Traditional management consulting firms tend to use frameworks that have been built by notable economists or business professors who espouse expertise in making smarter business decisions. Oddly, many of the consultants who’ve adopted these frameworks haven’t worked in the businesses for which they build frameworks.
While there’s no denying that these people are smart, most have never been in corporate leadership positions that require them to understand and deal with the most critical aspect of any business: human beings. Perhaps that is why typical management consulting frameworks and methods tend to ignore or minimize the ultimate arbiter of any business: the customers.
What do we mean by business dynamics?
Business dynamics are those factors that are used to describe the nature of a business as if it were simply made of widgets. For example, general frameworks like the Porter model isolate five elements including competitive rivalry, threat of new entrants, threat of substitutes, bargaining power of buyers, and bargaining power of suppliers. Analyses in the business dynamics realm also include such things as assessments of scalability, disruptability, and technology.
The value of business dynamics
Business dynamics are useful means of characterizing important aspects of a business and its current state. Each lends to a complete picture of a business – its strengths, weaknesses, opportunities, threats – and a sense for the likely trajectory of the business.
What business dynamics don’t do
But business dynamics tend to miss information that is critical in determining the ultimate success of a business. Importantly, business dynamics don’t consider consumer perceptions of a business, its brand or its products. And because all businesses depend on consumers for success, this is the most critical data of all. Furthermore, historical behavioral data on what consumers have done is important as a measure, but somewhat useless at determining what will happen going forward. Just because someone did something in the past, doesn’t mean they’ll do it again in the future. Context can shift overnight and so can the reasons why a person was compelled to take an action.
Human dynamics form the most important part of business analysis and development because they make a connection directly to those who will determine a business’s fate: the consumers. Human dynamics are not only about what consumers have done, but more importantly, about what they’re thinking and feeling.
Why is this important?
A business can have incredibly strong past performance that ticks the boxes of all the business dynamics measures. But under the hood, the product might be turning consumers off or wearing thin on their nerves. While consumers are still buying the product, they may be less enamored with it.
One could wait and see the result of this in behavioral data down the road, but by that time, you might be too late to fix a business. Instead, human dynamics will allow you to see weaknesses cropping up ahead of the hit to your financials, allowing a company to take action early and effectively.
In the world of innovation and new business identification, the role of human dynamics is even more profound. Innovation and new product identification is far more effective and efficient when you’ve first identified where human sentiment is heading, why, and how you can attach to it. That information isn’t always easy to capture, especially when applied to a specific industry or business. That’s why human dynamics focused on assessing perceived strengths, weaknesses, voids, and wishes becomes critical.
What are human dynamics?
Human dynamics are consumer attitudes, opinions and behaviors that impact what people do. Established psychological theory demonstrates that consumer attitudes always foreshadow behavior, so understanding these factors are most predictive in identifying what people are likely to do. Combined with business dynamics, human insight allows businesses to assess not only where they stand today, but also the relative weight of various strengths and weaknesses as well as hidden problems or market opportunities.
For example, while a competitor may have been able to maintain strong market share for many quarters, consumer attitudes may reveal that customers are not completely satisfied with a product and may jump to a competitor if certain conditions are met. Not only will you have uncovered a market opportunity but you will also have identified how it can be exploited.
The value of human dynamics in developing new businesses
Companies seeking to grow through new product development or by launching new businesses can find undiscovered growth drivers by correctly leveraging human dynamics. Whereas business dynamics are useful in assessing such factors as market maturity, competitive dynamics and scalability; human dynamics are unique and pinpoint where new market opportunities are popping up and for what reasons, unarticulated or heretofore undefined weaknesses that identify new product concepts that deliver against consumer needs, or changing consumer values that alter brand perceptions and open the door for new rivals.
Human dynamics allows users of this information to save time. Since consumers are the ultimate arbiters of all businesses, assessing what consumers think of a particular business category or a specific set of product offers BEFORE going deep on business dynamics enables you to make go/no-go decisions more efficiently and effectively.
While both business dynamics and human dynamics are necessary to complete the current picture of a business, the opportunities that lie before it, and how to seize those opportunities; human dynamics should have primacy in all businesses if the goal is efficient and effective operational and strategic decision-making.
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