1 00:00:02,180 --> 00:00:05,540 - [Instructor] Welcome to part three of this week's lecture 2 00:00:05,540 --> 00:00:08,380 and in this part we're going to be talking about 3 00:00:08,380 --> 00:00:09,830 the external forces. 4 00:00:09,830 --> 00:00:13,040 The external environment in which 5 00:00:13,040 --> 00:00:17,280 your business or organization will be operating 6 00:00:17,280 --> 00:00:21,750 and to give you a sense of how to think about 7 00:00:21,750 --> 00:00:23,530 the opportunities and threats. 8 00:00:23,530 --> 00:00:27,570 How these external forces influence your business 9 00:00:30,380 --> 00:00:35,380 or organization and what that suggests for next steps. 10 00:00:38,550 --> 00:00:40,860 So when thinking of the external environment 11 00:00:40,860 --> 00:00:44,050 you may wish to think about which of them 12 00:00:44,050 --> 00:00:48,740 are accelerators and which of them are brakes. 13 00:00:48,740 --> 00:00:52,430 What's making your business or idea go faster? 14 00:00:52,430 --> 00:00:54,420 What's making it go slower? 15 00:00:54,420 --> 00:00:59,420 And you can see that the PEST model is embedded here. 16 00:01:00,735 --> 00:01:04,830 There's a number of ways that you can see this. 17 00:01:04,830 --> 00:01:07,830 I'm sort of doing a number of them. 18 00:01:07,830 --> 00:01:12,410 Taking a very broad perspective, 19 00:01:12,410 --> 00:01:16,990 showing you a number of models that certainly have overlap. 20 00:01:16,990 --> 00:01:20,350 There may be some redundancy but basically 21 00:01:20,350 --> 00:01:24,620 I want to give you all of the tools 22 00:01:24,620 --> 00:01:28,600 and present them so you have many options 23 00:01:28,600 --> 00:01:32,050 to do this analysis. 24 00:01:32,050 --> 00:01:36,893 So forgive me if it gets a little bit repetitive at times. 25 00:01:41,010 --> 00:01:44,230 The first thing we'll look at is social forces. 26 00:01:44,230 --> 00:01:48,420 So one of the things that you can think about is, 27 00:01:48,420 --> 00:01:49,970 and it's really important 28 00:01:49,970 --> 00:01:54,360 in my world of food and agriculture 29 00:01:54,360 --> 00:01:57,440 that we really have an aging population. 30 00:01:59,870 --> 00:02:02,900 I am actually one of the very last of the, 31 00:02:02,900 --> 00:02:05,430 the youngest of the Baby Boomers. 32 00:02:05,430 --> 00:02:09,130 So feel free to make any Boomer jokes at me 33 00:02:09,130 --> 00:02:11,130 that you feel fit. 34 00:02:11,130 --> 00:02:16,130 They're probably true but when you think about 35 00:02:16,770 --> 00:02:20,997 how much of the wealth and power in our population 36 00:02:23,210 --> 00:02:28,210 is skewed to the older folks and just thinking about age, 37 00:02:30,260 --> 00:02:34,550 that when you look at the advertisement for baseball games, 38 00:02:34,550 --> 00:02:38,360 that tends to be a sport that many older folks like. 39 00:02:38,360 --> 00:02:42,990 You see Advil and life insurance 40 00:02:42,990 --> 00:02:45,500 and when it's football games, 41 00:02:45,500 --> 00:02:48,144 that tend to be like cars and beer. 42 00:02:48,144 --> 00:02:51,150 The advertisements that you would see on, 43 00:02:51,150 --> 00:02:56,150 on YouTube versus the Hallmark Channel or when you, 44 00:03:01,370 --> 00:03:04,510 streaming music like Pandora. 45 00:03:07,000 --> 00:03:10,130 The advertisements that you would see when you are, 46 00:03:10,130 --> 00:03:15,130 when you say you like The Beatles or Frank Sinatra 47 00:03:15,540 --> 00:03:19,700 is probably very different than the advertisement 48 00:03:19,700 --> 00:03:24,700 if you like, I don't know Jay Z or somebody who's you know, 49 00:03:27,350 --> 00:03:30,963 actively making music now. 50 00:03:36,280 --> 00:03:39,283 Political forces are also very important. 51 00:03:40,390 --> 00:03:44,410 Sadly it is my view that we live in a time 52 00:03:44,410 --> 00:03:49,410 of extreme political polarization, disengagement, 53 00:03:50,480 --> 00:03:55,480 a lot of apathy or if not apathy, a lot of powerlessness. 54 00:03:56,632 --> 00:04:01,430 I have never lived in a time where partisanship 55 00:04:01,430 --> 00:04:05,690 was more weaponized than it is now 56 00:04:05,690 --> 00:04:07,830 and someone who doesn't agree with you 57 00:04:07,830 --> 00:04:11,170 is the enemy and is a threat 58 00:04:11,170 --> 00:04:14,930 and is trying to destroy America 59 00:04:14,930 --> 00:04:16,793 and all kinds of stuff like that. 60 00:04:17,751 --> 00:04:22,751 And this lack of engagement I think really has a large 61 00:04:23,989 --> 00:04:27,190 impact on our economy. 62 00:04:27,190 --> 00:04:32,190 That if we feel like we don't have a voice, 63 00:04:32,420 --> 00:04:36,940 if we're not engaged, I think it's going to really 64 00:04:37,980 --> 00:04:42,840 affect our economy and it'll affect our business. 65 00:04:42,840 --> 00:04:47,840 We certainly live in an era of extreme income inequality, 66 00:04:49,490 --> 00:04:54,490 extreme debt on the part of young folks and you know, 67 00:04:57,479 --> 00:05:01,137 that certainly influences sort of what is bought and sold. 68 00:05:01,137 --> 00:05:05,410 And the last thing is one of many plugs 69 00:05:05,410 --> 00:05:08,450 that I am going to give during the semester 70 00:05:08,450 --> 00:05:11,860 and that is how important voting is. 71 00:05:11,860 --> 00:05:15,040 It may not be, it shouldn't be the only way 72 00:05:15,040 --> 00:05:17,010 that you make your voice heard 73 00:05:17,010 --> 00:05:19,690 but it is an extremely important one 74 00:05:19,690 --> 00:05:22,330 and I will say that there is no doubt 75 00:05:22,330 --> 00:05:25,720 that when you look at community wellbeing 76 00:05:25,720 --> 00:05:27,940 and what are indicators of that, 77 00:05:27,940 --> 00:05:31,440 what are signs of a healthy community, 78 00:05:31,440 --> 00:05:35,233 voting rate is one of the very most important ones. 79 00:05:38,660 --> 00:05:42,590 As an illustration, if you look at the electoral map 80 00:05:42,590 --> 00:05:44,850 from the 2016 election. 81 00:05:44,850 --> 00:05:49,850 Maybe you voted for Clinton, maybe you voted for Trump, 82 00:05:52,300 --> 00:05:55,910 maybe you weren't old enough to vote then 83 00:05:55,910 --> 00:06:00,554 or regardless of who you wanted to win, 84 00:06:00,554 --> 00:06:05,554 did not vote won all but a very small handful of states. 85 00:06:06,030 --> 00:06:10,200 So the number of people who didn't vote 86 00:06:10,200 --> 00:06:14,100 was greater than the number of people who voted 87 00:06:14,100 --> 00:06:16,130 for anybody else. 88 00:06:16,130 --> 00:06:21,060 So none of, so basically the lack of voice 89 00:06:21,060 --> 00:06:25,510 won the election and I think that that has a great deal 90 00:06:25,510 --> 00:06:29,470 to do with why we are such a fractured 91 00:06:29,470 --> 00:06:32,993 and in my opinion, troubled nation right now. 92 00:06:37,440 --> 00:06:40,100 And I think this speaks volume as well. 93 00:06:40,100 --> 00:06:43,960 That all the, the vast majority said 94 00:06:43,960 --> 00:06:47,950 we didn't vote because it won't make a difference 95 00:06:47,950 --> 00:06:51,570 and I think that your vote does matter 96 00:06:51,570 --> 00:06:56,410 and I am going to do all I can to encourage you 97 00:06:56,410 --> 00:07:00,410 to vote in this election and hope that you will continue 98 00:07:00,410 --> 00:07:03,980 to vote in every election that you can. 99 00:07:03,980 --> 00:07:07,300 I will certainly not tell you who to vote for 100 00:07:07,300 --> 00:07:10,620 but I will certainly encourage you and tell you 101 00:07:10,620 --> 00:07:13,043 how important it is that you vote. 102 00:07:18,660 --> 00:07:23,090 The next factor is economic forces 103 00:07:23,090 --> 00:07:26,760 and thinking about some of the economic forces 104 00:07:26,760 --> 00:07:31,050 that are shaping our economy right now. 105 00:07:31,050 --> 00:07:33,560 Three that leaped to mind for me 106 00:07:33,560 --> 00:07:38,460 is we have very poor infrastructure right now. 107 00:07:38,460 --> 00:07:43,460 Our bridges and roads and many, many other things 108 00:07:43,460 --> 00:07:46,471 are quite out of date. 109 00:07:46,471 --> 00:07:49,730 There's a great deal of debt. 110 00:07:49,730 --> 00:07:51,840 There's, most young folks 111 00:07:51,840 --> 00:07:56,840 that went to college did so on student loans. 112 00:07:58,470 --> 00:08:01,260 There's a great deal of debt floating around. 113 00:08:01,260 --> 00:08:05,510 Our federal government is in extreme debt 114 00:08:05,510 --> 00:08:09,730 and the last one is income inequality. 115 00:08:09,730 --> 00:08:14,420 Just knowing that the degree of wealth 116 00:08:14,420 --> 00:08:19,420 in the hands of a few is at nearly unprecedented amounts 117 00:08:20,900 --> 00:08:25,900 and as a result of that and at least in my view, 118 00:08:26,250 --> 00:08:30,240 it means that the power 119 00:08:32,760 --> 00:08:37,760 in our society is, in my view, 120 00:08:37,890 --> 00:08:41,370 overly influenced by those that have a lot of wealth 121 00:08:41,370 --> 00:08:45,520 and the degree of inequality means that fewer 122 00:08:45,520 --> 00:08:49,600 and fewer people feel like they have a stake 123 00:08:49,600 --> 00:08:53,770 and there's lots of research that shows that 124 00:08:55,880 --> 00:09:00,880 income inequality is socially toxic. 125 00:09:01,500 --> 00:09:02,830 That it leads 126 00:09:02,830 --> 00:09:07,497 to many, many, many unwanted socioeconomic indicators. 127 00:09:10,110 --> 00:09:11,890 And just as an example, 128 00:09:11,890 --> 00:09:16,890 one study by Oxfam.org globally found that 82% of the wealth 129 00:09:19,340 --> 00:09:23,470 created in 2017 went to 1% 130 00:09:23,470 --> 00:09:27,990 of the people. 131 00:09:27,990 --> 00:09:32,300 And certainly the COVID-19 pandemic 132 00:09:36,890 --> 00:09:39,623 has led to a whole other set of economic. 133 00:09:45,519 --> 00:09:49,140 The overarching economic force that I want to talk about 134 00:09:49,140 --> 00:09:53,943 and introduce you to is the idea of neoliberalism. 135 00:09:59,286 --> 00:10:00,220 And in many ways, 136 00:10:00,220 --> 00:10:05,113 it is the overarching social paradigm of our time. 137 00:10:07,525 --> 00:10:09,530 I wanna make clear that in some ways, 138 00:10:09,530 --> 00:10:13,410 this is a clumsy word in that it 139 00:10:14,579 --> 00:10:18,587 refers to the idea of liberalism 140 00:10:21,010 --> 00:10:26,010 in the classic sense which would be more attuned 141 00:10:26,010 --> 00:10:31,010 to something that the Libertarian Party would believe in. 142 00:10:35,846 --> 00:10:40,846 Not sort of we think of liberal as being the left 143 00:10:41,830 --> 00:10:43,900 and it is not about that. 144 00:10:43,900 --> 00:10:48,900 Although I would say that both of our main political parties 145 00:10:52,780 --> 00:10:56,680 have helped to advance this 146 00:11:00,500 --> 00:11:01,513 paradigm. 147 00:11:07,360 --> 00:11:12,360 So basically neoliberalism is, 148 00:11:13,839 --> 00:11:18,460 basically putting the markets in charge of anything 149 00:11:18,460 --> 00:11:23,460 and one of the thing that is a hallmark of it 150 00:11:23,755 --> 00:11:28,755 is taking power away from any kind of public institution. 151 00:11:32,560 --> 00:11:37,560 So basically defunding education, defunding libraries, 152 00:11:42,110 --> 00:11:47,110 any sort of counterbalance to economic forces 153 00:11:50,040 --> 00:11:55,017 and I'll let you read this paragraph here 154 00:11:58,450 --> 00:12:01,650 and again, a disclaimer that this is written by 155 00:12:01,650 --> 00:12:06,053 someone who opposes it, who doesn't see it as a good thing. 156 00:12:07,760 --> 00:12:12,760 But basically it's the idea that the market is the best 157 00:12:14,100 --> 00:12:19,050 and therefore should be really the only decision-making 158 00:12:19,050 --> 00:12:23,410 mechanism that we have, that the only way 159 00:12:23,410 --> 00:12:28,410 that we should try to change the world is as consumers, 160 00:12:29,200 --> 00:12:31,943 to vote with our dollars. 161 00:12:33,350 --> 00:12:36,450 As it says here that will reward merit 162 00:12:36,450 --> 00:12:41,410 and punishes inefficiency and that the market should 163 00:12:41,410 --> 00:12:42,760 determine everything. 164 00:12:42,760 --> 00:12:47,230 So basically in the U.S., since about 1980, 165 00:12:48,864 --> 00:12:53,864 this has been the economic ideology and the social ideology. 166 00:12:54,064 --> 00:12:56,450 It may be a good thing, it may not be. 167 00:12:56,450 --> 00:12:58,840 I really leave it up to you 168 00:12:58,840 --> 00:13:01,263 and I'll say a bit more about it. 169 00:13:03,052 --> 00:13:08,052 So here is a quotation of someone who would think 170 00:13:08,210 --> 00:13:09,150 that is a good thing. 171 00:13:09,150 --> 00:13:13,670 That the only social responsibility of a business 172 00:13:13,670 --> 00:13:17,647 is to increase the profits 173 00:13:19,290 --> 00:13:21,650 and returns to its shareholder 174 00:13:21,650 --> 00:13:26,650 and this is by Nobel Laureate economist, Milton Friedman 175 00:13:28,380 --> 00:13:32,680 and that the market knows best 176 00:13:32,680 --> 00:13:37,680 and by all of us pursuing our self interest, 177 00:13:37,860 --> 00:13:41,913 that's how we make a world as good as we can. 178 00:13:44,749 --> 00:13:47,610 So here are some of the things that we see. 179 00:13:47,610 --> 00:13:52,610 Under neoliberalism, we minimize tax and regulation, 180 00:13:53,085 --> 00:13:58,085 privatize services, the devaluation of labor unions. 181 00:14:01,370 --> 00:14:06,370 The defunding of most public institutions, 182 00:14:06,700 --> 00:14:10,810 the main exceptions being the military 183 00:14:14,669 --> 00:14:18,207 and the sort of, prison industry 184 00:14:20,810 --> 00:14:24,073 which both have grown greatly under this. 185 00:14:25,190 --> 00:14:29,720 It sort of posits that the pursuit of wealth 186 00:14:29,720 --> 00:14:34,340 is what we should all be doing and that the market 187 00:14:34,340 --> 00:14:38,963 allocates rewards based on merit. 188 00:14:39,820 --> 00:14:42,740 And another way of thinking about this is 189 00:14:42,740 --> 00:14:46,333 so-called trickle down or supply side economics. 190 00:14:47,950 --> 00:14:52,323 Another thing to look for is that under neoliberalism, 191 00:14:56,450 --> 00:15:01,450 because the market is given so much influence 192 00:15:01,880 --> 00:15:06,880 and the influence of any countervailing power is decreased, 193 00:15:08,920 --> 00:15:13,920 the market tends to remake all of our institutions 194 00:15:14,190 --> 00:15:15,590 in its own image. 195 00:15:15,590 --> 00:15:19,760 And three really obvious examples to me 196 00:15:19,760 --> 00:15:24,760 are how over the years, religion, government and education 197 00:15:25,100 --> 00:15:27,970 have more and more become to resemble 198 00:15:30,220 --> 00:15:34,106 being run like a business. 199 00:15:34,106 --> 00:15:37,381 And expected to earn money and be efficient 200 00:15:37,381 --> 00:15:42,150 and rather than looking at as a service that, 201 00:15:42,150 --> 00:15:47,150 or as an institution that has its own merit 202 00:15:47,280 --> 00:15:50,093 and that we should be supporting. 203 00:15:54,080 --> 00:15:57,233 Welcome to part three of this week's lecture. 204 00:15:59,640 --> 00:16:04,143 Continuing on with factors in the external environment. 205 00:16:05,200 --> 00:16:08,007 Can think about technological forces. 206 00:16:12,260 --> 00:16:17,250 So I just made a list here of all of the businesses 207 00:16:17,250 --> 00:16:22,250 and applications and activities that we do 208 00:16:22,930 --> 00:16:25,570 that depend on technology 209 00:16:25,570 --> 00:16:29,080 and just it's difficult to think 210 00:16:31,550 --> 00:16:33,480 where we would be or you know, 211 00:16:33,480 --> 00:16:37,263 none of these arguably would exist. 212 00:16:38,360 --> 00:16:43,360 But it's certainly without having a strong online presence 213 00:16:44,490 --> 00:16:46,603 and use of social media, 214 00:16:47,500 --> 00:16:50,050 I can't imagine that you're going to reach 215 00:16:50,050 --> 00:16:54,080 very many consumers since so much of us 216 00:16:54,080 --> 00:16:56,690 for better or worse spend so much time 217 00:16:56,690 --> 00:16:59,185 but you can also think about, 218 00:16:59,185 --> 00:17:01,930 do we have broadband access 219 00:17:01,930 --> 00:17:05,080 and can you get cellphone coverage everywhere 220 00:17:05,080 --> 00:17:07,530 and questions like that. 221 00:17:07,530 --> 00:17:12,530 To what extent is the technology available 222 00:17:12,671 --> 00:17:17,470 when your potential customers need it 223 00:17:17,470 --> 00:17:19,233 to get in touch with you? 224 00:17:24,350 --> 00:17:29,350 Another external factor is the competitive environment. 225 00:17:30,460 --> 00:17:35,460 How competitive is your product or service space? 226 00:17:36,560 --> 00:17:40,730 Do you have a lot of direct competitors or don't you? 227 00:17:40,730 --> 00:17:42,630 And to think about that, 228 00:17:42,630 --> 00:17:46,820 I'm going to walk through a continuum 229 00:17:46,820 --> 00:17:50,320 that you'll see on the next slide which may be 230 00:17:50,320 --> 00:17:54,850 the single most important concept in this class 231 00:17:56,380 --> 00:18:00,530 because understanding where you are on this continuum 232 00:18:00,530 --> 00:18:02,330 is going to tell you a whole lot 233 00:18:02,330 --> 00:18:05,460 about what kind of business that you're going to be 234 00:18:05,460 --> 00:18:07,713 and how you should market. 235 00:18:11,900 --> 00:18:13,960 So here is the continuum 236 00:18:13,960 --> 00:18:17,370 and each of the column, columns can be thought of 237 00:18:17,370 --> 00:18:20,703 as being ends and certainly there's a lot of gray area. 238 00:18:21,800 --> 00:18:24,800 But on the left is a commodity. 239 00:18:24,800 --> 00:18:29,800 So a commodity is something where basically all of the items 240 00:18:31,250 --> 00:18:32,480 are the same. 241 00:18:32,480 --> 00:18:34,940 They are very homogenous. 242 00:18:34,940 --> 00:18:36,840 So they're all the same. 243 00:18:36,840 --> 00:18:41,840 One is the same as the other and maybe a great example 244 00:18:42,310 --> 00:18:47,310 that you might be familiar with is a gallon of whole milk. 245 00:18:48,821 --> 00:18:50,850 Whether you buy it at Price Chopper or Shaw's 246 00:18:50,850 --> 00:18:52,930 or at a convenience store, 247 00:18:52,930 --> 00:18:55,620 that bottle of milk is pretty much the same. 248 00:18:55,620 --> 00:18:58,120 It's again, homogenous. 249 00:18:58,120 --> 00:19:02,170 What you get in that bottle, no matter you buy it, 250 00:19:02,170 --> 00:19:05,626 basically anywhere in the nation, 251 00:19:05,626 --> 00:19:08,973 it's very interchangeable with any other bottle of milk. 252 00:19:09,885 --> 00:19:11,740 There's low information there. 253 00:19:11,740 --> 00:19:14,710 There really, other than Vitamin D whole milk 254 00:19:14,710 --> 00:19:17,003 there really is no other information there. 255 00:19:17,920 --> 00:19:21,010 Because they're all the same, 256 00:19:21,010 --> 00:19:26,010 those who produce and sell it engage in 257 00:19:26,080 --> 00:19:30,693 so-called price-taking behavior. 258 00:19:30,693 --> 00:19:35,693 That there is a price and basically the price of that milk 259 00:19:35,830 --> 00:19:40,830 is not going to change much, no matter where you buy it. 260 00:19:41,170 --> 00:19:44,220 Especially if you go from Price Chopper to Shaw's 261 00:19:44,220 --> 00:19:47,400 to Hannaford's, it's basically, 262 00:19:47,400 --> 00:19:49,970 it's going to be the same price 263 00:19:49,970 --> 00:19:52,860 and therefore it's very competitive. 264 00:19:52,860 --> 00:19:55,980 That since they're all basically alike, 265 00:19:55,980 --> 00:19:58,520 none of them stands out. 266 00:19:58,520 --> 00:20:00,810 There are a lot of options 267 00:20:00,810 --> 00:20:05,090 and the way that you can make your way in the world in that 268 00:20:05,090 --> 00:20:10,090 is that producing and selling a high volume. 269 00:20:14,025 --> 00:20:17,510 So another example is corn, like field corn. 270 00:20:17,510 --> 00:20:22,400 Number two, yellow corn, it's basically all the same. 271 00:20:23,785 --> 00:20:25,663 There's not a lot of information there. 272 00:20:26,845 --> 00:20:31,845 And no matter where it's grown it's very interchangeable, 273 00:20:35,700 --> 00:20:36,553 et cetera. 274 00:20:37,492 --> 00:20:39,230 On the other side of the continuum 275 00:20:39,230 --> 00:20:42,200 is the differentiated product. 276 00:20:42,200 --> 00:20:46,830 So now you're, this is where whoever is producing it 277 00:20:46,830 --> 00:20:50,170 is making claims that it's not the ordinary thing. 278 00:20:50,170 --> 00:20:54,293 That mine is in some way different, 279 00:20:55,494 --> 00:20:59,773 possibly unique and hopefully in my case better. 280 00:21:00,608 --> 00:21:01,441 It's better in some way. 281 00:21:01,441 --> 00:21:03,593 It stands out from the crowd. 282 00:21:04,820 --> 00:21:06,340 Therefore there's high information. 283 00:21:06,340 --> 00:21:11,340 So example in milk might be locally produced, 284 00:21:13,680 --> 00:21:18,680 single herd, organic, grass-fed milk. 285 00:21:19,488 --> 00:21:21,347 So there's a lot of information there. 286 00:21:21,347 --> 00:21:23,700 It's not just milk, I gave a lot of attributes 287 00:21:23,700 --> 00:21:25,950 that I am claiming that my milk has 288 00:21:25,950 --> 00:21:29,700 and since it's not the same as everything else, 289 00:21:29,700 --> 00:21:32,900 that hopefully some consumers will value it more 290 00:21:32,900 --> 00:21:37,490 and they might be willing to pay a slightly higher price. 291 00:21:37,490 --> 00:21:39,823 The so-called price making behavior. 292 00:21:41,751 --> 00:21:46,650 The more unique or the more differentiated my product is, 293 00:21:46,650 --> 00:21:49,888 the less competition there is. 294 00:21:49,888 --> 00:21:54,140 So the more that my product stands out from the crowd, 295 00:21:54,140 --> 00:21:57,263 the more attributes that it has. 296 00:21:58,840 --> 00:22:03,289 Free range, grass fed, organic cows, 297 00:22:03,289 --> 00:22:05,403 locally grown, hand-milked blah blah blah, 298 00:22:07,060 --> 00:22:09,400 a lot of information means that there aren't 299 00:22:09,400 --> 00:22:12,972 a lot of others doing it and producing 300 00:22:12,972 --> 00:22:15,870 the exact same product I am. 301 00:22:15,870 --> 00:22:20,760 And since these do tend to be sort of artisanal or craft 302 00:22:21,670 --> 00:22:24,733 they are produced in a lower volume. 303 00:22:25,743 --> 00:22:28,240 So when you look at things like heirloom, fair trade, 304 00:22:28,240 --> 00:22:32,530 organic or any of the other attributes that I mentioned, 305 00:22:32,530 --> 00:22:36,810 these are the attributes that help these products 306 00:22:36,810 --> 00:22:38,790 stand apart from the crowds. 307 00:22:38,790 --> 00:22:43,790 You can think about the product or the service 308 00:22:44,800 --> 00:22:47,773 that you're going to be providing. 309 00:22:50,120 --> 00:22:54,490 Are you competing with everybody else? 310 00:22:54,490 --> 00:22:57,278 Just doing milk, just doing corn. 311 00:22:57,278 --> 00:23:00,740 Or are you doing something that stands apart? 312 00:23:00,740 --> 00:23:02,853 By some service that you offer. 313 00:23:04,702 --> 00:23:08,740 You know, yours is better, stronger, faster, quicker, 314 00:23:08,740 --> 00:23:11,943 more convenient, last longer, 315 00:23:13,315 --> 00:23:15,450 you know attributes that make you stand apart 316 00:23:15,450 --> 00:23:16,373 from the crowd. 317 00:23:21,634 --> 00:23:25,234 Another framework is the red or blue ocean. 318 00:23:25,234 --> 00:23:28,840 So you can think of these as being at the extreme ends. 319 00:23:28,840 --> 00:23:33,070 So a red ocean tends to more commodity items. 320 00:23:33,070 --> 00:23:36,480 There's lots of competitors, it's highly contested, 321 00:23:36,480 --> 00:23:40,044 it's a fairly crowded market space. 322 00:23:40,044 --> 00:23:42,610 There's blood in the water, that's why it's red. 323 00:23:42,610 --> 00:23:46,730 Versus a blue ocean, there are few competitors 324 00:23:46,730 --> 00:23:51,423 at least for now although if you are, 325 00:23:52,571 --> 00:23:54,530 have a really good selling product, 326 00:23:54,530 --> 00:23:59,250 certainly others are going to notice that 327 00:23:59,250 --> 00:24:04,250 and try to produce and sell a very similar product. 328 00:24:07,530 --> 00:24:10,170 So you have to keep reinnovating 329 00:24:10,170 --> 00:24:12,630 but if it's a new value, a new innovation, 330 00:24:12,630 --> 00:24:15,784 a new idea, it's a blue ocean. 331 00:24:15,784 --> 00:24:19,083 It's calm water, not a lot of competitors, 332 00:24:21,710 --> 00:24:24,433 not highly contested. 333 00:24:29,483 --> 00:24:32,800 You can also think of the competitive forces 334 00:24:32,800 --> 00:24:36,034 in terms of globalization, 335 00:24:36,034 --> 00:24:39,707 that we're seeing a lot of trade disputes now. 336 00:24:45,219 --> 00:24:47,240 Many, many businesses outsource. 337 00:24:47,240 --> 00:24:51,280 So they get their parts from far away 338 00:24:51,280 --> 00:24:55,800 and we certainly saw during the early days 339 00:24:55,800 --> 00:25:00,800 of the COVID crisis how we ran out of basic things 340 00:25:01,380 --> 00:25:06,380 like toilet paper and isopropyl alcohol 341 00:25:06,420 --> 00:25:10,100 because they are produced so far away. 342 00:25:10,100 --> 00:25:12,120 Now there's an advantage of that 343 00:25:12,120 --> 00:25:17,120 in that it's produced in the place where it can be produced 344 00:25:17,720 --> 00:25:22,200 at the least expensive cost which keeps prices down 345 00:25:22,200 --> 00:25:25,870 but we saw that this sort of global 346 00:25:25,870 --> 00:25:29,850 just in time delivery market didn't do well 347 00:25:29,850 --> 00:25:33,206 in the face of a big disruption. 348 00:25:33,206 --> 00:25:36,430 On the other end of the scale, we have niche markets 349 00:25:36,430 --> 00:25:40,630 and we have localization and here in Vermont, 350 00:25:40,630 --> 00:25:43,710 there's a lot of local support for that. 351 00:25:43,710 --> 00:25:47,300 People I think more than some of the other places 352 00:25:47,300 --> 00:25:48,720 I've lived anyway, 353 00:25:48,720 --> 00:25:51,213 really think about supporting local businesses. 354 00:25:53,146 --> 00:25:55,193 You know, the Keep Vermont Weird thing. 355 00:25:56,280 --> 00:26:01,280 More local restaurants, less chain stores. 356 00:26:02,080 --> 00:26:04,828 Like there's no fast food place downtown. 357 00:26:04,828 --> 00:26:09,480 At least I think not and a lot of locally grown, 358 00:26:09,480 --> 00:26:14,323 sort of unique taste of Vermont. 359 00:26:21,465 --> 00:26:24,133 You can also think in terms of regulatory forces. 360 00:26:25,590 --> 00:26:28,630 What are the environmental regs that we're facing? 361 00:26:28,630 --> 00:26:33,120 What are the labor regulations? 362 00:26:33,120 --> 00:26:38,120 Are there harsh or are there strict safety laws? 363 00:26:39,538 --> 00:26:42,970 Would we have things like OSHA for workers' safety 364 00:26:42,970 --> 00:26:47,850 but the things like, a lot of agricultural enterprises 365 00:26:47,850 --> 00:26:49,440 are exempt from. 366 00:26:49,440 --> 00:26:53,330 We have preserved taxation, is there wage controls 367 00:26:53,330 --> 00:26:56,890 and when you get into things like drugs or food 368 00:26:57,737 --> 00:26:59,994 there's a lot of safety regs. 369 00:26:59,994 --> 00:27:03,810 Communication, transport, zoning laws, 370 00:27:03,810 --> 00:27:08,660 all those effect the environment in which your business 371 00:27:08,660 --> 00:27:11,923 or organization will be operating. 372 00:27:16,633 --> 00:27:20,570 To think back about how different factors 373 00:27:20,570 --> 00:27:25,570 of production work, work against each other 374 00:27:26,300 --> 00:27:28,483 or compete against each other, 375 00:27:29,342 --> 00:27:30,442 there's the idea that, 376 00:27:32,850 --> 00:27:37,850 that capital and labor are often 377 00:27:42,398 --> 00:27:44,245 competitive goods. 378 00:27:44,245 --> 00:27:47,683 That they are substitutes. 379 00:27:48,615 --> 00:27:52,800 So there's this push to try to get rid of an employee 380 00:27:52,800 --> 00:27:56,620 and replace it with an automated thing, 381 00:27:56,620 --> 00:28:00,423 like the automated lines in a grocery store. 382 00:28:01,513 --> 00:28:05,460 Or the robot arm that welds something onto a car 383 00:28:05,460 --> 00:28:07,500 instead of a human. 384 00:28:07,500 --> 00:28:12,500 And one way to think about this is through taxation 385 00:28:12,610 --> 00:28:15,297 and subsidy. 386 00:28:15,297 --> 00:28:18,420 So a tax means when you buy something 387 00:28:18,420 --> 00:28:22,797 you have to pay an additional fee to the government. 388 00:28:24,690 --> 00:28:29,690 Like a sales tax and a subsidy means that 389 00:28:29,780 --> 00:28:32,400 the government is paying a part of this 390 00:28:32,400 --> 00:28:35,683 or keeping the price artificially low. 391 00:28:37,586 --> 00:28:40,680 Now when you tax something, you will have less of it 392 00:28:41,715 --> 00:28:45,380 and when you subsidize you will have more of it. 393 00:28:45,380 --> 00:28:49,270 And when you think about the difference between labor 394 00:28:51,440 --> 00:28:54,133 and capital, 395 00:28:55,715 --> 00:28:59,530 we tax labor, especially fairly low income labor 396 00:29:00,870 --> 00:29:04,740 something like seven times. 397 00:29:04,740 --> 00:29:08,913 So myself, my own labor, I have, 398 00:29:10,205 --> 00:29:12,870 I pay income tax in the federal, 399 00:29:12,870 --> 00:29:17,350 I pay state income tax, I pay into Social Security, 400 00:29:17,350 --> 00:29:21,490 I pay into healthcare, I pay into Medicare 401 00:29:22,650 --> 00:29:26,650 and my employer matches a lot of those 402 00:29:27,611 --> 00:29:30,900 and then my employer also has to pay for 403 00:29:32,133 --> 00:29:36,800 unemployment insurance, workman's comp insurance, 404 00:29:36,800 --> 00:29:41,800 all of these things increase the price of labor 405 00:29:41,810 --> 00:29:45,054 and make labor more expensive. 406 00:29:45,054 --> 00:29:49,083 So it's very, there's a disincentive for hiring folks. 407 00:29:50,140 --> 00:29:53,827 On the other hand, the price of capital 408 00:29:56,790 --> 00:30:01,790 is the interest rate and this is not set by the supply 409 00:30:03,180 --> 00:30:06,570 of savings and the demand for investment 410 00:30:07,417 --> 00:30:11,652 because we are terrible savers and we want 411 00:30:11,652 --> 00:30:15,100 lots and lots of credit for our businesses 412 00:30:15,100 --> 00:30:18,350 or to buy things, to buy homes, to buy cars 413 00:30:18,350 --> 00:30:21,650 or just putting things on our credit cards. 414 00:30:21,650 --> 00:30:25,010 So if it were set by the market, 415 00:30:25,010 --> 00:30:29,340 the rate of interest would be much, much, much higher. 416 00:30:29,340 --> 00:30:34,340 But it's actually set largely by a government bureaucracy. 417 00:30:34,420 --> 00:30:39,420 So note that we tax labor, we subsidize capital 418 00:30:42,540 --> 00:30:47,500 and then as a result, the incentives in the marketplace 419 00:30:47,500 --> 00:30:52,500 are to get rid of labor and replace it with a machine. 420 00:30:56,096 --> 00:30:59,193 Yet we all need, but then we think about 421 00:30:59,193 --> 00:31:00,026 where will we have jobs? 422 00:31:00,026 --> 00:31:01,910 And so we're you know, in many cases 423 00:31:01,910 --> 00:31:05,310 maybe lowering our environmental standards 424 00:31:05,310 --> 00:31:10,310 or giving huge tax breaks to someone who will provide jobs. 425 00:31:12,810 --> 00:31:16,260 So to me, the things that we tax 426 00:31:16,260 --> 00:31:18,473 and the things that we subsidize 427 00:31:22,150 --> 00:31:25,501 don't always make sense for the kind of outcomes 428 00:31:25,501 --> 00:31:27,163 that we want. 429 00:31:31,896 --> 00:31:36,300 A huge external factor that we're facing now 430 00:31:36,300 --> 00:31:38,303 is climate change. 431 00:31:39,214 --> 00:31:41,250 As well as biodiversity loss 432 00:31:41,250 --> 00:31:44,010 and all of the ecological problems 433 00:31:44,010 --> 00:31:47,040 that our earth is facing. 434 00:31:47,040 --> 00:31:52,040 Phosphorus in Lake Champagne and cyanobacteria, 435 00:31:52,630 --> 00:31:55,040 lots and lots of environmental challenges 436 00:31:55,040 --> 00:31:59,180 that we are facing and I will talk more that 437 00:31:59,180 --> 00:32:04,180 in the discussion about how that may impact 438 00:32:04,340 --> 00:32:08,123 your business or organization. 439 00:32:13,360 --> 00:32:16,600 So again, looking at the external environment 440 00:32:17,569 --> 00:32:21,593 helps you to see opportunities and overcome barriers. 441 00:32:27,221 --> 00:32:30,543 So for those of you who don't have a business idea yet, 442 00:32:31,460 --> 00:32:33,680 refer to the homework 443 00:32:33,680 --> 00:32:37,771 and think about environmental scanning. 444 00:32:37,771 --> 00:32:41,430 So this is something that savvy entrepreneurs are doing 445 00:32:41,430 --> 00:32:42,883 all the time. 446 00:32:43,967 --> 00:32:48,514 Learning how to trend spot, looking beyond the ordinary. 447 00:32:48,514 --> 00:32:52,590 So this photo that you see here is sort of an echo chamber 448 00:32:52,590 --> 00:32:57,590 where this person is just hearing their own thoughts. 449 00:32:57,860 --> 00:33:01,650 But to trend spot, you really wanna step out 450 00:33:01,650 --> 00:33:06,650 of your same old same old and notice what are people doing? 451 00:33:07,587 --> 00:33:09,670 What sort of media are they consuming? 452 00:33:09,670 --> 00:33:13,950 Networking with folks in other walks of life, 453 00:33:13,950 --> 00:33:17,490 self observing, challenging assumptions 454 00:33:17,490 --> 00:33:22,160 and talking with and observing customers 455 00:33:22,160 --> 00:33:27,160 of your products and with products of your competitors 456 00:33:28,350 --> 00:33:31,294 and notice where do they get information? 457 00:33:31,294 --> 00:33:33,393 Well what are they trying, what's the new trend? 458 00:33:36,400 --> 00:33:37,393 What is hot? 459 00:33:40,120 --> 00:33:42,720 Because only by having 460 00:33:42,720 --> 00:33:45,600 a good understanding of the external environment 461 00:33:45,600 --> 00:33:50,600 will you have these true and deep and meaningful assumptions 462 00:33:52,140 --> 00:33:54,450 and beliefs which you can then use 463 00:33:54,450 --> 00:33:58,130 to develop strategies and operation 464 00:33:58,130 --> 00:34:01,023 which will then give you the performance that you want. 465 00:34:06,413 --> 00:34:08,970 So once you've gone through and made a big list 466 00:34:08,970 --> 00:34:13,003 of the external and internal environment, 467 00:34:14,030 --> 00:34:18,148 you can put it into what is called a SWOT analysis. 468 00:34:18,148 --> 00:34:20,440 So SWOT stands for strengths, weaknesses, 469 00:34:20,440 --> 00:34:22,113 opportunities and threats. 470 00:34:22,954 --> 00:34:26,595 So note that strengths and weaknesses are internal, 471 00:34:26,595 --> 00:34:29,260 things that you might have some or a large amount 472 00:34:29,260 --> 00:34:30,613 of control over. 473 00:34:31,517 --> 00:34:35,174 What are your resources and capacities? 474 00:34:35,174 --> 00:34:37,133 What is your, how strong is your brand? 475 00:34:37,986 --> 00:34:38,966 How's your cost? 476 00:34:38,966 --> 00:34:42,700 Do you have expertise, what is your location? 477 00:34:42,700 --> 00:34:45,880 Things that you choose and then weakness 478 00:34:45,880 --> 00:34:48,840 are those, the lack of these things 479 00:34:48,840 --> 00:34:52,770 or the other factors that you may have control over 480 00:34:52,770 --> 00:34:54,493 that are, that work against you. 481 00:34:56,483 --> 00:35:00,883 Whereas here in the yellow print are the external factors. 482 00:35:00,883 --> 00:35:03,982 The opportunities and threats that you have 483 00:35:03,982 --> 00:35:04,815 that are external. 484 00:35:04,815 --> 00:35:06,670 The opportunities work with you, for you, 485 00:35:06,670 --> 00:35:08,223 the threats work against you. 486 00:35:12,006 --> 00:35:14,720 And do, through an environmental scan 487 00:35:14,720 --> 00:35:18,030 you can make a list of the technological, social 488 00:35:18,934 --> 00:35:23,047 and economic competitive and regulatory opportunities. 489 00:35:23,047 --> 00:35:27,383 How are these external factors working in your favor? 490 00:35:28,486 --> 00:35:29,862 Those are opportunities. 491 00:35:29,862 --> 00:35:31,040 How are they working against you? 492 00:35:31,040 --> 00:35:32,173 Those are threats. 493 00:35:34,520 --> 00:35:36,410 And then once you're done with that, 494 00:35:36,410 --> 00:35:40,080 then you can try to put it into this two by two graph. 495 00:35:40,080 --> 00:35:43,430 So hopefully you'll be up in the top right. 496 00:35:43,430 --> 00:35:44,980 You'll playing offense. 497 00:35:44,980 --> 00:35:48,723 It's first to ten, it's your ball, do your thing. 498 00:35:49,560 --> 00:35:52,910 If you're in the top left, 499 00:35:52,910 --> 00:35:56,140 there's a really strong opportunity there 500 00:35:56,140 --> 00:36:01,140 but the weakness prevents you from meeting that. 501 00:36:01,243 --> 00:36:06,243 So you wanna strengthen those places 502 00:36:07,080 --> 00:36:10,320 where you are weak so you have a chance 503 00:36:10,320 --> 00:36:12,063 to meet the opportunity. 504 00:36:13,090 --> 00:36:16,560 If you're in the bottom right, 505 00:36:16,560 --> 00:36:19,020 you have a lot of strengths but your threats 506 00:36:19,020 --> 00:36:21,570 are greater than the opportunities 507 00:36:21,570 --> 00:36:24,000 that you may wish to diversify 508 00:36:24,000 --> 00:36:26,340 and put those strengths that you have 509 00:36:26,340 --> 00:36:30,600 toward another opportunity to get back to the top right 510 00:36:30,600 --> 00:36:33,320 and if you are in the bottom left, 511 00:36:33,320 --> 00:36:38,320 you are playing defense and it may reach a point 512 00:36:39,380 --> 00:36:42,253 where you simply close the business. 513 00:36:49,030 --> 00:36:51,660 This is the end of part three. 514 00:36:51,660 --> 00:36:54,570 When you're ready, please watch the video 515 00:36:54,570 --> 00:36:57,283 for the fourth and final part, thank you.