Information Management for the Intelligent Organization

Chapter 4: Environmental Scanning as Strategic Organizational Learning

"To overcome the intelligent by folly is contrary to the natural order of things; to
overcome the foolish by intelligence is in accord with the natural order. To
overcome the intelligent by intelligence, however, is a matter of opportunity. There
are three avenues of opportunity: events, trends, and conditions. When
opportunities occur through events but you are unable to respond, you are not
smart. When opportunities become active through a trend and yet you cannot make
plans, you are not wise. When opportunities emerge through conditions but you
cannnot act on them, you are not bold. Those skilled in generalship always achieve
their victories by taking advantage of opportunities."
(Zhuge Liang, ca. 200 AD, The Way of the General)


Selections from Chapter 4

Today's organizations face an external environment that is increasingly complex
and volatile. In an international survey by the Harvard Business Review, 12,000
managers in 25 countries identify a wide array of forces of change including
"globalizing markets, instantaneous communications, travel at the speed of sound,
political realignments, changing demographics, technological transformations in
both products and production, corporate alliances, flattening organization ..."
(Kanter 1991, p.151). These forces of change are said to cause the traditional walls of
business boundaries to crumble. The managers in the survey indicated that change
is a fundamental part of organizational life everywhere, and that fostering closer
relationships with customers and suppliers is a critical issue. From an information
perspective, every change or development in the external environment creates
signals and messages that an organization may need to heed (Dill 1962). Some of the
signals would be weak (difficult to detect), many would be confusing (difficult to
analyze), and others would be spurious (not indicative of a true change). In seeking
information, the organization would have to attend selectively to a flood of signals
created by a dynamic environment, interpret often confusing messages, and make
sense of cues in relation to the firm's goals and activities. Weick (1979) suggests that
a central information task of organizations is to interpet equivocal information
about the external environment. Environmental scanning is the acquisition and use
of information about events, trends, and relationships in an organization's external
environment, the knowledge of which would assist management in planning the
organization's future course of action (Aguilar 1967, Choo and Auster 1993). The
external environment of an organization includes all outside factors which can
affect the performance or survival of the organization. Although there are many
factors, it is helpful to divide the external environment into a small number of
sectors. For business organizations, the environment may be analyzed as consisting
of six sectors: customers, suppliers, competition, socioeconomic, technological, and
governmental sectors (Jauch and Glueck 1988). Alternatively, one may distinguish
between a macroenvironment comprising social, economic, political, and
technological sectors, and a task/industry environment comprising mainly the
customer and competitor sectors (Fahey and Narayanan 1986). Organizations scan
the environment in order to understand the external forces of change so that they
may develop effective responses which secure or improve their position in the
future. Thus organizations scan in order to avoid surprises, identify threats and
opportunities, gain competitive advantage, and improve long- and short-term
planning (Sutton 1988). To the extent that an organization's ability to adapt to its
outside environment is dependent on knowing and interpreting the external
changes that are taking place, environmental scanning constitutes a primary mode
of organizational learning. Environmental scanning includes both looking at
information (viewing) and looking for information (searching). It could range from
a casual conversation at the lunch table or a chance observation of an angry
customer, to a formal market research program or a scenario planning exercise. One
of the earliest studies on environmental scanning differentiated between four styles
of scanning: undirected viewing, conditioned viewing, informal search, and formal
search (Aguilar 1967). In undirected viewing, the manager is exposed to information
with no specific purpose or informational need in mind. In fact, the manager is
unaware of what issues might be raised. Undirected viewing takes place all the time,
and alerts the manager that 'something' has happened and that there is more to be
learnt. An example of undirected viewing would be when the manager converses
with business associates during social gatherings. In conditioned viewing, the
manager is exposed to information about selected areas or certain types of
information. Furthermore, the manager is ready to assess the significance of such
information as it is encountered. An example of conditioned viewing would be the
browsing of sections of newspapers or periodicals that report regularly on topics of
interest. In informal search, the manager actively looks for information to address a
specific issue. It is informal in that it involves a relatively limited and unstructured
effort. An example of informal search would be the activity of keeping an eye on the
market to check on the results of some new product pricing policy. Finally, in
formal search, the manager makes a deliberate or planned effort to obtain specific
information or information about a specific issue. An example of formal search
would be a systematic gathering of information to evaluate a prospective corporate
acquisition. Environmental scanning is also seen to take place at multiple levels of
detail. At high-order levels, scanning looks at the total environment, develops a
broad picture, and identifies areas that require closer attention. At low-order levels,
scanning homes in on the specific areas and analyses them in detail. Etzioni (1967,
1986) compares this to a satellite scanning the earth by using both a wide-angle and a
zoom lens. For an organization, such an approach results in a "mixed scanning"
strategy that guides information collection and decision making. We see similarities
between Etzioni's multiple levels of broad and focused scanning and Aguilar's
multiple modes of scanning through general viewing and purposeful searching.

In their recent study of environmental scanning for the British Library, Lester and
Waters (1989) define environmental scanning as the "management process of using
environmental information in decision making." The process comprises three
activities:
(1) the gathering of information concerning the organization's external
environment;
(2) the analysis and interpretation of this information;
(3) the use of this analysed intelligence in strategic decision making.
(Lester and Waters 1989: 5).
Lester and Waters extend the definition of environmental scanning to include the
analysis, interpretation, and use of the information gained in strategic decision
making. This is in line with current strategic management theory, where the
analysis and diagnosis of environmental threats and opportunities typically form
the first phase of the strategic management process (see for example, Glueck and
Jauch 1984, Mintzberg 1994).

Is environmental scanning different from information seeking? In a review of the
literature of library science, management, psychology, and computer science, Rouse
and Rouse (1984) define human information seeking as the process of identifying
and choosing among alternative information sources. Information seeking is
embedded in a larger process of decision making, problem solving, or resource
allocation that provides the context for establishing information needs. Information
seeking is dynamic in that the methods and criteria for information selection or
rejection vary over time and depend on intermediate results. At a conceptual level
then, environmental scanning may be seen as a special case of information seeking.
Scanning is part of the process of strategic decision making, and a study of scanning
as information acquisition should analyse the selection and use of alternative
information sources. However, much of the field research, particularly in library
and information science, deals with the information needs and uses of defined
groups of users, and with the search and retrieval of information, often from
documentary or bibliographic sources and online information systems. In most of
these situations, a problem or information need is articulated or at least made
relatively clear, and information is then sought to address the specific question or
need. This may be contrasted with scanning, which not only includes searching for
particular information but also simply being exposed to information that could
impact the firm. As we explained earlier, scanning is often undirected viewing
without specific purpose or information need, and without awareness as to what
issues might be raised.

From Competitor Intelligence to Social Intelligence

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Competitive Intelligence

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Business Intelligence

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Environmental Scanning and Organizational Learning

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Research on Environmental Scanning

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