1.7 Tools: Environmental Scanning

Do you remember corporate icons like A&P, Bethlehem Steel, Circuit City, Compaq Computer, and Pan-Am? Each dominated its industry. For example, at its heyday, A&P operated over 15,000 stores—more than any other retailer, ever! A&P made the tagline "Everyday low price" famous. Similarly, PanAm ushered in modern air travel, launching Boeing's iconic 747. Aside from their remarkable success, these companies share an unenviable trait: Each is extinct. What happened? These companies failed to heed former Intel CEO Andy Grove's advice—adapt or die. A big fan of environmental scanning, Grove warned:

Grove's warning remains valid today. Consider the possibilities for change in today's operations management environment. The Internet, additive manufacturing, and autonomous vehicles are changing the way we think about both products and the production process. To help your company not just survive but thrive in tomorrow's competitive marketplace, you need to adopt the mindset and develop the toolkit of an active scanner.

What Is Environmental Scanning?

Environmental scanning occurs when you acquire and use information about events, trends, and relationships in your company's internal and external environments. Your goal: Consider both internal and external forces to identify your firm's strengths and weaknesses and know how well your company stacks up against rivals' capabilities and customers' expectations. Importantly, scanning can be passive or proactive.

Passive Scanning

Almost every manager observes changes in the marketplace as they occur. For example, you might hear about a new technology at a professional luncheon or observe a delighted customer's response to a competitor's product. Most managers, however, respond in an informal and ad hoc manner. Observations don't initiate analysis. Nor do they lead to improved planning.

Proactive Scanning

Some managers, however, proactively search for new ideas and potential opportunities and threats. Consider the following from the Wall Street Journal:

Jim Breyer and Candace Corlett are experts in utterly different fields. He is a Silicon Valley venture capitalist, deeply immersed in the world of computer networks. She is a New York-based retailing analyst who hangs out in shopping malls to see what everyone is buying.

Yet every week, Mr Breyer and Ms. Corlett embark on similar quests. They read voraciously and brainstorm with colleagues. They travel to hot spots of innovation or just a few miles down the road, but their ultimate goal is the same: to find the latest business trends with staying power. That's because their long-term professional success—just like that of countless other executives—depends on being early and accurate trend spotters.1

At companies that value proactive scanning, scanning is part of everyone's job. Scanning drives organizational learning, helping the company anticipate change, avoid surprises, identify opportunities and threats, and improve decision-making. Proactive scanning systems pursue the following objectives.

1. Detect important cultural, economic, legal, political, social, and technological events and trends.

2. Help managers accurately and objectively understand the company's strengths and weaknesses.

3. Identify and define potential opportunities and threats implied by identified events and trends.

4. Promote an adaptable, forward-looking mindset among managers and employees.

What Does A Proactive Scanning Process Look Like?

Proactive scanning is systematic—both in gathering and analyzing information. Figure 1.12 depicts the scanning process. Let's take a closer look.

Look Everywhere

You need to understand both your internal and external environments. As you look inside, pay attention to goals, structure, measures, and capabilities. Why do people make decisions the way they do? As you turn to the external environment, you should seek to understand trends in the following areas: customers, competitors, suppliers, and technology. You should also track economic, legal, social, and political conditions. What will the market look like in one, three, and five years? Ask, "Why?"

Use a Variety of Tools

As you scan, use all of the available tools. Informal approaches like talking to personal contacts, participating in professional associations, monitoring the media, reviewing public opinion polls, and analyzing anecdotes can help you spot trends early. More formal gathering techniques—such as detailed literature searches, key-informant surveys, focus groups, in-depth interviews, and facility visits—provide deeper insight, but may not be timely. Futuring or visualization exercises can help you get out of the box. But, you need to do a lot of homework to flesh out and validate concepts that emerge in these brainstorming initiatives.

Synthesize Insights

As you gather data, look for common themes and trends. Simple graphic techniques can make themes/trends visible. Cluster analysis, frequency charts, trend diagrams, and timelines are commonly used. Big data can help you find hidden correlations. Your goal is to look at the data from every angle possible and ask, "What does this really mean?"

Communicate Persuasively

As you identify the story, you need to make it sticky. SWOT (strengths, weaknesses, opportunities, and threats) analysis can help. A SWOT matrix such as the one shown in Figure 1.13 makes findings easier to interpret. Figure 1.13 identifies a few typical strengths, weaknesses, opportunities, and threats. It also lists some commonly asked questions that are used to identify these core ideas. You may find performing a mock SWOT Analysis for key rivals to be useful. Your goal: Tell a compelling story that motivates change, drives learning, and improves performance.

Avoid Common Pitfalls

Relatively few companies master the art and science of environmental scanning. Most fall into one of several common scanning pitfalls. Once off track, they never build the momentum to fully resume proactive scanning. The good news: With a little planning and some hard work, you can avoid each of the following pitfalls.

• Fail to Follow the Process: When you fail to look at diverse sources of information, evaluate the information from diverse viewpoints, or consider both internal and external issues, you are unlikely to generate meaningful insight.

• Fail to Involve the Right People: If you don't involve the people who can act on the insights discovered, you may struggle to get them to buy in to the changes the scanning suggests.

• Fail to Dig Deeply: When you don't consider the interactions among different trends or if you fail to open not just your eyes but also your mind, your scanning results will likely be superficial and/or narrowly focused.

• Fail to Collectively Push the Boundaries: You want to be polite, but if you don't challenge your colleagues' thinking—and invite them to push your own thinking—you will miss out on creative but robust interpretations of the data.

A Success—and Failure—Story

Motorola, the company that introduced the cell phone to the world on September 21, 1983, set the early standard for proactive scanning. Motorola viewed Japan as a key source of advanced technology, and Japanese companies as a threat to Motorola's leading market presence. Motorola invested heavily to learn the Japanese language, to delve into the technical literature, and to build long-term relationships with researchers and research organizations. The payback: For almost 15 years, Motorola cell phones were synonymous with mobility, quality, and style. The Motorola brand was one of the world's most admired.

But, Motorola's scanning approach also offers a warning. Success led to complacency. Motorola missed the industry's shift from analog to digital. Robert N. Weisshappel, Motorola's cell-phone chief, had commented, "Forty-three million analog customers can't be wrong."2 Nokia, a Finnish company, took advantage of Motorola's shortsightedness and knocked Motorola from its market-leading position. Apple later humbled both of these tech giants by launching the iPhone. Your takeaway: Scanning isn't something you do once—or for a little while. Proactive scanning must become part of your organizational culture.