity to influence the structure of the model in your particular industry or sector.
The ISO requirement
There is a requirement within any ISO standard usually clause 4.1 that requires you to look at what the standard calls “context”. Clause 4.2 looks at “interested parties” many of which are also external to the organisation and can feed into the same analysis.
This means taking a look at the world outside of the company to see what might push you off course when it comes to your objectives and targets.
The combination of these three models; PESTEL, Porter and SWOT can be viewed as a funnel where at the top end of the funnel the PESTEL analysis allows you to look at things which may impact the business, but over which you have no control. Underneath PESTEL there is the Porter analysis which helps you look at the competitive environment and how over time you might be able to reshape it.
Both of these analyses help you identify opportunities and threats at the strategic or business planning level. These opportunities and threats feed directly into the final layer of the funnel which looks at SWOT analysis. Strengths and weaknesses being an internal navel gazing exercise where you look at:
- What you are good at
- What you need to improve
Conclusion
Even later again when researching another blog I found that Porter had also been dissatisfied with the way in which SWOT analysis worked and his (Porter) model was developed to offset some of the limitations he felt the SWOT model had. Aahhh… I am in esteemed company indeed!
So, now when we are implementing any ISO standard which requires an organisation to think about the “context” it exists within, we use a framework which looks at:
- PESTEL Analysis – issues over which your company has no control
- Porter Analysis – issues which your company can influence but usually over the longer term
- SWOT Analysis – PESTEL and Porter feed into the opportunities and threats arising from the external world. Strengths and weaknesses are about internal navel gazing determining what you are good at, and perhaps, more importantly what you are not so good at and therefore what needs improving
Related tools and ideas
Recommended references
Downloadable resources
- Various templates and checklists be found in each of the recommended references above
