Creating an Early Warning System With Environmental Scanning

What is the importance of continuously validating an environmental scan?

Innovation, the siteless web, social media, and social commerce (ecommerce) bring the need to consistency scan the business environments at play. Performing an environmental analysis or PEST (political, economic, social, technology) can make or break an organization.  Environmental scanning generally produces large amounts of data. With large volumes of data, having strategic ROI models and scenario predictive analytical models for data mining becomes critical to boost strategic analysis and decision making. 

Strategic planners today are consistently performing with artistry balancing trade-offs. Social media trends are causing huge changes in strategic focus requiring innovation to turn the process into (social) commerce. Scanning the business environment can predict early warning signals for ‘correct’ action and not ‘corrective’ action. A series of sample questions are provided to kick start PEST.  The questions are focused on the remote, internal, and industry areas in an environmental scan.  Before the list of questions can be determined we must establish the areas at play in Michael Porter’s Five Forces model – rivals (jockeying for position), new entrants, buyers, suppliers, and substitutes.  We undertake the forces of change (strength or resistance) matrix of four domains:

1.  Weak change forces, strong resistance

2.  Strong change forces, weak resistance

3.  Weak change forces, weak resistance

4.  Strong change forces, strong resistance

Using the change matrix and force field analysis the strategic trade-offs are determined after answering a series of questions, rated to mitigate risk based on ‘cause and effect.’ Questions in environmental scanning may include:

Is this a comprehensive strategy and operating plan to realize the performance potential?

Is the necessary human capital, financial, physical and other resources provided and allocated to achieve success or do we need a GAP analysis?

Is there use of effective system of key performance measurements, indicators/trends to monitor and control strategic operating performance?

Does the board/stakeholders understand and support the resolution of short-term, intermediate, long-term priorities of management?

What are the specific competitive strengths and weaknesses, market forces or drivers of profitability that determine performance results?

What is the generic strategy and mantra?

Are we running the alternatives through scenario and financial analysis?

What is our position on the strategy – a shaper or adapter or reserving the right to play?

The competitive advantage of environmental scanning is the identification of trends, forces at play, and keeping one-eye opened when challenges or opportunities sail up to the boat dock.  In two words – adaptability and predictability.

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