Environmental scanning is one of the most important preliminary activities in strategic planning. It is the process that gives strategy planners the facts to help them create realistic tactics.
It involves seeking ready data that help in forecasting what the atmosphere could be like in the years to come. This is its major point of departure from the more familiar SWOT and PESTEL analyses, which dwell heavily on the present state of affairs. In fact, in environmental scanning, SWOT and PESTEL are components that fit into a larger analytical frame.
The futuristic effort in understanding the operational environment for the business makes a lot of sense in strategic planning, which in itself focuses on the future. In modern-day environmental scanning, the strategy planners must be alive to the possibility of fresh factors coming into play later, and as much as possible, predict them.
Given its importance, environmental scanning must be undertaken with utmost dedication. After all, it sets the tone for the strategic plan. It presents the facts that inform the strategic decisions and direction.
Think of it as a medical diagnosis that helps the doctor to decide the treatment to put a patient on. What would happen if the diagnosis was wrong? Environmental scanning is similarly substantial, hence my reference to it as the EPIC TaSK. This acronym denotes the importance of the environmental domains that must be assessed during the scanning, as opposed to the commonly used version – SKEPTIC – which stands for Socio-demographics, Competition, Economics, Environmental, Political, Technical, Industry and Customer.
For me, EPIC TaSK represents Economic, Environmental, Political, Industry, Customer, Technical, Socio-demographics and Competition (Note that in these acronyms, competition is deliberately represented by ‘K’ to make meaningful words out of the acronyms). A thorough understanding of these areas helps to chart the strategic direction of the organisation.
While many institutions undertake this task once for every strategic plan period (usually five or three years), the prevailing circumstances make it necessary to revisit the process with increased frequency. The world has become more dynamic. The assumption that the environmental circumstances will remain as assessed for more than one year can in the present circumstances be suicidal.
Ideally, these factors should be reviewed every quarter or every six months at the minimum, depending on the nature of the business. Some organisations are more exposed to rapid changes than others, and may need to do more frequent reviews of their operational environments. Compare a steel manufacturer with an electronic goods maker, for example. Granted, the latter today faces more rapid changes in technologies and consumer demands, and has to be on constant alert not to be caught napping.
The demands of the strategic environmental scanning requires that a dedicated team is put together. Call it the Strategic Environmental Scanning Committee. This team, made up of a close knit group of talented professionals, should at the very minimum undertake the following responsibilities:
a). Specify the environmental scanning needs. What resources does the organisation need to effectively undertake the task? Institutions assign different weights on the EPIC TaSK domains, depending on the nature of their operations. Being clear on these helps the team to prepare effectively.
b). Identify sources of information. Environmental scanning entails extensive research. It is important that a list of relevant sources of information is generated.
c). Assign carefully selected employees. The employees can be organised into groups according to the environmental domains under EPIC TaSK, and senior managers asked to oversee the teams as per their areas of expertise and interests. For instance, the head of finance could steer the team scanning the economic environment. The HR director would be responsible for the team looking at socio-demographics, while the marketing director could take charge of the customer and competition aspects.
d). Collect data regularly and share the information at the quarterly strategic leadership meeting. This process helps to keep the organisation up to date with emerging environmental circumstances so that it may respond immediately. It gives environmental scanning the dynamic attribute necessary to keep the organisation’s strategies relevant at all times.