Successful projects start with a thorough environment analysis

The project environment is, on the one hand, the space in which the project and the project environment influence each other and, on the other hand, the space in which the project is formulated, evaluated and implemented. Every project is embedded in a project environment with different mechanisms of action. The environment influences the project directly or indirectly and / or is passively influenced by the effects of the project. The external influencing factors can be very complex and also difficult to penetrate.
The timely and systematic recording of environmental factors relevant to the project allows conclusions to be drawn about the embeddedness of the project and contributes to the successful implementation of a project. The analysis of the "PESTEL" spheres (according to Francis J. Aguilar) reveals possible influences and helps to shed light on the developing project. PESTEL is an acronym made up of the first letters of the words politics, economics, sociology, technology, ecology and law.
We explain the individual spheres for the different project types and what you can derive from the environment analysis.
A meadow with trees.


Political environment

In the political environment, it is possible to show which different fields of interest exist, and which "centres of power" have to be taken into account. Politics is to be understood in a narrow sense, as a method of defining and enforcing certain ideas against other interests. It is important for the project manager to identify these different political interests in order to take measures that will help to keep potential risks away from the project or to link supporting areas to the project.

  • Investment project: In order to build a railway line, forest must be cleared, and the interests of the railway operator in a fast connection between origin and destination clash with the interests of nature conservationists in preserving the forest.
  • R&D project: For the development of a new electric cooker, the development department is striving for a variant that is as energy-saving as possible, with an extractor fan integrated into the hob. The focus is on performance. But on the other hand, the marketing department wants a particularly low-priced solution in order to optimise costs.
  • Organisational project: At a trade congress, two speakers are to appear who represent companies that are competitors in their market segment. In the course of their respective presentations, jibes and digs at the competition cannot be ruled out. The desired factual orientation meets undesired emotionality.

Economic environment

The economic environment analyses economic interests and framework conditions, financial requirements, but also organisational facts and competitive aspects. For example, the project manager should ask whether seasonal or cyclical fluctuations need to be taken into account for liquidity reasons, or whether there is a project budget.

  • Investment project: When building a railway line, the expected costs, the financial resources provided, the subsequent passenger volume and the fares influence the revenues of the project.
  • R&D project: For the development of a new electric cooker, the expected development and market launch costs are relevant, but also possible sales figures and sales revenues to be realised influence the project.
  • Organisational project: The expected number of visitors of the trade congress is a driving factor for the project.

Sociological environment

The sociological environment can examine what social, psychological and cultural factors affect the project, whether ethical or moral boundaries are set for the project, but also what moods or emotions of the people affected by the project should be taken into account.

  • Investment project: In a railway project, the construction of the stations is influenced by the required accessibility.
  • R&D project: People speak different languages and may have limited understanding of written instructions. This influences the control panel, but also the instructions for use of the electric cooker to be developed.
  • Organisational project: For the visitors of the congress, personal (e.g. vegan food) or religious (e.g. kosher) requirements have to be taken into account in the catering.

Technological environment

The investigation of the physical, technological and aesthetic issues takes place in the technological environment. It shows whether and perhaps how technical innovations are to be integrated into the project and whether new or tried and tested technologies are being used. 

  • Investment project: In the railway project, attention should be paid to the connection to the 5G mobile communication standard.
  • R&D project: The new electric cooker should have induction hobs according to specifications. However, background noise caused by the magnetic field (e.g. crackling and low humming) is not desired.
  • Organisational project: At the congress, the seating must ensure that every visitor has a good view of the speaker, and the conference technology must ensure that it is loud and clearly audible.

Ecological environment

Behind the ecological environment is the "green" environment. This determines whether the project will have an impact on the environment and what environmental guidelines or requirements need to be followed.

  • Investment project: The railway project runs through an urban area that was heavily contested in a war fought years ago. Explosive ordnance left behind from that time (e.g. mines and unexploded ordnance) could affect the construction work.
  • R&D project: The new electric cooker must comply with specifications on technical installation dimensions and connections.
  • Organisational project: For example, the safety of visitors must be ensured at the congress, so access control must be set up and attention must be paid to the signposting of escape routes.

Legal environment

The legal environment involves legal and contractual investigations, e.g. consideration of the jurisdiction, laws and regulations applicable to the project, including property rights or rights of use.

  • Investment project: National building and transport regulations must be observed for the railway project.
  • R&D project: The new electric cooker must be designed in accordance with the applicable technical regulations.
  • Organisational project: Personal data must be collected at the trade congress, but this data may only be collected and stored in accordance with the applicable version of the Data Protection Act.

Dealing with different areas of the project environment

Some of the project influencing factors identified in the PESTEL analysis can put the project at risk, while others can support it. For example, failure to comply with data protection regulations may jeopardise the organisation of the congress, whereas ensuring that all visitors are catered for may be supportive, as every potential participant will actually be able to attend.
Classification into 'threat' and 'support' categories provides the basis for deriving the most coherent measures possible. By defining measures to eliminate or minimise potential risks and to connect supporters to the project, it is often possible to manage the negative aspects and use the positive facts to promote the project.

Example of how to deal with „threats“

In order not to jeopardise the production of invoices and certificates, only data relevant to the production of invoices or certificates of participation should be collected and stored for a certain period of time. Other information, e.g., about eating habits, must not be traceable to individuals. The aim is to ensure that cost accounting, the preparation of certificates and information for catering are in line with data protection requirements. The associated measures are the creation of several databases, each for one objective, i.e., database 1 - invoicing, database 2 - certificate of attendance, database 3 - catering. In addition to the aforementioned objective, there is another: the use of data only for permitted areas and time periods. This includes the deletion of data in accordance with legal requirements.

Example of how to deal with „support“

Taking into account visitors' eating habits is good for the congress, but it means that not every caterer can be considered as a project partner and that the cost of the now more extensive catering may increase. The aim is to cater for all potential visitors at the buffet. A related measure is, for example, to draw up contracts in such a way that food requests do not lead to additional costs and that buffet stations are set up.
By incorporating the identified measures into the project planning and implementation, the project manager can gain control over the project environment.

Derivations from the environment analysis

If the PESTEL analysis and classification into 'threat' and 'support' already indicate that the project will face such serious challenges that it will be very difficult or impossible to complete, the project can be stopped immediately. Little time and money has been invested in the project and no excessive resources have been used. The early and quick termination of a project that cannot be successfully implemented is a success factor for an organisation that should not be underestimated.

Environment analysis - The Author
Keywords: Project management, Tips, Environment analysis, POSTUR

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For better readability, we usually only use the generic masculine form in our texts. Nevertheless, the expressions refer to members of all genders.