What is environmental scanning?

Environmental scanning is the process of gathering information about the current business environment. In this context, the environment includes your company, your industry and the overall market. For example, a thorough environmental scan considers several economic factors, such as labor force participation rates and inflation rates.

The goal of environmental scanning is to collect information that can help you make better decisions. Depending on the scope of the scan, the scanning process might help your company minimize risk, identify new business opportunities or gain a competitive edge in the marketplace.

8 steps to environmental scanning for your business

Taking a systematic approach can help you achieve consistent results. If you’re ready to try environmental scanning, consider the following steps.

1. Define the purpose of the scan

The first step is to determine why you’re scanning the environment. You might be preparing for a new product launch, outperforming competitors or planning for long-term growth. Defining your purpose makes it easier to collect relevant data and use it to make decisions. It can also give your team a sense of purpose.

2. Choose a scanning method

Some scanning methods are structured, while others rely on trade publications, surveys, industry reports or expert panels. Here are a few options to consider:

• SWOT analysis: SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and weaknesses are the internal factors in your control. Opportunities and threats are external factors. Although you can’t control them, you can prepare for them. SWOT analysis can help you capitalize on industry trends while strengthening your business.
• PESTLE: PESTLE stands for political, economic, social, technological, legal and environmental. All six are external factors that can affect your business. For example, technological change can make it easier to manufacture a product or deliver a service. PESTLE analysis gives you an opportunity to identify relevant factors and determine the best way to respond.
• Market research: Market research typically includes reading articles, newspapers and academic journals. It may also involve monitoring industry demographics, paying attention to the performance of your competitors and understanding the labor market both in general and as it relates specifically to your industry.
• Expert opinion: Industry experts excel at recognizing emerging trends and explaining how those trends are likely to affect your industry. Paying attention to these experts can help your business take advantage of new opportunities.
• Industry analysis: Industry analysis is a type of market research that assesses the business strategies used by your direct or indirect competitors. By evaluating competitors’ strategies and resulting successes or failures, you can create new strategies to stay ahead of the competition.

3. Gather data from multiple sources

Once you choose a scanning method, you can start gathering information. It’s helpful to use multiple sources, as relying heavily on a single source may affect the results of your environmental scan. For example, if you read a report that focuses on financial data, you might not notice that consumer demand for one of your product lines is increasing rapidly.

Relying on multiple sources can also enhance objectivity, giving you a balanced view of market conditions. Consider incorporating these sources into your scanning process:

• Market research reports
• Local, state and federal legislative websites
• Trade publications
• Newspapers
• Customer surveys
• Economic indicators (e.g., consumer confidence, inflation rate, unemployment rate)
• Government reports

4. Analyze the data

Now that you have relevant data, you can begin analyzing it. Data analysis helps identify patterns and connections, so it can help you determine the best way to address internal and external factors. You might want to search for the following:

• Trends: Is consumer demand for your products rising or falling? Are changes in the unemployment rate likely to affect your hiring process? Have your competitors started adopting machine learning, natural language processing or other aspects of artificial intelligence (AI)?
• Opportunities: Does your industry have an emerging market segment you can enter quickly? Can you partner with another company? Are new technologies making it easier to meet your customers’ needs?
• Risks: Are there any risks that might harm your company if you don’t address them? For example, are there new regulations that might affect your ability to source raw materials?

Consider using charts, graphs or custom dashboards to make the data easier for team members to interpret. Another option is to prepare an executive summary that describes the results of your environmental scan in simple terms.

5. Determine how the results are likely to affect your business

Now you can connect the findings of your environmental scan with your company’s mission and vision. You might want to ask yourself these questions:

• How are current trends likely to change customer behavior?
• Will economic and political factors make it more expensive to operate the business?
• Can we use new technology to create a culture of innovation?
• Could market changes limit our ability to serve a particular customer segment?

6. Prioritize your findings

Not all findings have the same level of importance, so it’s helpful to prioritize them from most urgent to least urgent. Setting priorities can help you use capital, labor and other resources wisely. Consider ranking your list based on the level of risk or opportunity, the urgency of the issue or how closely each issue aligns with your company’s goals.

For example, if one finding has the potential to increase sales by 200% and another finding has the potential to increase sales by 50%, you might want to focus on the one that’s likely to give you the bigger increase.

7. Integrate the findings into your business strategy

Now that you have a list of findings in order of priority, you can use them to update your business strategy. For instance, if you determine that there’s an unfilled niche in your industry, you can ask your product design team to come up with new ideas. You might also want to adjust your pricing strategy to account for economic shifts.

Consider including multiple employees in this process. For example, a Marketing Specialist can help create new promotional campaigns, or members of your executive team might help you determine how each finding aligns with your company’s vision.

8. Continue scanning the environment

The business environment is always changing, so environmental scanning is an ongoing process, not a one-time technique. Conducting regular scans helps ensure your team is always aware of what’s happening inside and outside the company.

FAQs about environmental scanning

How does environmental scanning affect workforce planning?

Environmental scanning can help you identify industry changes that are likely to affect your hiring needs. For example, if you notice increased demand for one of your products, you might decide to hire new employees for your production and marketing teams. As technology shifts, you may want to update your job descriptions to include new skills.

How does environmental scanning support risk management?

Environmental scanning may support risk management by helping you create safeguards against internal and external threats. For instance, if a SWOT analysis reveals that half of your human resources team is within a few years of retirement, you can start focusing on succession planning. In other words, environmental scanning can help improve stability within your company.

Who in the company benefits from environmental scanning?

Executives use it to make strategic decisions, hiring managers use it to better understand workforce trends and members of the marketing department use it to track changes in consumer behavior. Employees at every level can use the scanning process to allocate resources and set priorities.