Environmental Scanning: Everything You Need to Know
Environmental scanning is the gathering, use, and monitoring of the company's environment, internal and external, to detect potential threats toward its future plans. 4 min read
What Is Environmental Scanning?
Environmental scanning is the gathering, use, and monitoring of the company's environment, internal and external, to detect potential threats toward its future plans. Thus, it is an extremely important aspect of risk management for companies of any size. Environmental scanning represents a broad view approach as compared to surveillance of a specific or narrow sector or objective. It's a vital means of helping management to plan the organization's future actions.
What Are the Various Types of Environmental Scanning?
When a company performs environmental scanning, it looks for a broad range of things that can affect future operations. These fall under major overarching umbrellas that can include the following:
- Legal (legislative changes, best practices in health and safety)
- Ecological (climate and green considerations)
- Technological (adoption of new technologies, mobile platforms, and the like)
- Sociological (different generations working together; managing changing expectations)
- Economic (the public's tendency to spend money in varying circumstances)
What Modes of Scanning Are Used?
There are four modes of scanning that can be used by companies, depending on their beliefs and philosophy of operations:
- Conditioned viewing
- Undirected viewing
These processes are used to better understand the forces that are acting on the company, both external and internal, so that it can more effectively respond to such situations in the future.
Why Environmental Scanning Is Vital
Scanning helps to identify threats and opportunities to help avoid unpleasant surprises, gain a competitive advantage over others, and create more effective planning in both the long and short term. Environmental scanning is an important means of organizational learning for companies, which allows them to view and search for information. It covers everything from casual discussions to off-handed observations to formal programs of market research and organizational planning.
What Does Environmental Scanning Accomplish?
Environmental scanning is essential to helping plot a future course for the company. Identifying opportunities and threats is the very core of risk management. It enables companies to formulate important strategies and plans of actions while minimizing threats and taking advantage of opportunities that arise. Scanning also allows a company to differentiate between the two: What constitutes an opportunity for one organization may actively threaten another.
Environmental Scanning Research
There are a number of factors that have a direct or indirect influence on browsing and scanning behavior. These include how turbulent the current environment is, how dependent the company is on given resources, and factors such as how the business works — its nature and strategies, how available information is, and the knowledge and skills of the scanner. These situational factors can be examined by measuring how uncertain the environment is, how complex the environment is, and how prone it is to rapid change.
Articles by Miles & Snow in 1978 looking at defenders, prospectors, and analyzers, and Porter in 1985 on the overall cost of leadership, focus, and differentiation are two important examples of organizational strategy types that are still used across the board. These well-respected typologies focus on the functional specialties of management, the level of hierarchy, and cognitive style of the manager performing the scan.
What Comprises Environmental Scanning?
Environmental scanning involves examining several factors: the need for information, the search for it, and its use. Information used in environmental scanning must be of a specific scope and focus, especially where the most intense scanning is performed.
It's also important to closely examine the sources of information sought and to monitor the methods and systems of this examination.
Finally, it's important to observe how information is used to make decisions, engage in strategic planning, and reduce equivocality.
There are a number of research takeaways regarding environmental scanning. These include specific elements of situational dimensions, organizational and scanning strategy, manager traits, information requirements, information sought, and use of information.
- Situational dimension concerns: These refer to the effect that environmental uncertainty may have on your organization as perceived by managers. These are affected by the dynamics, importance, and complexity of the environment at large. Those who perceive uncertain environments will be likely to scan more often.
- Traits of managers: These include unanswered questions about the cognitive traits and skills of management. Those in upper management tend to scan more often than low-level management. Lower level managers tend to scan beyond their specialization limits.
- Information requirements: This is the basic focus of the environmental scan. You are analyzing your competitors, customers, technology, suppliers, socio-political and economic conditions, and more. Scanning is often focused on those factors that are directly market-related.
- Information sought: This relates to the preferences and desired use of information. There is a wide variety of sources that can be used to find information, but most businesses prefer personal ones to formal ones. They prefer sources with which they are experienced rather than those that are impersonal, unfamiliar, and unrelated to their direct perception of the overall environment.
- Use of information: This relates to organizational learning and workforce planning. The information is being used ever more often to drive this type of planning. Research is fairly clear that the most effective scanning and planning are directly linked to improved performance overall.
There are decades of research studies that directly link effective environmental scanning to organizational performance. It has been shown that environmental scans are the most effective and important factor in lifting successful companies above those that fail, and that it improves average performance on an annual basis. It has been proven that financial performance in terms of outside contacts is improved by environmental scanning.
The benefits have been shown to go far beyond financial and economic performance, however. Studies have proven that it is essential to strategic planning, to the ability to implement change, to react to unforeseen circumstances, and to avoid unpleasant surprises.
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