2.4 Video Lecture: How to Analyze Your Marketing Environment

Your market environment scan gave you a structured map of your market as it is today, and surfaced some insights about how it might change and how we might change in response to it. And we have the SWOT framework for further structuring our insights into internal strengths and weaknesses and external opportunities and threats.

What now?  How do we translate this information into value-added actionable insights?  The key is to move beyond simply categorizing with SWOT to using it to generate a small set of testable hypotheses that correlate between internal strengths/weaknesses and external opportunities/threats.   These statements provide the “so what”  action-oriented insights that make your analysis valuable to its audience.

This is the topic for the final video lecture in this chapter.

Transcript

How do you assess your marketing environment? Here’s my “how to”.

[0:02] Scan for “What is”: Use 5Cs or BMC/Environment tools to build a map of current market and trends

First you want to create some clear “what is” hypotheses, using a framework like the business model canvas environment, or the five CS to systematically scan your environment. So write it down, get it down. Document what you think, share it with other people. See if we all have the same picture of how the world is.

And in particular, want to think about the relationship between your value proposition and your customer segments, that thing we call product market fit. How well do the existing products and solutions that we’re offering fit the existing needs of customers? That’s our focus in this class. So that’s your first judgment.

[0:46] Analyze scan for “What Predicts?”: Why might the future be different than the past?

Then the second thing is to think about some predictions, in particular, the correlation with time: how might the future be different from the past? Even if we don’t do anything differently, if we continue doing our business model, why might it be more or less successful?

And in particular, we want to look at things in the macro environment. What are trends or shocks in the macro mind? What are the microenvironment dynamics? What new competitors have shown up? What new channels have become viable to take products to market? What new expectations do customers have from us? What’s going on within the players, that we would hypothesize makes the future different from the past.

[1:26] Correlate SW with OT to generate a set of “So What” testable hypotheses

And then the last thing you want to do is map some of these things into strengths and weaknesses: Is this macro environment trend an opportunity or a threat. Is this aspect of our organization, our strong brand, a strength or weakness. Last thing we want to do is correlate these things together.

[1:42] Using SWOT poorly

And I’ll just give you one 30-second rant about SWOT. SWOT is the biggest tool that everybody knows, And is the most useless tool in management. Everybody knows it. You can’t not use it. It makes intuitive sense, let’s look internally and let’s look externally. Something is a strength is a weakness is an opportunity is a threat.

It’s nice. It’s sticky. It makes sense. It allows us to map the whole world. It’s useless as a categorization system. It’s pointless as a categorization system.

Number one, what makes something an opportunity or a threat? You can reframe everything as an opportunity or a threat.

Number two, because it has these four nice boxes, people feel the need to fill all four boxes equally. I don’t know if you ever did this in undergrad, if you ever saw SWOT in undergrad, but you’re like, “Okay, I have to have three strengths and three weaknesses and three opportunities and three threats…”, you don’t! You don’t, there’s no requirement, but it’s like the tool gets in the way.

[2:34] Using SWOT well

But SWOT analysis is the correlation between the strengths and weaknesses, and the opportunities and threats.

I’ll give you the formula first, and then we’ll give you some examples. “The opportunity is key, this new emerging technology is key, because of the correlation it has with our strength.” It leverages our platform that is right for this new technology. So here’s an example of the opportunity: a growing market allows us to leverage a strong brand, a new technology lets us improve a weakening value proposition… this is a “opportunity leverages a lack of strength”, it’s aligned with a lack of strength. This is an “outside-in” version of correlation. This is an “inside out” version of correlation. So “strength is key because it allows us to pursue this opportunity or address this threat.

That’s the “so what” question. Too many SWOTs just stop at the SWOT, and they don’t do the “so-what”. A skilled staff. Why does it matter that a skilled staff is a strength? You put it in the chart, you go.. “strength, skilled staff, bullet point, done.” .

Skilled staff is a strength because it allows us to better serve a growing customer segment. A brand image is a strength because it creates a distinction in a highly competitive market. We are making some relationship hypotheses. We’re making these connections. We’re making these correlations between these things. That’s where the value comes in doing your SWOT analysis.

[4:05] Example: A market analysis for Zimmer

Let me give you some examples from Zimmer.

[4:09] What is: Current Environment

So what are some things we know about the Zimmer environment. The letters behind them stand for the business model canvas/ business model, environment box. So industry forces, key resources, channels, customer segments, revenue models, customer segments. That’s what that notation stands for.

And so this could be a list. There’s intense competition. That might be something you put in the threat box if you were doing a SWOT analysis. We created a business model canvas, we filled in, in a “5 C’s”, we pulled out these things, we said, “here’s some things to know about the Zimmer environment”.

[4:42] What is: Current Product-Market Fit

Because this is a marketing class, and I’m doing the SWOT analysis for a marketing opportunity, I dug into, “what’s the relationship between the value proposition and the customer segment and how does our go to market strategy work together?’

So ” current products do offer strong benefits to surgeons, patients, and payers.” So in the case of Zimmer we’ve got good product market fit, it’s working. Here’s a connection between channels and customer relationships. In this case, the choices that we’re making about channels help reinforce the kind of customer relationships that customers want. We have these doctors who want this hands-on help, and they reward us with loyalty.

We deploy this highly trained sales organization, they maintain these relationships , as a result of that, that creates value for the doctors because it reduces the risk they have in the operating room, for selecting the wrong piece or not being well-trained, and as a result, they give us loyalty. So that kind of all fits together.

Also because patients rely on doctors for brand choice right now, that’s a statement of what is, that’s a statement of our observation of the environment, going to market through doctors works well. So that’s a hypothesis based on our belief about patients relying on doctors for brand choice.

[5:55] Why might the future be different?

Why might the future be different? We’ll just pick that one, come up here. The macroeconomic trend of aging baby boomers, that was a big thing we all talked about in that case.

Patients are now seeing direct to consumer advertising of pharmaceuticals. This is a trend that’s going on in the marketplace. Not in our industry. It’s part of our macro-environment. But it means that our patient customers are getting used to advertisements for medical products and devices. And so, that may change this “What is” in our market environment. It may make the world different. There’s diminishing returns to technical innovation, so us and our competitors are not able to advance the technology as quickly as we had before. And as a result, insurance is less willing to pay increased prices. That’s an industry force that is a threat. We’re not going to be able to continue to do our current business model of introducing new things at higher prices, because the people that have to pay those higher prices are no longer willing to do it.

[6:53] Testable correlations: the analysis value-add

If I wanted to give a summary of the current state of the Zimmer world, here’s the three statements I would make: .

Active, aging baby boomers, they are an opportunity to leverage our strong market share of higher growth. We are a leader in the marketplace. We can use these trends to grow without changing our business model. We don’t have to do anything differently. We can just ride the wave.

However, growing consumer comfort of direct to consumer advertising, that’s what DTC stands for, means that patients may no longer rely on doctors for the brand, they may bring competitive brand choice with them. We’ve allocated a lot of our marketing money to creating these sales relationships, and if instead, customers are shopping for doctors, based on something they saw on a television ad, that is no longer necessarily the most effective use of our dollars.

Third, because we have this observation of diminishing returns to technological innovation, that threatens the distinctiveness of our brand. We used to be able to say we were a unique technology. At the point that we are in the marketplace with the Zimmer case, that was increasingly no longer true. Until we can get to this true personalization, which is what happened later.

So to get to these statements, I can do a fair amount of work, thinking, writing out some things, categorizing … but at the end of the day, these are the only three things that I really need to tell people about this situation. My value add– my analysis value add– is distilling all of this work, like mapping into the five CS, thinking about the business model, thinking about this fit, thinking about how the future can be different from the past and distilling it down into statements that look like this.

These are testable statements. These are statements that we can use to build tests. And they are the core insights that you need to know.