Describe how to identify business and consumer needs and how to prioritise them

Welcome to Strategic Thinking: Identifying and Prioritising Needs

Welcome! In this part of your CB3 journey, we are diving into the very foundation of strategy. Before a business can decide where it is going, it must understand what its customers and the business itself actually need. Think of this as the "discovery phase." If you get this right, the rest of your strategy falls into place. If you get it wrong, you might build a perfect solution for a problem that doesn't exist!

Don't worry if this seems a bit abstract at first. We will break it down into simple steps, using examples you see every day.

1. Business Needs vs. Consumer Needs

To think strategically, you must distinguish between two different perspectives: the Consumer (the person buying the product or service) and the Business (the organisation providing it).

Consumer Needs

These are the problems customers are trying to solve. They can be Functional (e.g., "I need car insurance so I can drive legally") or Emotional (e.g., "I want a brand I can trust so I feel safe").

Example: Imagine an actuarial consultancy. Their Consumer (a pension fund) doesn't just "need a report." They need clarity on their liabilities to ensure they can pay pensioners in 20 years. The report is just the tool to meet that need.

Business Needs

These are the internal requirements an organisation must meet to stay healthy and competitive. They often revolve around Profitability, Compliance, Efficiency, and Growth.

Example: That same actuarial consultancy has a Business Need to automate their data entry. Why? To reduce costs and free up senior actuaries for higher-value strategic work.

Quick Review:
• Consumer Needs: Focus on solving external customer problems.
• Business Needs: Focus on internal health, efficiency, and meeting strategic goals.

2. How to Identify Needs

Identifying needs isn't about guessing; it’s about gathering evidence. In the context of Strategic Thinking, we use several methods to "listen" to the market and the organisation.

Market Research (For Consumer Needs)

• Primary Research: Directly asking people via surveys, interviews, or focus groups. Example: Sending a questionnaire to policyholders about their claims experience.
• Secondary Research: Looking at existing data, such as industry reports or competitor analysis. Example: Reading an IFoA report on emerging trends in mortality rates.

Environmental Scanning (For Business Needs)

Businesses use tools like PESTLE (Political, Economic, Social, Technological, Legal, Environmental) to identify external factors that create new needs.
Example: A change in Legal regulations regarding pension age creates a Business Need for a firm to update its calculation models immediately.

Gap Analysis

This is a simple but powerful technique. You compare Where we are now (Current State) with Where we want to be (Desired State). The space in between is the Gap, which represents the Needs that must be addressed.

Key Takeaway: Identifying needs is about observation. Don't just look at what people say they want; look at the problems they are trying to solve.

3. Prioritising Needs: The Strategic Filter

Here is the tricky part: You will always identify more needs than you have the time, money, or people to fix. Prioritisation is the process of deciding what comes first.

The Impact vs. Feasibility Matrix

A common way to prioritise is to plot needs on a simple grid:
1. High Impact / High Feasibility: These are "Quick Wins." Do these first!
2. High Impact / Low Feasibility: These are "Major Projects." They are worth it, but they need careful planning.
3. Low Impact / High Feasibility: These are "Fill-ins." Only do them if you have spare time.
4. Low Impact / Low Feasibility: These are "Thankless Tasks." Avoid them!

The Eisenhower Matrix (Urgent vs. Important)

In a business context, we often confuse "urgent" with "important."
• Important: Aligns with long-term strategic goals.
• Urgent: Needs immediate attention (often someone else's priority).
Strategic thinkers focus on the "Important but not Urgent" tasks—like building a new risk model—before they become emergencies.

Memory Aid: The "PIE" Rule
When prioritising, remember PIE:
P - Profitability (Will it make/save money?)
I - Impact (How many people/processes does it help?)
E - Ease (How hard is it to do?)

4. Common Mistakes to Avoid

Don't worry if this seems tricky at first; many experienced managers fall into these traps!

• The "Loudest Voice" Trap: Prioritising the need of the person who yells the loudest (usually a frustrated stakeholder) rather than the need that adds the most value.
• Confusing "Wants" with "Needs": A customer might want a flashy mobile app, but they need a simple way to track their investments. Focus on the underlying need.
• Ignoring the Business "Back-End": Only focusing on consumer needs while ignoring internal business needs (like outdated IT systems) eventually leads to operational failure.

5. Step-by-Step Summary of the Process

1. Gather Data: Use surveys, PESTLE, and internal audits to find gaps.
2. Categorise: Is this a Consumer need or a Business need?
3. Score: Assess each need based on its Impact and Feasibility.
4. Align: Check if the need fits the company’s long-term Strategy.
5. Select: Choose the top priorities and allocate resources (budget and staff).

Did you know?
Many successful products were created by identifying Latent Needs—needs that consumers didn't even know they had until the product was shown to them. Strategic thinking involves looking ahead to what people will need tomorrow, not just today!

Key Takeaway for the Exam

When you are asked about identifying and prioritising needs, always mention that resources are finite. Strategy is the art of sacrifice—choosing to do the most impactful things and consciously deciding not to do others. Use tools like the Impact/Feasibility Matrix to justify your choices.