2. environmental scanning - radar for success

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Environm ental scanning - the internal communication of external inform ation abo

issues that m ay influence an organization's decision-m aking process - can identi

eme rg in g is su es, situ atio ns , a nd pote ntia l p itfa lls th at may a ffe ct a n o rg an iz atio n's fu tu

38 T h e I n f o r m o l i o n M an a g e m e n t J o u r n a l • M ay / J u n e 2 0 0 4



May/JYne 200d • The Information Manogemen1 Jeur nel 39

At the Core

This article

defines environmental canning

explains why it i. vital to an

organization's strategic planning

describes the prace involved in

environmental scanning

rganizations today face unprecedented challenges in maintaining

commercial survival and success. This is true for organizations

both large and mall, for-profit and non-profit. ucces requires a

keen, trategic understanding of external influence in order to

respond in ways that will ensure the organization's urvival and

success. Environmental canning i one tool in an organization's ar ella! that can

be used to gain this understanding.



What ' 5 Environmental

Scanning?

Environm ental scanning is th e

i n te rna l commun ic a ti on of external

inform ation about issues that may

potentially influence an organiza-

tion' decision-making pro e .

Environm ental scanning focu es on

th e id entificatio n of em erg in g issu es,

ituations, an d p oten tia l pitfalls th at

m ay affect an organization's future.

The inform ation gathered, includ-

in g th e ev en ts, tren ds, an d relation -

ships that are external to an organ-

ization, i provided to key m anager

w ithin the organization and is used

to guide management in future

plans. It i al 0 used to evaluate an

organization's strengths and w eak-

nesse in respon e to ex te rna l t hr ea ts

and opportunities. In essence, envi-

ronrnental scanning is a m ethod for

identifying, co llectin g, an d translat-

ing information about external

influences into useful plans and

decisions.

Why Environmental Scanning?

T here are m any im portant reasons

to do environmental scanning.

B ecause of rapid changes in today'

m arketplace and new and em erging

business practices. it is easy for an

organization to fall behind by no t

keeping up in areas uch as technol-

ogy, regulations. and various ri in g

trends. Environmental scanning

reduce the chance of being blind-

id ed an d resu lts in g reater an ticip a-

t or y mana gemen t

T he relationship am ong m arkets,

trategic planning, and the environ-

meat extern al to an o rg an iz atio n is

w hat defines an organization's suc-

cess. As e xt er na l f or ce s a re i de nt if ie d,

organizations have the opportunity

t o e xam in e their options in respon e

to the challenge and co nsid er the ir

internal strengths and w eakne ses to

respond to the e challenges.

According to lohn D . toffels

Stra teg ic Issues M {m age 11 1 en t: A

C om prehensive G uide to E nviron-

m enta l Scanning , environmental

scanning allows an organization to

a dd re ss e xtema l c ompe ti ti ve , ocial,

econom ic, and technical is su es th at

may be hard to identify and are per-

sistent. Specifically, its intent is not

m ere ly o ne o f in fo rm atio n g ath ering ;

rather, its purpo e i to focus on

future im pacts on the organization

rather than tho e centered on the

present situation. E nvironm ental

scanning helps an organization learn

about the potential influences from

external environment and how it

can respond trategically. Through

understanding these two elem ents -

ex tern al influ en ces an d th e orga niza-

tio n's in tern al p ro ce sses - the organi-

zation can respond in a m ore tim ely

and e ff ec ti v e manne r.

The focus of environm ental scan-

ning is on strategic thinking and

planning. Its value comes from the

identification and understanding of

com plex I sues facing the organiza-

tion. Environm ental canning helps

an organization form a trategic

position from w hich it c an a dd re ss

ex tern al fo rc es o ver w hich it h as little,

if any, control. T hrough consistent

m onitoring of external influences,

40 The l"form"I;O n M an"gement Journal • M ay/June 2004

organization can hape their own

internal processe to reflect neces ary

and effective responses. The process

of understanding the m atch betw een

external influences and internal

resp on ses assists in ad ju stin g o rg an i-

zational stru cture an d strate gic p lan

that are d esign ed to be m ore e ffective

and fle ible to changing market

force. Thus, the ucce sful organiza-

tion is focused 011 learning as w ell as

on flexibility and responsivene s.

Environmental scanning is not a

ta gn an t p ro ce ss . It should be con-

stant and ongoing in order to main-

tain a p re pa ra ti ve s ta nc e a environ-

m ental influence arise. T his organi-

z ati on al le arn in g process isa ke y

component to organizational me-

ce . Through constant m onitoring

of the environment, managem ent

has the ability to make nece sary

adju tments in the organization'

response that can mean the differ-

en ce b etw een su ccess an d fa ilu re.

Ex te rna l Env ironments

T he re a re se ve ra l e xte rn al e nv iro n-

ment that may impact an organiza-

tion. These can be grouped into cat-

e go ri es i nc lu din g so ci al, re gu la to ry ,

tech nolo gica l, p olitical, ec on om ic,

a nd i nd us try . [S ee " Ex te rn al E nv iro n-

ment s Impa ct in g the M odern O rgan-

ization" 011 page 421. Influences of

each can negatively affect an organ-

ization, resulting in poor perform -

ance or ultimate failure. f these

environments, as Chun Wei hoo

notes in I ll fo rm a ti on Ma na gem en t

fo r th e in te llig en t O rg an iza tio n: T he

A rt o f S ca nn in g t he E n vir onm en t, th e

in dustry ' en viron men t is the mo t

significant, w ith its focus on cus-

tom ers, suppliers, and com petitors

a nd th ei r in tric ate re la tio nsh ip s.

It is in cre asi ng ly v ita l 10 the con-

tinued grow th and improved per-

formance of an organization to

monitor these external environ-

ments in order to make necessary

adjustments to these influence.

Environmental scanning offers a

process by which the value of an



organization may be maintained or

enhanced even in the face of adver-

sa rial challenges. Environm ental

canning helps to fOCLlS th e o rg an i-

zation' strategic and tactical plans

on those external forces that may

threaten it stability and turn tho. e

potential problems to i ts a dv an ta ge .

An rganization manage this

proces. by identifying and examin-

in g those external events that may

otherwise be unpredi table an d

uncontrollable. The proces assumes

that potential im pacts on the organi-

zation may come from unexpected

ources, Therefore, environmental

scanning i in teg rally lin ked to org a-

nizational and strategic planning and

plan. for unexpected changes that

will affect the organization.

Environmental cans mu t be

conducted on an ongoing basis in

o rd er to effectively m on itor external

forces that are lik ely to impact an

organization. Issues for each of the

external environments should be

explored. A cornprehen ive envi-

ron mental scanning pro ess will

keep a " atchful eye on the potential

im pacts of the followi.ng different

e n: i ronmen t:

• I nd u st ry /Ma r ke t: Because the in-

dustry/market environment gen-

erally eems to be the most sig nif -

icant, it i useful to examine the

structure of the industry and

identify the key competition in

the in dustry. U nd erstan din g the

role of the competitor in the

market and their relationship

w ith each other, their ell torners,

an d their suppliers will provide

useful information on trends and

po ten tial pro blem s fo r competing

orga n izat ions,

Technology: The emergence of

n ew techn olog ies can impact

organizations' overall bus! ness

and p rod uctio n p ro cesses. lt is

II eful, therefore, to monitor

changes in te hnoL ogie , particu-

larly tho e that influence bu ine

efficiencies, changes in produc-

tion, ex istin g in fra structure (e.g.,

energy, transportation, and com -

munication), an d the rise of new

products or services.

Regu la to ry : Changes i n law and reg-

ulatory guideli nes may also h av e asig nifican t im pact o n the organiza-

tion. Communications m edia ow n-

ership laws, for example, can have

dramatic effects on the numbers of

tations on e ow ner m ay have, thereby

p ote ntia lly affe lin g th e overall mar-

ke t s tr uc tu re a nd market share. Laws

regarding m inim um wage and busi-

ness taxes can have direct bearing Oil

hiring pra ct ic es w i th in an organiza-

ti nn , Regula to r} ' information on

employment pr a ti ce , i ntell ec tu al

property, and tho c that are industry-

specific are im po rtan t to onsider.

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• E co nomic: Local , r eg i ona l, n a ti ona l,

and international economies can

aff ect a n o rg an iz atio n, d ep en din g

o n its size , sco pe , an d market.Rates

of unemployment an d in flatio n can

help r hinder grow th if the organ-

ization is caught oIT-guard. Eco-

nomic information can help the

organization prepare for change

in these and other related i .ues(e.g., exchange rate and gross

national product of potential

t ra di ng n at io ns ).

ocial: M arket changes are som e-

t im e s d ri ve n by c ha ng es in so ci ety .

Demographic shift in the popula-

tion may cause an incrca T or

decrease in demand for a given

product o r s erv ic e. Demographic

inform ation should b m onitored

[or changes in variables uch as size

a nd distrib utio n o f p op ulatio n, ag e,

e du ca ti on , a nd i nc om e. A dd itio na l,

qualitarive jndlcators (e.g., con-

sumer attitudes) a re a ls o impo rt an t

a nd sh ou ld b e m on ito red .

• P ol iti ca l: Loca l, na tional , an d inter-

national politics call influence an

organization in ways that may be

direct or indirect. Certainly, theacts of terror on epternber II,

2 0 0 I, di r ectly affected man)'

national and international busi-

ness practices. Tariffs c an c on ce rn

organizations by e it he r r es tr ic ti ng

trade now or by encouraging

them , depending on how they are

et, It is u se fu l fo r an organ ization

to ha e a lear understanding of

the political climate in which it

operates so that it can be prepared

for udden changes that re ult

from elections or changes in exi t-

ing policies or law .

How Does Env ironmenta l

S ca nn in g W o rk ?

Executives and other deci ion-

maker w ithin an organization

mu t not pend their entire time

monitoring the environment. The

environmental scanning [unction

can be set up as a distinct unit, scm-

tinizing development based upon a

set of criteria developed in conjunc-

tion w ith the primary deci ion-

m akers in the organization. priori-

tizing those trends and events w ith

the potential for the most critical

impact .

Scanning the external environ-

m ent ident ifics potential threats tD

and opportunitie for a n o rg an iz a-

tion; an internal a e merit of an

organization id en tif ie s its s tre ng th s

and weakne ses, J nformal ources

and the information they produce,

emerging i sues, a well as the

strengths and weaknesses of an

existing sy tern, can be identified. A

more formal scanning system can

be used to correct th e weaknesses.

A form al environm ental scanning

process has five basic steps that arc

integrally linked and may overlap

w ith o th er:

1) Id en tify th e e nviro nm en ta l s ca n-n in g n ee ds 0 / th e organization.

The overall purpose of the

c an n i ng , p arti ci pa nts in th e

pro ess, and allocation of tim e

and res urces must be deter-

m ined prior to beginning the

scanning pr cess. Thi mean

that enior management has to

re ognize the need [or scanning

in order for it to be successful.

It is u sefu l to h ave p articip an ts

42 T h e l n ir m o + i c n M a n o g e m e n l J o u r n a l . M e y / J u n e 2 0 0 .4

m eet to initially discuss poten-

ti al c ha ng es that may influence

the organization ba ed upon

their tacit know ledge and expe-

rience .

21 Gather the i , l !ormntiol l . The

organization's needs m ust then

be translated into specific ele-

ments of informat ion that w ill

be required. A list of que tions

and selected urces should be

prepared in advance in order tom ake scanning activities m ore

ta rg ete d a nd e ff ec tiv e.

3) A nalyze /he in/ormation. Once

info rm atio n h as b een co lle cte d,

it should be analyzed for issues

and trend that may in flu en ce

the organization. This step m ay

need to be repeated if th ere a re

gap in the information or if

new que lions arise from the

c omp il ed i nf ormat io n.

4) C omm un ic ate th e re su lts" lnfor-

marion that has been analyzed

and translated into potential

effects on the organization can

next be reported to the appro-

priate decision-m akers w ithin

the firm . Because managers

prefer to m inim ize the am ount

of tim e necessary to study

information and make deci-

sions, reports sh uld be pre-

sented in concise format and



ences of other organizations. This

allo ws th em to e xam in e a lt er na ti ve

o lu tio ns, th en d ev elo p effectiv e p li -

des a nd d ec is io n s.

M a n ag ers o bta in th eir in fo rm ati on

from a variety of ources, including

print and online material . Chao ay.

th ey o ften rely 1110St heavily , howeve r,

on a mall group of individuals who

serve as th ei r n etw o rk of resource.

M a nagers prefer to receiv e in form a-

ti on th at i5 p resen ted in p erso n rath er

Ulan through readin g. T hi method

allow managers to get only that

information that they determ ine is

necessary for making decisions, to

as k question, and to control th e flow

o f info rm atio n, w hich is n ot po ssible

w hen depending on a book or report.

cu tomized to m eet in dividu al

ma na ge rs ' p re fe re nc es .

5) f ak e i nf or m ed d ec is io ns . nee

the env iro nm ental scann in g act-

i vi ti es h av e b ee n p re e nte d.o rg a-nizational leadership can lake

appropriate step to position the

o rgan izatio n in th e m an ner that

will be most re pensive to the

opportunitie or threats that

h av e b ee n i de nt if ie d.

I nf orma tion Sources for

Envi ronmenta l Scanning

T here are a v ari ety o f ource com-

monly used in environmental- an-

ning practices. These include both

external and internal inform ation .

External information source can

include a w ide range o f m ate rial

such as prin ted new spaper articles

and experts in the field . External

ources do not have to be publ ished;

in fact, most managers get much of

their information from word-of-

mouth through a p rsonal network

f contacts, In te rn al in fo rm atio n

in clu de s o rg an iz ati on -sp ec if ic in fo r-

mation that can be compared to the

finding of external scanning in

order to m axim ize organizational

resp on siv en e s. E xam ples o f ex tern al

and internal info rm atio n sou rces are

listed in th e tab le ab ov e.

Generally, the planning pha e of

the environmental scan produces

t ar ge te d i ss ues like! to h av e an effect

on th e org anization . Selectin g w hich

sources to use w ill depend on the

potential point of impact on the

organization . Early warnings w ill

com e from inform al sources such as

d irect in teractio n w ith a CD tom er or

from experts in the field. later indi-

cator may come from ources such

as newswires or pre s releases. By th e

t ime inform ation has been pub-

lished, its effect will h ave lik ely

already made their way into the

organization and may be too late to

cou nt raci,

H ow D o M anagers U se

Information?

O rg anization al m anag er and ex ec-

lItivesare responsible for m aking

quick d ec is io n s th at ma y s ig n if ic an tl y

change an organization. Environ-

mental c an ni ng o ff ers a nti cip ato ry

and forecasting in form atio n to assist

manager in making these de isions

whi le attempting to identify cri es

before they occur. M anagers are also

responsible for m alting m any deci-

sions and, therefore, do not have

m uch tim e to d ev ote to systematically

earching for inform ation. instead,

th ey n ee d t imely in fo rm atio n th at h as

been di tilled down to the main

po ints that are relev ant to the o rgan i-

zation.Manager h av e c er ta in preferen es

for h ow to receive in form ation . C hao

says that m anagers prefer inform a-

tion that is pr e ented in oncrete

term s, dearly focu ed with attention

given to detail, and in a way that

allow s them to scan and absorb the

information quickly. Ca e studies

an d ex am ples are p articu larly useful

becau e managers often learn

thro ugh co rnp ari 011 w ith ex peri-

44 The Information M anogemenl lournal . Mo'lIJun~ 2004

Which Organizations Should

Consider Scanning?

O rganization con idering the

e st ab li s hmen i or fo rm alizatio n o f an

environm ental scanning function

sh ould ask th em selv es the fo llow in g

qu e tions:

Does th e o rg an iz atio n c urre ntly

capture environm ental inform a-t ion? In w hat w ays? I it formally

structured?

Js environm ental canning infor-

mation can idered to be impor-

tan t to strateg ic d ecisio n-m ak in g

and planning? To operations?

I the organization flexible and

open to new ideas?

• Doe the organization' senior

management upport the idea of



the assessm ent of new inform ation.

and the adjustment of internal

operations to meet new challenges

as theyarise. It can identify an

organization's unique strengths.

find weaknesses in i ts compe ti to rs ,

and identify new markets, prospec-

tive u stomer s, a nd em erg ing tech-

nologie .

E nv iro nm en tal cann in g s er ve s a an

early w arn ing y st er n, i de nti fy in g

potential threats t t he organiza tion.

By a lertin g th e o rg an iz atio n to p os si -

ble changes in th e e nv ir onmen t,

environm ental scanning helps it

modify it strategies to th e external

environment. The ultimate goal of

en viro nm ental cann in g i to help an

organization learn about the external

environment in order to increase its

responsiveness an d flexibility in deci-

sion-making p ro ce se s. P l J

tion of relevance, fam iliarity with

th e topic and information sources,

language usage, tim e lim itations,

and accuracy of information all play

a role in the analysis proce s. In

addition, an overem phasis on scan-

ning could have negative effect on

an organizati n. This could be due

to the focus on a defen ive trategy

to ex ternal f or e rather than a con-

tinuation of process improvement

an d g rowth w ith in th e organization.

E nvironm ental scanning offers

m any advantages [or modern

organizations. It contributes to an

organization's transformation into a

learning organization, one that con-

tinually seeks new inform ation that

may change it overall position in

th e m arketplace. Environmental

scanning also a s its in th e develop-

ment o f strateg ic p lan s and po licies.

environmental scanning at the

h ig he st le ve ls ?

., Are the organization's comm uni-

cation ch an nels o pen to envi ron-

mental canning activities?

Is th e le ve l of i nv es tmen t a llo ca te d

to en ironmental scanning uffi-

cient to b en ef it th e o rg an iz ati on ?

Where in the organization hould

this function be coordinated. and

located?

If the organization'S senior man-

agem ent or executive staff is strong-

ly in favor of an environmental

SC31111ingfunction, then it is m ore

likely to receive adequate invest-

ment. In addition, managers who

upport the canning function ar e

more likely to integrate it into th e

full strategic planning function of

the organization. Thi s a ss im ila ti on

will i nc r ea e t he l ikel ihood of suc-

cess in both t he environmenta l scan-

n in g f un ctio n as w ell as the overall

organization.

Kendra S. A J b r : i g n t i s A s si st an t P r o f e s s o r in the Schoo! o f l i 1 f or m a t i o n

S cie nc es a t th e U niv er sity a /T en ne sse e, K n ox ville . S he m a y b e c on ta cte d a t

[email protected].

Barriers to

Effective Scanning

There ar e several reasons why

environmental scanning may not beeffective in an organ izarion. Th e

sheer volume of information may be

overw helm ing, resulting in an infor-

mation overload in which important

pieces of information may be over-

looked or missed. There are also

many sour e of information that

. c anners may not be aware 0[, and 0

they may m iss p oten tially i mp ortan t

information. Nav ig ati ng th e o ce an of

existing in fo rm atio n is also d ifficu lt

because of the ornetirne lack of

organization and completeness of

that which is presented. E ven in the

best of circum stances, inform ation

may no longer be timely by th e tim e

canners are able to lo cate it. This is

p articularly tru e o f rapid ly ch an ging

m arket that are influenced by tech-

n olo gyo r reg ulato ry hanges,

There are also problems with

environmental scan nin g related to

i n t e r p r e t a t i o n of th e information

that ha s been g ath ere d. Dete rr ni na -

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S ca n n in g t h e Environment. Medford, N.J.: Information Today Inc ., 200 l ,

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l Ipaper/12.hlml (ac c sed 5 M arch 2004 ).

nyder , Ne il H . "Env ir onmen ta l Volatility, Scann ing I nt ensi ty , a nd Organ iz . . .t innal

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Env ir onment nl S ca nn in g. Tarrytown. N.Y.: Elsevier Science Inc., 1994 .

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and Forecasting in Strategic Planning: The tate of the Art." L ong R tlllge Planlling 14

(198] J.

Kumar, Karna lesh , R am ubram an ian , an d K aren S tran dh olrn . " Comp etitiv e

Strategy, E nv iro nm en tal can nin g and Perform ance: A ontext pecific Analysi of

thei r Re la tionship. " I nt er na ti on ai J o urna l oJ Commerce &Man ag em en t ] ] ( 20 0 I) .

T homas, P hilip . . " E nv iro nm en tal S can nin g: The S tale o f th e Art," L ong R ange

Plal ln ing 13 (F eb ru ary 198 0 ).

Moy/June 200~ • The Information Manogement Jour nul 45

mailto:[email protected].

http://informaliollr.nct/ir/7-

http://informaliollr.nct/ir/7-

mailto:[email protected].

2. environmental scanning - radar for success

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