Business Microscope: A Tool to Evaluate Internal Business Systems
Evaluating internal strengths and weaknesses is a common business practice that is regularly performed during a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). The reason is that knowing where you company is strong and weak is critical to making good strategic decisions. A strategy is much more likely to succeed if it is properly leveraging a company’s core competencies and competitive advantages. In fact, strategies often fail to yield meaningful results when leaders try to mimic what other successful companies have done without first understanding the internal capabilities required for a given approach to work. Consider a law firm whose strength is their client relationships. For them, a growth strategy of expanding into new cities will probably not be as effective as a strategy where they instead expand the breadth of services offered to their existing client base. Expanding services with existing clients leverages their strong relationships much better.
Weaknesses also have a significant impact on strategic planning. A company’s strategy will be less effective if there are internal weaknesses that counteract or sabotage strategic actions. For example, if a company strategy is focused on automating operational processes to increase output, but the company lacks the necessary expertise to manage such a system, then the company needs to recognize that as a weakness to mitigate or else the strategy will likely fail.
An important consideration when evaluating strengths and weaknesses is to contextualize them against the external impacts the company is facing. A compelling strategic opportunity is one that pairs an external trend with an internal strength simultaneously. Similarly, the most dangerous external threats are ones that are compounded by an internal weakness.
Using Focus Lenses with the Business Microscope
To help contextualize strengths and weaknesses with external impacts, the business microscope is used for focusing internal evaluation on specific microsystems. An external impact is the resulting effect that an external factor has on a particular microsystem within the company. These microsystems are categorized by the four Business Focus Lenses: Customer & Market, Product, Operations, and People. So rather than trying to write a single list of strengths and weaknesses for the company, you should segment your lists by each microsystem that corresponds to a Focus Lens. Then, when looking at a particular Microsystem such as Operations, you should evaluate the strengths and weakness within the sub-systems that lay within the Operations microsystem. This process is guided by the Business Microscope and will help ensure that internal evaluation is comprehensive and contextualized.
Microsystems and Sub-systems
A microsystem consists of processes, resources, assets, and knowledge that fall within a Focus Lens. Note that a microsystem is not departmental or functional. A microsystem extends across the organization and involves many different departments and teams. For example, the Customer & Market microsystem involves more than just sales and marketing teams. It includes everything that relates to how the company touches and interacts with the Customer & Market such as customer segmentation, how the company attracts and connects to customers, how the company manages the customer experience, and where the company is located within its markets. These examples are representative of sub-systems within the Customer & Market microsystem. One sub-system within Customer & Market is Attraction, which involves everything the company does to attract its customers. This is more than just the activities of the marketing department. It includes everything the company has or does that relates to attracting customers like the aspects of the company’s culture, brand reputation, product design and/or experience, expertise and capabilities, etc. Watch the four videos below to get more details on each of the four microsystems and the different sub-systems that they are comprised of.