Analysing the Macro-environment

Following up on my earlier post about tools for strategic analysis this post looks to explain a tool for general macroenvironmental  analysis. In our current climate it is always a good idea to think about how external environment factors can influence your practice. While certain events may not seem to impact you as a health professional there may be ripple effects which may pose threats or opportunities. Let’s get to it!

To do this type of analysis we use an analysis tool called a PESTE analysis. It focuses on the Political, Economic, Sociocultural, Technological and Ecological forces within the macroenvironment that may shape larger trends in the environment you are operating in. As an example I’ve done a fairly simple analysis of the South African healthcare industry.

Political

South Africa is facing major political uncertainty at this point in time. The ANC elective conference in December 2017 will be a major determinant of the political narrative going forward. Regardless of who wins, health professionals face the continued uncertainty of the proposed National Health Insurance implementation. Whichever way this is implemented it will in the short term cause a lot of uncertainty for the private health sector. Health professionals need to keep in mind that they need to have contingency plans in place for when the NHI is implemented. The NHI will most likely face litigation before implementation but health professionals (and especially practice owners) should be making provision for the eventual implementation of the legislation. This does not only pose a threat for private healthcare professionals but also creates opportunity for the creation of first mover advantage by positioning your practice/s as a contracted provider – which in the end is what most private health institutions will be under NHI. Politically it is a pressure point for government, regardless of who wins, to advance the country towards universal health care.

Economy

Recent developments have seen South Africa being downgraded to junk status by at least one ratings agency and put on review for downgrade by another. Economic growth has contracted and remains stagnant with the unemployment rate only getting higher with no sustainable strategy for economic growth on the cards. Speculation about a possible increase in taxes (personal or VAT) is rife – but both these options will most likely not lead to the desired outcomes. As a health professional this will impact salary, job prospects and disposable cash and as a practice owner this will necessitate planning for negative pressure on the prices of services rendered. While inflation of medical services has been consistently above inflation for many years now this is will likely not be sustainable as consumers are put under more pressure due to mandatory NHI payments within the next two to five years. The continued stagnation of the economy will most likely hit smaller practices the hardest which will create opportunities for enterprising practice owners to buy out smaller practices to expand their own footprint.

Sociocultural

Currently our society is moving towards greater scrutiny of government and associated private spending. Social unrest and tension is becoming an issue as service delivery continues to be poor in most of the country. Health and wellness continues to be a trend that keeps on growing, with most people wanting to lead healthier lives but with the ease of access to an overload of information there continues to be a large amount of services and products that are not tested that are offered to consumers. The impact of social media is a cultural phenomenon which will continue to disrupt the health and wellness arenas as it evolves. Threats will continue to emerge in the form of increased pressure from society to remain transparent and not seem to be taking advantage of the public – especially important in dealings with the proposed NHI. This said, opportunities are myriad in terms of making use of social media to capitalise on the cultural fascination with health and wellness.

Technological

While the rest of the world is gearing up for the fourth industrial revolution South Africa seems to have decided to ignore it. Disruption on the healthcare arena is likely to come from the private sector who will have the foresight and freedom to invest in new data infrastructure technologies. Opportunities exist in the development of blockchain technologies to enable the implementation of trusted smart contracts and eventually evolving into distributed autonomous organisations. Artificial intelligence will have a profound impact as access opens to more mainstream business ventures and it is used to streamline administration and clinical tasks. Social media technologies continue to be the greatest disruptor and as internet connectivity increases its disruptive potential will increase as well. The most obvious opportunities here lie in the distribution of telemedicine over the infrastructure provided by social media. Dentists are already making use of 3D printing technology and as this further improves this will become a potential way to achieve superior differentiation for some surgical and rehabilitative practices. As the Internet of Things becomes more mature and utilisation of these technologies become better implemented we will see an improved opportunity in the health wearables sector. Green technologies also remain an important investment in SA where energy infrastructure is a concern. Cyber security remains the greatest threat for practices in South Africa with most institutions not having adequate security in place but becoming more and more dependent on multiple networked devices.

Environmental

For the most part environmental factors do not pose a direct threat to most practices but it is a good idea to take note of the continued environmental factors that could create opportunities and threats to most businesses. A major concern is the continued water shortage and while water restrictions aim to reduce water consumption this is not a sustainable solution. Some types of practices can be quite water intensive and as water will get more expensive there will exist a need to find safe alternative sources of water. On the other hand there are ample opportunities to make use of the natural resources available to offset operating costs. Wind and solar remain viable sources for electricity generation with expected reduction in cost as the technology matures. This also reduces the threat from poor governance of ESKOM with decreased reliance on public infrastructure.

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This PESTE analysis gives a basic overview of trends in the macro-environment. The drawback of this type of analysis is that it takes a large amount of research to generate an accurate picture of these factors. This should not be a deterrent from doing a PESTE analysis however, as there will always be events and trends that are missed. The one thing you know is that you do not know everything – so at the least it is better to prepare for the things you can identify and so develop an adaptable framework to use as the unforeseen arises.

Any ideas about ways to improve this article? Let me know!