of the American Society for Information Science and Technology     Vol. 28, No. 3      February / March 2002

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Environmental Scanning

by Eileen Abels

Eileen Abels is associate professor at the University of Maryland. She can be reached at 4105 Hornbake Library Bldg., College Park, MD 20742-4345; telephone: 301/405-2043; e-mail: ea29@umail.umd.edu
Environmental scanning assesses the internal strengths and weaknesses of an organization in relation to the external opportunities and threats it faces.

Why Is Environmental Scanning Important?

All organizations need to monitor at some level what goes on in their environments and recognize their strengths and weaknesses in relation to it. The importance of environmental information depends on the degree to which the success of the organization itself depends on its environment. In the business literature, this dependency of the organization on its environment is referred to as perceived environmental uncertainty (PEU). Gordon and Narayanan (1984) identified factors that determine PEU. These factors include the nature of the society, economic stability, legal stability, political constraints, the nature of the industry, the customer base and the nature of the organization.

While PEU varies from industry to industry, the level of recognition of the importance of the environment also varies from company to company, as does the reaction of companies to their environment. Khandwalla (1977) identifies three possible relationships between organizations and their environments:

  •   Dominant organization/dominated environment
  •   Dominant environment/dominated organization
  •   Symbiotic relationship neither the environment nor the company dominates.

The relationship between an organization and its environment depends upon the internal strengths and weaknesses of the company, which means that an opportunity for one company will be viewed as a threat to another company, depending on how well each is positioned to deal with the specific trend or issue.

How Is an Environmental Scan Conducted?

Bryson (1989) outlines general steps for conducting an environmental scan:

  •   Identify the purpose, participants and time commitments.
  •   Carry out the scanning activities.
  •   Analyze and interpret the strategic importance of issues and trends.
  •   Select issues and trends for further action.
  •   Report and disseminate the results.

Each of these steps is broken down into specific actions. Scanning activities are of particular interest to information professionals.

Carrying Out the Scanning Activities

An environmental scan is an ongoing process that comprises two phases: an internal environmental assessment and an external environmental scan. The internal environmental assessment identifies strengths and weakness of the company. The external environmental scan identifies opportunities and threats in the environment.

Conducting an Internal Assessment of Strengths and Weaknesses. An internal assessment focuses on inputs and outputs. To assess inputs, data are gathered on the number of employees (FTE), total expense on wages, supplies, equipment, physical plant and resources used to deliver services or products. Outputs translate into current strategies to deliver services and/or products. Again, data are gathered, this time relating to the number and type of services or products and the number of customers/users as well as the categories of users served. Internal performance is measured in terms of quantifiable output measures such as number of databases accessible, hours of operation, hits on a website or questions answered.

Determining External Events or Topics for the Environmental Scan. An important step in environmental scanning is the identification of external events that impact an industry. Typical focal points of environmental scanning include competition, technology, regulatory activity and the economy. Competitive intelligence, knowing what competitors are doing, requires one to define the competition. In an environmental scan, the competition has to be defined in the broadest sense, going beyond obvious competitors to potential competitors in other industries. Libraries have often considered information brokers to be competitors; now, libraries have to compete with bookstores, the Internet and search engines.

An environmental scan will always include continual and predictable events that require constant surveillance, such as competitors in the industry, products and product development, regulations, new technologies, and economic and social conditions nationally and globally. In addition, one-time or periodic events should be monitored. Elections would fall into this second category. Still other events are unpredictable and may have far-reaching and enduring impacts. These become part of the environmental scan when they occur. The terrorist attacks in New York and Washington, DC, on September 11, 2001, fall into this category. These events have changed the environment for almost every industry around the world.

Events and topics selected for an environmental scan will be most effective if they relate closely to critical success factors (CSFs). Rockart (1979) noted that managers receive too much information and that they should focus their attention on CSFs that is, three to six areas in which satisfactory results will ensure the success of the organization. Examples of critical success factors, as identified by Rockart, include an efficient dealer organization for the automotive industry, new product development in the food processing industry and innovation in creating new types of policies in the life insurance industry.

Identifying Resources to Scan. The information found through scanning helps chart the future course of an organization. Scanning efforts include

  • gathering data deliberately through market research studies;
  • having informal conversations with other executives;
  • reading newspapers, magazines and journal literature;
  • monitoring demographic data; and
  • benchmarking initiatives that compare one company or industry's performance, finances, etc., to another company or industry.

 The following excerpt from a Harvard Business Review case study by Wetlaufer (1999) illustrates the environmental scanning process from the focus of one specific industry:

    There was the competition to keep tabs on, of course, but as an executive at a company catering to teenagers and 20-somethings, he knew he also had to stay on top of the popular culture. So, while he started with the Wall Street Journal, he quickly turned to Women's Wear Daily and about a half-dozen teen and fashion magazines that he relied on for spotting trends. He also did a quick check of several websites each day. And finally, Roger scanned the local paper. (p. 30)

Is Environmental Scanning Worth the Effort?

Khandwalla (1977) reported research findings that found a positive correlation between the level of PEU and the amount of environmental scanning. The kind and quality of the information reaching the decision makers is one important factor influencing the organization's success in dealing with the environment. However, another factor that is even more critical is the ability of the decision-maker to interpret the information!

Further Reading

    Bryson, J.M. (1989). Strategic Planning for Public and Nonprofit Organizations. (pp. 242-244) San Francisco: Jossey-Bass.

    Gordon, Lawrence A. and Narayanan, V.K. (1984). Management Accounting Systems, Perceived Environmental Uncertainty and Organization Structure: An Empirical Investigation. Accounting Organizations and Society, 9(1), 33-47.

    Khandwalla, Pradip N. (1977). The Design of Organizations. (326-354). New York: Harcourt Brace Jovanovich, Inc.

    Rockart, John F. (1979). Chief executives define their own data needs. Harvard Business Review. 30, 81-92.

    Wetlaufer, Suzy. (1989). Case study: A question of character. Harvard Business Review, p.30.

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