Environmental scanning – Business intelligence

Environmental scanning – Business intelligence

Here at company liquidations, we are committed to helping businesses whether thay are in peril or simply need some new tools to succeed.

It would be an understatement to say that the global economy has faced some challenges over the last few years and experts are saying that there are more rocky times ahead.

Now more than ever it is important that businesses conduct environmental scans on a regular basis to ensure that they have early warning of issues that may affect them and their customers.

So what is an environmental scan?

Essentially an environmental scan is a method of bringing together data to form a picture of the world in which a business operates. It answers fundamental questions such as what does the economy look like? Are there legal changes that may affect us? Will there be technological developments that change the way we do business?

The company may use formal methods such as a Political, Economic, Social, Technological, Legal & Environmental (PESTLE) model or may adopt their own proprietary system. Whichever method is used it means that the firm has a way of changing their operations proactively rather than reacting after the fact to things that happen externally.

Gathering your data

The richer the data set you are working with, the better your results. With environmental scanning it is true to say that the vast majority of the work is done behind the scenes and it’s important to allow enough time to bring together a large enough amount of information to make your conclusions worthwhile.

Think about external sources of information that may be available. The Office for National Statistics1 (ONS) collects a huge amount of data on all sorts of aspects of life whether it is business statistics, employment information of demographic data. Best of all it’s free.

Other government departments such as the Department for Business, Innovation and Skills2 produce some very useful information and briefing notes. Similarly the official parliament website3 releases information from a variety of aspects concerning governmental work.

Sector specific sources are also useful. A good example of this would be the Nationwide Building Society that produces regular house buying and mortgage information that would be useful for anyone concerned with the property market. It’s also important to think laterally to an extent here. Although you may not be directly involved in the market, your company may be indirectly affected by changes in conditions. Using our example of the property market, kitchen installers, bed retailers and garden designers may all pick up work from customers who have just bought a new house. A slowdown in the market may well affect their business adversely.

Think also about internal data. You may have feedback information from your customers or may conduct market research with them. Look at your sales data, where it comes from, what people are ordering and how much they are spending. Are there trends there that indicate changing market conditions?

Bringing it together.

Once you have gathered data it is important to start to use it to form a picture.

Look for trends in data and compare what you have in this scan with what you experienced in previous iterations. How are things changing?

Look also for links between different aspects of the information you have found and start to form conclusions. Look also to relate this to performance in your own business. Do the conclusions you have drawn look like what is actually happening on the ground?

Whilst you may start off looking for a breadth of information it is also important to think about depth. It is distinctly possible that the information you glean may then simply beg more questions. Don’t be afraid to go back to look for more information to add depth to your data sets if you have to.

Reporting what you have found

The temptation here is to tell everybody everything. However there is such a thing as too much of a good thing.

The sign of a great analyst is where they can take a huge volume of information and distil it down into a few key points that get to the heart of the matter.

Think about what you have found. How will this affect the company and what action does the business need to take?

Make sure also that the information is presented to the right people at the right level. Whilst the board as a whole will need fairly general information it may be that the Finance Director or the Operations Director will need more targeted and specific environmental information for their individual areas.

Doing it all again

The value of an environmental scan can be multiplied by including trend data as we’ve already seen so it’s important the business completes the exercise regularly. Being able to see how things have changed and also spot patterns can give directors and managers a refined early warning system.

Another key aspect of producing regular information is that the firm needs to revisit conclusions and decisions that resulted from the data. Were assumptions correct? Did the market move as expected? By doing this the quality of decision making is increased and mistakes are reduced.

Conducting an environmental scan two to four times a year can provide a wealth of useful data for the business.

How could a good environmental scan help?

Let’s look at an example.

Imagine a tyre retailer. They perform a scan and find that parliament is enacting changes to MOT regulations and that tyres will need to have a bigger minimum tread depth. The conclusion they draw from this is that there will be a surge in tyre purchases when the new regulations come into force.

In the preceding months the company performs more scans to find out what the industry as a whole is doing, what their customers know about the issue and how large the surge is likely to be. As a result of this they put in place marketing to inform their customers and an operational plan to make sure they have enough stock to cope.

Once the new regulations come into force the company then monitors its performance against that of its competitors and the industry as a whole using its trade contacts to provide data. They use the knowledge gained to adjust their marketing to better target specific sectors where they are under performing.

From their analysis the company also understands that although there will be a surge in orders, it will be temporary as a large number of tyres are changed initially, but that it will level off after a period of time. This stops the business from thinking that a high level of sales will continue.

Summary

An environmental scan is one of the key tools that a board and managers can use to change the way the business works from reactive to a proactive focus.

Spotting trends and patterns before they happen and understanding the effect that legal and technological changes might have on the company is an extremely powerful weapon in the effective manager’s armoury.

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