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
1. What Is Environmental Scanning?
2. What Are the Various Types of Environmental Scanning?
3. What Modes of Scanning Are Used?
4. Why Environmental Scanning Is Vital
5. What Does Environmental Scanning Accomplish?
6. Environmental Scanning Research
7. What Comprises Environmental Scanning?
8. Research Takeaways
9. Improving Performance
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:
- Searching
- Enacting
- 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.
Research Takeaways
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.
Improving Performance
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.
If you need help with information about environmental scanning, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.
End2End Innovation Management begins by asking the fundamental question, "Where to Play?". Answering this question relies on several congruent activities and internal capabilities that primarily fall within the discipline of Foresight and Strategy. Organizations equipped with strong foresight capabilities can align their strategy with future scenarios and build resilience in an increasingly uncertain and competitive landscape.
Essential in Foresight and Strategy is an organization’s capacity to scan its business environment. Environmental Scanning helps make sense of the various elements that have relevance and impact in this environment. It focuses on activities that enable the identification of new opportunities for growth, possible threats for mitigation, informing strategic priorities, and shaping future goals.
→ Always-on Environmental Scanning with ITONICS: Discover how to scan
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The practice of environmental scanning has been around for as long as people have tried to preempt threats and capitalize on opportunities. However, the systematic collection and interpretation of relevant data for strategic planning—environmental scanning as we know it today—was popularized by futurists in the mid to late twentieth century.
Sometimes referred to as Futures Scanning Systems, Early Warning Systems, Future Intelligence Systems, and Horizon Scanning, Environmental Scanning methods can differ but share an exploratory process, a future-oriented lens, and output of actionable intelligence.
What Is Environmental Scanning?
Environmental scanning is the capability to scan the (business) environment comprehensively and continuously.
The business environment comprises internal and external drivers of change, including capabilities, trends, disruptive and emerging technologies, startups, competitors, markets, business models, risks, regulations, and customer needs.
Common innovation terminology that environmental scanning practitioners will encounter includes:
|
Term |
Definition |
| Scouting |
Scouting is the process of collecting pertinent data that contextualizes change and leads to uncovering weak signals. |
| Weak signal | A weak signal represents the first sign of discontinuity or change. Weak signals are only indicators of change and will have to be qualified and evaluated during the environmental scanning processes. |
| Trend | As an expression of new consumer attitudes, expectations, or behaviors, trends present consumer and market shifts that drive new change. Trends are an indication of market PULL; guiding innovators in knowing what consumers need, desire, and occasionally demand. |
| Emerging Technology | Emerging Technologies represent a market PUSH; driven by R&D and innovation, these are the tools capable of meeting—and sometimes creating—new needs, desires, and demands. |
| Inspiration | An inspiration is evidence of how organizations or individuals are responding to a trend or emerging technology in the real world. Inspirations serve as springboards for ideation, helping innovators look beyond their category, connect information in new ways, and nurture fresh thinking. |
| STEEP | STEEP—social, technological, economic, environmental, and political—is a framework for segmenting the environment across dimensions to facilitate scanning and analysis. It indicates where an observed change is occurring. |
The ultimate goal in environmental scanning is to find the substantial starting points that will ignite new thinking, catalyze action, and engage customers.
The Fundamentals of Environmental Scanning
Getting started with environmental scanning requires a clear structure for managing the flow of information. Foresight managers must first understand their organization’s current environmental scanning techniques and define the key objectives. This will help establish the scope of environmental scanning activities and search fields. Primary activities include trend and emerging technology scouting, competitor watch, and startup and partner scouting.
The information and insights collected during these activities are only as good as the sources from which they are derived. A rigorous methodology should balance tangible scientific, technological, and social data insights while also recognizing the significance of the intangible, value-driven changes in society.
Valuable sources of data and information can be found across four quadrants—from analytic to visionary and from interactive & intuitive to evidence & expertise.
A common challenge that organizations face in environmental scanning is mitigating the “noise” to find and act on relevant information and impact. Internal, collaborative evaluation of trends, technologies, and other drivers of change can serve as a means of discerning relevance and help teams understand what these elements might mean for their business. Based on the unique industry- and company-specific criteria, the internal evaluation also helps empower teams with the consensus needed to ensure strategic alignment, strengthen buy-in, and act decisively.
Defining the team and responsibilities upfront ensures that the right competencies and areas of expertise are leveraged. An environmental scanning team consists of the following roles:
- Scout: actively searches for and tracks relevant signals
- Analyst: monitors the evolution of signals to trends, technologies, and other drivers of change, and eventually to opportunities
- Expert: evaluates the drivers of change according to defined criteria
- Foresight Manager: establishes the process and is responsible for the outcomes
Teams can optimize their environmental scanning capabilities through centralization and automation:
Firstly, having a central platform to collect information can reveal connections between related elements and allow for sharing information between team members and business units. A single point of truth helps to create a shared understanding, fosters discussions about the importance of factors, and facilitates internal evaluation.
Secondly, integrating a tool that can automate the scanning process can provide teams with a comprehensive birds-eye view of potential opportunity spaces. Learn more about how the ITONICS software suite supports other industry leaders' environmental scanning process:
Also read: 4 Ways Environmental Scanning Helps You Design Your Innovation Playground
4 Steps to Enhance your Environmental Scanning Process
1. Reinforce Your Scouting and Scanning
Innovation team capabilities need to be clearly understood so that gaps and opportunities for increased output can be augmented with digital tools, machine learning, and AI. The sheer volume of raw data that needs to be collected can easily become problematic. Subsequently, filtering information to display what is most relevant and important is another crucial step. A common assumption would be that these steps become easier when innovation teams grow; however, more team members do not necessarily mean that the scouting and scanning capabilities are enhanced.
Identifying a wide variety of sources from where scouting and scanning information can be garnered is essential for ensuring a complete view. This ‘total’ view often uses the STEEP, or PESTEL (also known as STEP, PESTLE, or PEST) analysis methodologies to encourage ‘total’ environmental scanning. Scouting and scanning processes should enable both a birds’ eye and fish-eye view of the environment. This requires the environmental scanning process to take an overall approach first, and then through structured steps, views become more partial as connections start to become evident. Connections and relations between weak signals guide the sense-making process, and systems and tools need to be positioned to support this process.
2. Consider Internal and External Factors During the Sense-Making Phase
Thorough and structured scouting and scanning become useful through the sense-making processes. During this phase, teams need to be able to identify patterns from the vast amounts of data, and through connecting data, important patterns appear from which teams will commence their sense-making phases.
Teams need to inquire which factors, directly and indirectly, impact the organization, and internal and external factors should be taken into account. Degrees of impact is crucial to map out as internal factors will determine capacity and strategic planning, and external factors of influence use trend and technology insights that indicate opportunity spaces.
The sense-making process requires digital and physical interlinkages, as well as scientific and intuitive activities. Having the ability to quickly view the numbers of data points, relations, and current impact is imperative for quick responses. However, leveraging human capital will help ensure a deeper understanding of opportunities and threats.
The future is, in a profound sense, unknowable. But not everything is uncertain; some things are relatively predictable. We can do a respectable job of "sensing" the basic dynamics of the future and the alternative courses they might take.
James L. Morrison and Ian Wilson
3. Leverage Internal and External Expertise to Support Decision-Making
Asking questions around what changing environments, behaviors, expectations, and mindsets are and how they will influence the future helps us identify opportunity spaces and threats. Organizations want to leverage opportunities and turn threats into opportunities to gain a competitive advantage. Opportunity spaces may illuminate new markets, R&D of new or complementary products or services, integrating technologies, optimizing processes, realigning purpose, or changing interactions with people.
To enable firstly, the identification of opportunity spaces, and secondly, shape strategic response, needs to involve cross-organizational input. In addition, robust insights from the sense-making process may also require input and collaboration from experts outside the organization. Involving the right people at the right moments along this part of the innovation journey can significantly expedite and organize efforts—systems and tools that enable systematic collaboration resulting in more efficient and ultimately successful innovations.
4. Continuously Engage in Environmental Scanning
To respond to rapid changes, organizations must integrate continuous environmental scanning processes into strategic mapping. Environmental scanning serves as an early warning system that helps organizations adapt quickly and effectively. As opposed to project-based scanning, continuous scanning can only be sustainably implemented when efficient systems and tools can optimize the processes.
How Using ITONICS Enhances Environmental Scanning
The ITONICS Innovation OS helps innovation architects discover, collect and evaluate emerging trends and technologies in one central location.
The automatic discovery of weak signals from a wide variety of sources globally speeds up the scanning and scouting processes significantly and assists teams in the systematic organization and evaluation of elements during the sense-making process. The ITONICS rate and review functionalities provide easy ways to garner collaborative input and visualize the input in ways that immediately indicate intelligence.
Using connections, tagging and relations enable quick identification of relevant intelligence, and filtering functionalities speed up gaining individually relevant perspectives.