Environmental Scanning: Generate Successful Business Strategies
August 25, 2021
What is environmental scanning?
Environmental scanning involves analyzing and leveraging data regarding events, patterns, trends, opportunities, and potential threats, to help improve decision making. Further, the environmental scanning process is a subsection of strategic planning and is a key component in developing successful planning and management strategies.
Environmental scanning should not be confused with external scanning, as external scanning strictly measures, tracks, and analyzes external data only. On the other hand, the environmental scanning process involves various types of both internal and external data and is understood to create a larger understanding of how your organization is situated within its industry, its market, and provides clear comparisons between your competition. This article will take a closer look at the importance of environmental scanning, the five sectors of environmental scanning, and the difference between internal and external environmental scanning.
The importance of environmental scanning
Beyond simply gathering a deeper understanding of the business landscape and gaining competitive intelligence insights, environmental scanning is also linked to generating successful business strategies. According to a Gartner study, enterprises will miss out on up to 10% of annual sales due to poor business strategies. This includes both developing and executing said business strategies. Environmental scanning fulfills the informational needs required for improving strategic planning and generates insights on competitors that can be used internally to compare your competitor’s strategies against your own.
The five types of environmental scanning
As mentioned previously there are various types, or modes, of environmental scanning, that can be conducted internally and/or externally. Today, many companies conduct a variety of environmental scans, both internally and externally. This is primarily due to the increasing competitiveness in business landscapes and the increasing amount of data, that can generate thoughtful insights, being created daily. Likewise, the five major modes of scanning include: economic, technological, legal, ecological, and sociological.
1. Economic scanning involves evaluating how consumers are spending their money, which industries are outperforming others, and the financial health of various markets due to economic factors.
2. Technological scanning refers to the evaluation and tracking of new technologies, updated technologies, and consumer & business trends within tech.
3. Legal scanning involves monitoring legislative changes and their overall impact on business rules and regulations, consumer activities, and public health and safety.
4. Ecological scanning considers climates, natural disasters, and green issues as a whole.
5. Sociological scanning involves deepening one’s understanding of current social movements, political climates (not related to legislation), and cultural impacts of business decisions.
Internal vs. external environmental scanning
In order to conduct a thorough environmental scan, companies must take a look at both internal and external factors. Likewise, it is important that companies regularly gather, collect, and analyze both internal data (possibly from a CRM or from HR) as well as external data from third-party data providers. Let’s take a look at some of the internal and external factors (similar to the above-mentioned scanning types) that companies often examine when performing an environmental scan.
- Company’s organizational structure
- Business strategies, marketing strategies, etc.
- Culture and workplace environment (including employee retention, turnover, etc.)
- Overall company-wide leadership
- Economic conditions
- New technologies
- Competitors’ performance
- Global events (i.e. COVID-19)
- Political and legislative changes
- Workforce trends
- Climate, natural disasters, etc.
- Cultural trends (global and domestic)
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The environmental scanning process
As one can see, the environmental scanning process can require vast amounts of data, resources, processing, and analysis. According to research conducted by the University of Toronto’s Information Studies Program, the environmental scanning process includes four major checkpoints: searching, enacting, conditioned viewing, and undirected viewing.
- Searching relates to the perception and initiation of a necessary environmental scan. During this process, a company or organization will aim to collect as much data as possible to create an accurate business landscape.
- Enacting relates to the initiation of an environmental scan without the necessity of one. For instance, if a company recognizes they don’t have the resources to conduct an accurate scan but proceed to do so regardless.
- Conditioned viewing pertains to companies that recognize the need for a scan, but are passive about the process and, in turn, don’t generate useful insights.
- Undirected viewing is similar to enacting, however, the company or organization realizes there is not a need or they don’t have the ability to conduct a scan, so a scan does not take place.
Benefits of utilizing environmental scanning
Environmental scanning provides companies with various benefits, beyond the above-mentioned advantages, such as strategic planning and overall business landscape research. Some additional benefits of environmental scanning include:
- Improves company-wide organizational strategies
- Enhances market adaptability and boosts performance
- Helps generate unique proactive marketing and sales strategies
- Benefits risk mitigation best practices and overall threat management
In all, environmental scanning is a critical component of developing and implementing a successful business strategy. With the rise of alternative data and an increasingly digital landscape, environmental scanning will continue to utilize non-traditional data sources, and businesses will rely on such indicators to develop strategies that keep them ahead of their competitors.
Frequently asked questions
What is an example of environmental scanning?
An example might be tracking and analyzing data surrounding a new technology or tool that other companies are adopting or utilizing.
What are the key steps involved in environmental scanning?
There are two essential modes of environmental scanning: internal analysis and external analysis. Within these modes, there are four major steps: searching, enacting, conditioned viewing, and indirect viewing.
What are the types of environmental scanning?
There are five main types of environmental scanning: technological, legal, ecological, sociological, and economic (financial).
What is horizon scanning?
Horizon scanning is different from environmental scanning in that it focuses on looking for signals that forecast emerging technologies, risk factors, etc. Horizon scanning primarily takes place in sectors that involve policy-making or preventative actions, not necessarily correlated to particular companies or finance.
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