Environmental Scanning: Looking 'Outside' for Strategic Intelligence
By Steve Bukowski and Judd Michael
In this TechNote we address a management practice known as " environmental scanning ", or just scanning for short. Scanning has been used by a variety of organizations for many years, with its origination perhaps coming from military intelligence and strategic planning. Environmental scanning is known as a key function of successful managers working at successful organizations. In fact, almost all large, successful companies encourage their managers to engage in scanning, and we felt it is such a valuable tool that wood industry leaders should learn more about it.
Our experience shows that most wood industry managers are good at keeping an eye on internal metrics related to such key issues as productivity and sales. The average manager spends a significant portion of time reviewing operations and other internal functions that impact the near-term bottom line. Many managers, however, are not as good at seeing the external factors that impact their business. This is unfortunate since research has shown that companies with managers who actively "scan" the external environment have better performance than those where less scanning occurs.
Environmental scanning is the term used to describe the acquisition and use of information gleaned from sources external to your company. Scanning can be thought of as a form of early-warning radar that lets managers look into the future. In general, scanning is done to accomplish two broad sets of goals: first, to understand external forces on the organization; and second, to see threats and opportunities and avoid surprises. Realized together, these should improve the accuracy of planning efforts and help to plot future courses of action for the company.
If done properly, scanning can help managers answer such questions as
What are the trends and issues that will affect my business in 5 (or 10) years?
Do we have an effective long-term strategic plan that will be aligned with future business conditions?
Or, Are there new ideas that I'm not seeing that could solve our recurring issues?
If you feel like you have a good handle on such questions then maybe you're already a skilled "scanner". If not, then perhaps you and your fellow managers should reconsider your scanning strategy.
The actual process of scanning the environment and gathering new ideas can, and should, be done by just about everyone who wears a management hat. This would typically range from plant-level managers all the way up to the president or owner. Many larger companies assign one or more employees to a formal scanning role. They then summarize the collected information so that the appropriate managers can make decisions. Also, scanning can be done informally by various people looking outside of your daily operations and communicating their findings to the decision makers through conversations, emails, etc.
The frequency with which you scan can be described in three manners: ad-hoc, scheduled, or continuous. Ad-hoc scanning is reactive and is usually done as a response to a failure in performance. Both scanning on a scheduled basis and continuous scanning are proactive. These types of environmental scanning are not necessarily done to address a specific need or crisis, but rather are done to keep up with what is on the horizon for your business environment at large. Although continuous scanning has the ability to keep you current and provide a steady stream of new ideas, it requires a constant dedication of often limited resources.
So, where do you begin to scan? Information can be obtained from many sources, including trade publications, trade shows, partnerships with suppliers or customers, or collaborations with academic institutions or government agencies. If you are reading this TechNote then you are already aware of the value of the World-Wide Web outlets as a source of industry information. Someone in your company should also be talking to suppliers and inquiring as to what competitors are doing. Is a competitor making changes in their tooling and processes? If so, could this be a sign of changing quality perceptions in the market? Could suppliers potentially serve on cross functional teams to generate ideas to manufacturing issues? Since suppliers service a host of customers similar to your company, they may be good candidates for a team to generate ideas to changes in a process.
The value of scanned information is intimately tied to the strategy of your company and the goals set forth for your operations. Remember that there is an infinite supply of ideas in the world; only those ideas that will move your business closer to achieving its business goals, as dictated by the business strategy, should be considered.
In addition to acquiring information from outside your company, you need to set aside time to digest the meaning of the information in relation to your company. You may find some information that charges you up and makes you want to hit the floor running, but without careful reflection, you may make changes in your operation that you will later regret. Reflection does not have to involve incense and chime music, reflection is simply absorbing what you have actually uncovered. Often, the process of reflection will involve conversing with other managers and listening to their reactions and thoughts.
Obviously, some issues and information will not reveal their true relevance (and value) immediately. It is important to take in the ideas, sift through them, and then determine if the ideas can be applied to (or will affect) your operations. More than likely the more complex the ideas gathered the more reflection will be required to digest their meaning.
If you are not scanning the environment and implementing new ideas from outside your operations you may be missing out on unforeseen opportunities. Another danger in not looking outside the firm is that your sense of how to resolve operations issues and your sense of good and bad performance may be severely altered. Knowing your operations is important, but knowing and implementing relevant ideas from the broader business environment will help you gain new insight into your operations and help move them towards improved effectiveness.
We assume that nearly all managers would say that they already engage in some level of informal scanning, and this is certainly a good thing. But, experts believe that more formalized programs are necessary if your organization seeks to truly understand the external forces, threats, and opportunities it faces. Without such an understanding of what the future holds, a company's leaders will have lowered odds of being prepared to either take advantage of opportunities or to respond to the threats.
And finally, keep in mind that environmental scanning isn't like looking into a crystal ball held by the proverbial gypsy. While scanning may be used to look far out into the hazy future, it can be based on concrete observations about future events that are likely to impact your industry and/or your operations. The challenge may then be how to take what has been seen in your scans and apply it to your planning efforts. So naturally, one of the factors that greatly increases the value of scanning is incorporating it as part of your overall strategic planning process . While this may be difficult at first, it is absolutely critical if your strategies are going to "be all that they can be".
Penn State offers management education programs designed to help the wood industry design and manage strategic planning, environmental scanning, scenario planning, etc., as well as other leadership-related training. Feel free to contact us with any questions.
Judd Michael and Steve Bukowski