Scanning the horizon – PESTELO or PESTLE?

Jan 22, 2016

PESTELO analysis isn’t common in small businesses. There are plenty of situations where it should be. PESTELO adds an extra element to PESTLE analysis. PESTELO makes you look at whats happening in organisations on which your business depends.

Let me explain:

What is PESTLE analysis about?

At the start of your new planning round its sometimes worth taking a good look at whats happening in the outside world. Whats going on out there will impact your business. You need to take time out once in a while to review and think about implications for your business. I’ve always used PESTLE analysis to do this in my own business, and often when I’m helping clients with planning and strategy. I’ve written about it before, and its one of the most popular pages on the website. To recap, the letters in PESTLE lead you through a review of all the external factors that impact your business:

  • Political
  • Economic
  • Social
  • Technology
  • Legal
  • environmental

We discussed PESTLE analysis in episode 34 of The Next 100 Days Podcast. You can listen in here.

I don’t necessarily do this in every 100 day cycle in my business, but I probably take a look once a year. It certainly formed one aspect of the quarterly personal offsite I did last Fall. Recently I came across another variant of PESTLE analysis, PESTELO.

Whats different about PESTELO?

In short there’s only one difference, The extra letter, O for Organisation. PESTELO is quite popular in the public sector, and the examples I’ve found in the UK are from the Police and the Health Service. An individual Police force undertakes a PESTELO analysis, the O part of the analysis looks at what else is going on in Policing, in short how changes in other organisations that are part of the overall Policing, or the wider emergency services in the UK are likely to affect that individual force. The same is true in the UK NHS. The NHS contrary to most people’s perception isn’t a single big organisation, it’s actually a collective of very many much smaller organisations. When any of these organisations plan, they need to be cognizant of whats going on in the wider NHS world.

So, how might PESTELO apply to the smaller business?

Remember PESTELO analysis is looking externally to your business, so we aren’t talking about how you’re own business is organised, so at first sight it may not make sense to use PESTELO instead of PESTLE. But, think for a moment, your customer base may comprise lots of organisations, particularly if you operate in the B2B space. So, whats happening in your customer’s organisation? How does whats happening in his organisation impact on the way you might serve him? I suddenly saw the relevance of PESTELO for my own business. The last 2 years have involved extensive consulting engagements in the health sector. Surely then whats happening organizationally in the NHS is just as important to my business as it is to an organisation within the health service. Some immediate questions come to mind:

  • What’s new in the client’s organisation?
  • What national changes or directives do they need to respond to?
  • Where might they need help and support? What new opportunities does this bring?
  • What new bodies might be set up, which bodies might close, or merge?

PESTELO adds an extra, and very useful element to horizon scanning not just for big complex organisations, but also for the small business.

Next time I review my business it’s definitely goodbye PESTLE hello PESTELO.

Have you got more questions about PESTLE or PESTELO? Want to discuss this further? Lets have a chat on Facebook Messenger. Click this link to connect with me.

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