Data is crucial in making sound business decisions, and business owners can acquire this much-needed data through business analysis.
For example, Microsoft’s data analytics to help move 1,200 employees from five buildings to four resulted in a 46% reduction in meeting travel, saving the company an estimated $520,000 annually in employee time.
Such a solution is possible through creative means, especially when analysts look into evolving and nontraditional trends like remote working, collaboration, and employee distance.
Business analysts interested in improving their methods to evaluate enterprises can access numerous tools that can assist in creative business analysis, such as Google Ads and Google Display provided by digital advertising companies.
Source: StartupStockPhotos from Pixabay
Why is creativity important for business analysts? What is the PESTLE method, and why is it beneficial to analysts for idea generation? Is this method helpful in business analysis? Does this method have any limitations?
This article tackles the importance of creativity when analysts evaluate business challenges and develop solutions. This write-up also explores the PESTLE method's advantages and disadvantages when used in business analysis.
The Value of Using Creativity in Business Analysis
The business world is often full of data-driven and tough-minded logical analysis, that it’s easy for some analysts to leave out creativity.
Some say businesses don’t have time for creative pursuits and are only interested in results. Perhaps this situation happens in some cases.
Others might even argue that creativity is too unstructured and without discipline, which may go against how traditional businesses operate.
But creativity can help business analysts form fresh ideas and innovative solutions for unique problems and ever-changing requirements. Today’s business environment is constantly evolving and adapting. Analysts must be creative to think of new solutions to address these changes.
In other words, creativity can be an analysis, problem-solving, transformation, and strategy tool you can use together with other business analysis methods.
By combining creativity with logic, structures, and processes, business analysts can improve their evaluation of the enterprise and provide eye-opening solutions that are fresh in the eyes of the business.
Using the PESTLE Method in Creating Ideas and Solving Problems
The PESTLE analysis is a classic method business analysts use to get a picture of an enterprise’s macroenvironment. The acronym stands for:
- Political
- Economic
- Social
- Technological
- Legal
- Environmental
PESTLE allows companies to understand the environmental factors impacting a new business or industry. Some factors will be more critical to various business types, and a PESTLE analysis can help identify risk factors for these firms.
You might ask, “If this method is already an established business analysis tool, how do we use it creatively?” In this case, you can consider combining it with other tools that encourage creativity, such as the six thinking hats method.
The six thinking hats is a business analysis tool for idea generation and problem-solving. This method requires each participant to think and perform according to what “hat” they’re wearing and explore issues creatively and objectively using predefined perspectives.
In the six thinking hats, each colored hat has the following roles:
- White hat: Provides logic and objectivity and is concerned with facts and figures.
- Green hat: Engages in creativity and seeks new ideas.
- Yellow hat: Promotes positivity and provides an optimistic outlook.
- Red hat: Gives ideas based on emotion and intuition.
- Black hat: Provides cautious and critical judgments.
- Blue hat: Controls the process of the other hats.
One feature of the six thinking hats method is its flexibility. If you have a team of analysts, you can assign one or more roles to each person or prefer not to use all hats.
This way, each person “wearing a hat” can focus on a particular role and present ideas specific to that role.
In other words, how you use this tool depends on your resources and the business problem you must solve.
You can also include a seventh hat, also called the royal hat, representing the business owner or overall decision maker. The person with this hat often has the final say on what business decisions or solutions the organization should implement.
Political Factor
This PESTLE factor refers to government controls over the industry or economy of a country or state. The political environment can influence an industry through the following factors:
- Legislation relevant to the industry
- Trade tariffs (merchandise imports or customs duties)
- Economic or fiscal policies
- Internal or external conflicts, such as wars, rebellions, or terrorism
Using the six thinking hats method, you can use the yellow hat to present business opportunities relevant to the political environment. Examples are decreasing tax rates or increased security in the country.
With the white hat, you can present the country’s laws so the business can understand the relevant labor laws, foreign investments, and customs policies.
Economic Factor
This factor directly impacts a company’s long-term prospects in a market, including how a company sets its product prices or influences the market supply and demand. Economic factors include:
Using the red hat to introduce a creative spin to this factor, you can say that specific social sentiments in the market are likely to affect household purchasing patterns.
For example, if there’s a significant occurrence of customers purchasing bath soap with toothbrushes, should the business consider packaging both products together?
Social Factor
This factor involves culture and demographics that can impact the firm’s market environment and influence spending habits, lifestyle choices, and peak purchasing periods.
A society’s lifestyle and culture can influence when, where, and how people engage with and purchase products and services. Social factors include:
Using the white hat for analyzing social factors, you can consider using historical data for peak buying periods.
One example is when classes start, so you’ll know when the business should replenish its inventories for educational materials like notebooks, textbooks, and writing materials to sell.
Technological Factor
This PESTLE factor can affect specific industries more than others. For example, financial companies can invest more in technological security solutions than coffee shops.
Some of these technological factors are:
- Technological awareness and development
Suppose you’re analyzing a business using a black hat. You can view the business environment critically and consider the risks of implementing technological solutions.
If the business needs a database solution, you can present risk factors like cybercrime, theft, employee errors, fire damage, or natural disasters. These things can put the hardware and software at risk.
Legal Factor
The legal factor often works closely with the political environment. This relationship can affect the company’s internal and external environment by influencing industry-wide procedures and policies and controlling employment and safety regulations.
Legal factors include:
- Industry-specific regulations
- Environmental regulations
Suppose you’re analyzing a business in a foreign country, and someone on your analysis team wearing the black hat suggests the country has unfavorable employment laws. If you wear the green hat, you’re encouraged to think of a new solution to make such a law work in the firm’s favor.
Environmental Factor
This factor relates to the physical environment of a business, including environmental protection requirements.
While the environment is more important to industries like tourism, agriculture, and food production, this factor can also affect other firms that do business with these industries. Elements under this factor include:
- Climate and global climate change
- Environmental offsets (compensation for unavoidable environmental impacts)
A yellow hat analysis of the environmental factor can involve proposing environment- or community-focused programs to the company and discussing these programs’ advantages like branding benefits or broader market reach.
Advantages of the PESTLE Method
Many analysts have used the PESTLE method because of its effectiveness for the purpose for which it’s created. The advantages of this tool include cost-effectiveness and awareness development.
Cost-Effectiveness
In most cases, the only thing you need to spend to conduct a PESTLE analysis is time.
Additional programs and ideas can help provide input and feedback in a PESTLE analysis. But in general, you don’t need to make a formal document to perform this method; a pen and paper or a simple document can suffice.
A well-crafted PESTLE analysis should be straightforward and easily digestible. The time you spend, the amount of research you need, and how you combine PESTLE with other analysis tools can change. But the cost to perform such an analysis won’t fluctuate too much.
Awareness Development
Business analysts typically use PESTLE to analyze a firm’s macroenvironment. But with some tweaking, you can narrow the analysis to specific products, marketing programs, customer relationships, and other relevant business areas.
For instance, when you use PESTLE to analyze new developments within the business, this method can help raise awareness of potential threats.
Such threats can take the form of existing competitors, new entrants to the industry, or competition among the firm’s products.
Another example is when your data shows a 20% population growth in a particular city. At first glance, this increase can mean more potential customers for the business.
But what if the increase comprises predominantly young adults in the 20- to 30-year range while the enterprise’s target market is high-income individuals in their 50s? You can recommend that the business consider developing a new product targeting this developing market segment.
Limitations of the PESTLE Method
PESTLE is one of several business analysis tools that work for various situations. But none of them is a perfect solution for all business analysis needs. Like the other tools, PESTLE has limitations, including fast-changing factors and being time-consuming.
Fast-Changing Factors
PESTLE factors change all the time. For example, a law that favors a business can suddenly be repealed the next day. A state-of-the-art technology lauded as revolutionary a few months ago may already be outpaced by a newer and better one.
So if you’re doing a PESTLE analysis, the data you have now may already be outdated. Changes in any of the six factors can affect your analysis results.
Such uncertainties can make it difficult for the analyst to predict the business’ future, which is what the PESTLE analysis is meant to do.
Time-Consuming Process
While PESTLE is cost-effective, it’s also time-consuming, especially when you consider that you have six factors to work on.
In addition, you don’t want to present shallow information to the decision-maker, so you have to provide thorough research to some extent, which takes a lot of time.
For example, if you’re researching the legal aspect of a business, you can’t only look at the first paragraph of a particular law. There may be more pertinent details in that law that the first paragraph doesn’t cover, and reading through the whole thing can be time-consuming.
So if you’re planning to evaluate a firm’s macroenvironment as part of your business analysis, consider using the PESTLE method and provide creative solutions by using this tool in tandem with the six thinking hats method.
Reference
- 4 Examples of Business Analytics in Action
https://online.hbs.edu/blog/post/business-analytics-examples
Author: Arnold Rogers
As an experienced business consultant, Arnold Rogers has advised businesses across many industries in areas of lead generation, customer experience, service development and small business cash flow and financial management. He has experience in handling diverse industries, from fast-moving consumer goods to business to business hardware retailers. Arnold's core focus and interest is in improving businesses' efficiencies by leveraging technology, from marketing to project management. In his free time, he contributes to tech and finance websites to share his views.