by Russell T. Westcott
Environmental scanning and analysis should not be a periodic event but an ongoing process. Changes in the business environment can often affect an entire organization, sometimes almost overnight. The process is a continual, rigorous search for developments happening throughout the world and the potential it has to affect what your organization does or is planning to do.
Your organization may be making a high-quality product or delivering a high-quality service and making good profits, but that is no guarantee that it will continue to prosper in the future. Current strategy and operations can be rendered obsolete by a newer version in the marketplace, no longer viable due to a change in a product liability law, or instantly unmarketable because of the introduction of a totally new product or service. Think about a few examples such as the:
- IBM electric typewriter replaced by word processors and then by PCs
- Rapidly evolving technological changes in how we store, access, and communicate information: punch cards, perforated paper tape, magnetic wire and tape, floppy disks, all gone, variations of compact disks replaced with flash drives and storage, processing, and access with cloud computing
- Transition to more environmentally friendly means of generating power: coal-fired generation plants replaced by solar panels and wind turbines
- Near total demise of women’s corsets and automobile carburetors replaced by changes in clothing styles and electronic ignition
- Use and destruction of natural resources replaced by conservation efforts that have replaced or curbed generation of poisonous gases, poisoning of water, dumping of hazardous chemicals, and buildup of nonbiodegradable materials at refuse disposal sites
- Evolving replacement of prescription drug-based therapies with safer nonprescription supplements derived from natural ingredients
- Robotic surgery that allows less-invasive wounds with safer and faster recovery
- Transition of employer-run career planning, professional development, personal safety, security, and health care activities to become more the responsibility of the individual
- Extensive use of trades people for maintenance and repair work decreasing by the do-it-yourself trend
- Print media, e.g., books, newspapers, magazines, mailings, and advertisements being replaced through electronic transmission
- Education and training activities tending toward more flexible scheduling and delivery with a focus on serving individuals rather than groups/classes
- Economic turmoil effecting investment and saving practices shifting to people and organizations learning how to do with less income
- Unemployment remains high while thousands of jobs remain unfilled; the shift in skills and knowledge requirements for the newer technologies and practices is a major cause
The examples above are not intended to spread gloom and doom but are evidence of the absolute need to keep in constant touch with developments in the world that can affect your organization, both short- and long-term. This is usually referred to as environmental scanning and analysis or just “environmental scanning.”
Many smaller organizations resist environmental scanning citing lack of time, money, and skills. Yet frequently, it is the smaller organizations that often appear most blind to the consequences of not paying attention. This is especially so when such an organization is much farther down the supply chain and unaware of what is happening in its immediate customers’ and end-user environments. The smaller organization could be out of business in a week or even a day if it produces a product that’s no longer wanted, banned by law, or obsolete.
One answer to the lament that smaller organizations don’t have the resources to conduct environmental scanning and analysis is to break the task down into manageable segments. For example, in a ten-person company:
- The owner scans the Wall Street Journal and the primary general newspaper or an online news service every day.
- The operations manager scans four to six different industry journals each month.
- The office manager scans the regional news (online or in print) every day.
- Operator A scans one daily television news channel each day or a weekly local newspaper each week.
- Operator B scans another daily television news channel.
- The shipping/receiving person queries delivery drivers about what they see and hear on their routes.
- The external salesperson queries 10 customers a week about the business climate.
- Three other employees each scan or listen to a selected media outlet two to three times a week.
Each person summarizes potentially applicable news weekly in an e-mail summary to the other scanners. Critical news is highlighted for immediate attention. All 10 employees participate in a short monthly conference call or live meeting to discuss events and actions that may affect the organization.
This process accomplishes several positive outcomes. It trains each employee to become involved in the strengths, weaknesses, opportunities, and threats that can affect the organization’s survival. Additionally, the process opens the eyes of employees to the critical factors that affect the development and sustainability of the organization’s strategic plans. Employees see first-hand why it’s valuable to stay in touch with local, regional, national, and worldwide developments that can affect their industry and employment. It also reinforces the employees functioning as a team.
Persons involved in the process should be given a short training in what to listen and look for. Following are some of the general categories in which data, information, and knowledge may be collected and analyzed:
- Internal factors (strengths and weaknesses)
- Organization structure
- Organization strategy and actions
- Predominant managing style
- Customer base
- Supplier base
- Internal capability
- Financial stability
- Ethical and legal practices
- Customer focus and relations
- Employee relations
- Investor obligations
- Community obligations
- Product/service realization
- Core competency
- Work force skills
- Supplier relations
- External factors (opportunities and threats)
- Missed business opportunities
- Societal trends and changes
- Competition trends and changes
- Economic trends and changes
- Regulatory immediate changes and potential future changes
- Technology trends and changes (software, hardware, user attitudes)
- Public image/reputation
- Conservation of natural resources
Questions for auditors to consider
- Is environmental scanning and analysis treated as a necessary and ongoing process?
- Does top management support, personally participate in, and guide the process?
- As with any organizational process, is environmental scanning and analysis subjected to continual improvement of the process itself?
- Has an appropriate training and evaluation program been designed and implemented that addresses why and how the environmental scanning and analysis process is needed and the role of the scanners?
- Given that there could be periods of infrequent incidents and news that directly affects the organization, is the momentum to the process sustained?
- Are the individuals who uncover a situation that could affect the organization given recognition for their discovery?
- Is the information that is uncovered, disseminated, analyzed, and used widely publicized throughout the organization?
- Have metrics been established for measuring and reporting the effectiveness of the environmental scanning and analysis process? Are they based on both outputs from the process and outcomes from the use of the information uncovered?
- Does the design of the environmental scanning and analysis process use checklists for each scanner as reminders of what to look for? Are scanners encouraged to continually work to improve their checklists?
- Are statistical trending and analysis tools used in the environmental scanning and analysis process? Are these tools and resulting reports providing the type, timeliness, accuracy, completeness, and applicability of the process relative to the time, cost, and effectiveness of operating the process?
- Depending on the industry in which the organization functions, is the organization’s environmental scanning and analysis process appropriate and worthwhile to publicize to its customers?
- Has the linkage between the environmental scanning and analysis process, outputs, outcomes, and the organization’s strategy development and strategic planning process been established and communicated internally?
Environmental scanning and analysis process audit checklist suggestions
There are two overall types of checklists to consider. First are the suggested questions an auditor of the environmental scanning and analysis process should consider. The second type of checklist an auditor would expect to see consists of questions individual scanners have helped to create, and will ultimately improve with his or her experience. This type of checklist is created depending upon the objective and scope of each scanning assignment, e.g., scanning:
- General news sources
- News in industrywide publications
- Worldwide news
- Local or regional newspapers, television, or radio news
- Observations from attending an industry-oriented convention
- Observations from attending a community meeting or political rally
As much as it’s feasible, employees involved in the scanning should be given training in analyzing the data, information, and knowledge collected by their work. If the scanner is in an industry where a higher level of competency is necessary to perceive the possible connections between scanned material and its potential for effecting the organization, an analyst position should be established to whom the scanners feed their data. Whether or not the scanner conducts the analysis, the primary question scanners should be ask is: “Could what I am seeing and/or hearing/or sensing possibly have an effect on our business?”
There will certainly be times when picking up a piece of potentially meaningful data, information or knowledge triggers a need to specifically research the opportunity or threat in greater depth. Provision in the environmental scanning and analysis process should be made for this and a decision should be made about who will be responsible for it.
The sidebar below summarizes two significant external events that were missed due to the lack of an ES&A process. As you no doubt surmise, the ES&A process should be tailored to the strategies and operational needs of individual organizations. The benefits-to-cost ratio of operating the process must be positive and preferably repetitively monitored and continually improved. If the organization has a formal process for risk assessment and management, the ES&A process should be linked to it.
Organizations that operate in a global marketplace have need for a more encompassing and sophisticated process than a retailer in a small town. However, the concepts are the same for both large and small businesses. Any organization of any size needs to keep in touch with what’s happening in the world around it.
No Call, No Information
During a cost-cutting activity, a large public utility eliminated a group of experienced customer service personnel. Members of this group were assigned to call a set number of key customers at least once a month. The aim of this exercise was to talk with key people in the organization to uncover any errors or inconveniences the customer might be having. In doing so, the customer reps would ask about potential growth of the customer’s business, reasons for any losses of the customer’s customers, and any other events or business conditions that could affect the relationship between the customer, the utility, and their mutual profitability.
From the outside, casual observers of this process may have believed that the purpose of these specialists’ jobs was to socialize. This was true, to some extent, but for two purposes: To make the customer feel as though he or she received continual attention and to surface any data, information, or knowledge gained from interactions with key people in the customer’s organization. This information could be brought back to the utility for immediate action or to be entered on a watch list for follow up.
A little over three months after the disbanding of the utility’s special customer service group, the CEO read an article in the morning paper talking about the departure of a company—and key utility customer—to a new location in the southwest. There had been no contact with the utility other than the customer’s call to have the power shut-off. A few folks lower in the organization knew about the shut down, but assumed that management knew so they said nothing.
Whether the utility could have done anything to change the plan of the customer if the customer service function would have remained intact will never be known.
A 30-person engineering firm had a very large contract with a client until the client disappeared one weekend. This surprise was partly because the engineering organization had several projects underway with the client. Each project was managed by a different project manager, resulting in multiple interactions between the engineering people and the client’s people. The engineering employees later admitted that they had heard rumors about the client’s problems about matters they thought were not of direct concern to the engineering firm. Further underlying the surprise, the engineering firm had no process for capturing and feeding back this type of information to its management.
The owner of the engineering firm admitted his firm had lost more than $1 million in lost business, unrecoverable equipment, layoffs, legal fees, and loss of reputation in its industry due to this lack of communication.
About the author
Russell T. Westcott is an ASQ Fellow, Certified Quality Auditor and Certified Manager of Quality/Organizational Excellence. He is editor of ASQ Certified Manager of Quality/Organizational Excellence Handbook, Fourth Edition and a co-editor of the ASQ Quality Improvement Handbook, Third Edition. He authored Simplified Project Management for the Quality Professional (ASQ Quality Press, 2005), and Stepping Up To ISO 9004:2000 (Paton Press, 2003). He is active in ASQ’s Quality Management Division and the Thames Valley (CT) section management.
Westcott instructs the ASQ Certified Manager of Quality/Organizational Excellence refresher course nationwide. He writes for Quality Progress, The Quality Management Forum, The Auditor, and other publications. He is president of R.T. Westcott & Associates, founded in 1979, based in Old Saybrook, Connecticut.