Framework library · Strategic planning
PESTLE analysis
PESTLE sorts the world outside the business into six groups so that nothing large is missed: politics, the economy, society, technology, law and the environment. A useful PESTLE is short, tied to one decision and one time horizon, and says for each line what it would do to that decision.
Use it when
- You are about to make a decision with a long life, such as building a data centre or entering a country, and need the outside factors on one page.
- A strategy cycle is starting and the external section of the last plan is a year old.
- You need the opportunities and threats for a SWOT and want them grounded in specific changes.
- A board asks what could change around the business over the next five years.
Avoid it when
- The question is about competitors and industry structure. Use Porter's Five Forces, which PESTLE does not cover.
- You need to plan for several different futures. PESTLE lists the drivers. Scenario planning turns the most uncertain of them into futures to test against.
- No decision or horizon is attached. An open-ended PESTLE becomes a list of trends with no consequence.
How to run it
Fix the decision and the horizon
For example, "Should we build a second campus near the capital for service from 2029?" A five-year horizon reads the world differently from a one-year one.
List specific changes under each heading
Write changes, with a source where you can: "the queue for new grid connections above 20 MW is now about four years", not "energy".
Put each change in one place
Some changes fit two headings, such as a data law driven by politics. Choose the heading that names the mechanism and move on.
Say what each line would do to the decision
Delays it, raises its cost, opens demand, closes an option. A line with no effect on the decision can be dropped.
Pick the few that matter most
Choose the two or three lines with the largest effect. If they are uncertain, monitor them or build scenarios around them. If they are near certain, write them into the plan as assumptions.
Check the evidence on those lines
Mark anything that is opinion, and check the lines the decision rests on before acting on them.
Work through it
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Mistakes to avoid
- Listing trends without effects. "AI is growing" says nothing; "AI tenants need racks drawing five times the power of our current halls" might change a design.
- Filling all six boxes evenly. In most decisions two or three headings carry the weight.
- Mixing internal facts into the scan. Your own costs and capabilities belong in a SWOT, not here.
- Doing it once. The external picture moves, so revisit the lines that mattered at each planning cycle.
Where it comes from
Francis J. Aguilar, Scanning the Business Environment (Macmillan, 1967), which grouped the external environment into economic, technical, political and social sectors (sometimes written ETPS). Later variants such as PEST, STEEP and PESTLE reorder the groups and add legal and environmental factors. Source.
Use it with
Further reading
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