Question: How do you understand environmental scanning, why is it important and what are the potential problems of implementing it in a Sri Lankan Context?
Successful Businesses depend upon the ability of the senior leaders to adapt to rapidly changing external environment. Unfortunately, the lead time once enjoyed by decision makers to analyze and respond to these and other changes is decreasing. Traditional long-range planning models, with their inward focus and reliance on historical data, do not encourage decision makers to anticipate environmental changes and assess their impact on the organization (Cope, 1981). The underlying assumption of such models is that any future change is a continuation of the direction and rate of present trends among a limited number of social, technological, economic, and political variables. Thus, the future for the institution is assumed to reflect the past and present or, in essence, to be "surprise-free." However, we know that this is not true, and the further we plan into the future, the less it will be true.
What is needed is a method that enables decision makers both to understand the external environment and the interconnections of its various sectors and to translate this understanding into the institution's planning and decision-making processes. Environmental scanning is a method of accomplishing this.
Brown and Weiner (1985) define environmental scanning as "a kind of radar to scan the world systematically and signal the new, the unexpected, the major and the minor" (p. ix). Aguilar (1967), in his study of the information gathering practices of managers, defined scanning as the systematic collection of external information in order to (1) lessen the randomness of information flowing into the organization and (2) provide early warnings for managers of changing external conditions. More specifically, Coates (1985) identified the following objectives of an environmental scanning system: * detecting scientific, technical, economic, social, and political trends and events important to the institution, * defining the potential threats, opportunities, or changes for the institution implied by those trends and events, * promoting a future orientation in the thinking of management and staff, and * Alerting management and staff to trends that are converging, diverging, speeding up, slowing down, or interacting.

Background
Environmental scanning is one of four activities comprising external analysis. As illustrated in Figure 1, external analysis is the broader activity of understanding the changing external environment that may impact the organization. In describing external analysis, Fahey and Narayanan (1986) suggest that organizations scan the environment to identify changing trends and patterns, monitor specific trends and patterns, forecast the future direction of these changes and patterns, and assess their organizational impact. Merged with internal analysis of the organization's vision, mission, strengths, and weaknesses, external analysis assists decision makers in formulating strategic directions and strategic plans.
The goal of environmental scanning is to alert decision makers to potentially significant external changes before they crystallize so that decision makers have sufficient lead time to react to the change. Consequently, the scope of environmental scanning is broad.

Defining Environment
When we scan, it is useful to view the environment in a mariner that organizes our scanning efforts. Fahey and Narayanan (1986) help by identifying three levels of environment for scanning. The task environment is the institution's set of customers. The task environment relates to a particular institution.
The industry environment comprises all enterprises associated with an organization in society.
At the broadest level is the macro environment, where changes in the social, technological, economic, environmental, and political (STEEP) sectors affect organizations directly and indirectly. For example, a national or global recession increases the probability of budget cuts in companies and downsizing with the associated layoffs and lower consumer purchasing power.

Defining Scanning
There are a number of ways to conceptualize scanning. Aguilar (1967) identified four types of scanning. Undirected viewing consists of reading a variety of publications for no specific purpose other than to be informed. Conditioned viewing consists of responding to this information in terms of assessing its relevance to the organization. Informal searching consists of actively seeking specific information but doing it in a relatively unstructured way. These activities are in contrast to formal searching, a proactive mode of scanning entailing formal methodologies for obtaining information for specific purposes.
Morrison, Renfro, and Boucher (1984) simplified Aguilar's four scanning types as either passive or active scanning. Passive scanning is what most of us do when we read journals and newspapers. We tend to read the same kinds of materials--our local newspaper, perhaps a national newspaper like The New York Times or The Wall Street Journal, or an industry newspaper like The Chronicle of Higher Education. However, the organizational consequences of passive scanning are that we do not systematically use the information as strategic information for planning, and we miss many ideas that signal changes in the environment.
Active scanning focuses attention on information resources that span the task and industry environments as well as the macro environment. In active scanning, it is important to include information resources that represent different views of each STEEP sector.
Another way of looking at scanning was described by Fahey, King, and Narayanan (1981). Their typology views scanning as irregular, periodic, and continuous. Irregular systems are used on an ad hoc basis and tend to be crisis initiated. These systems are used when an organization needs information for planning assumptions and conducts a scan for that purpose only. Periodic systems are used when the planners periodically update a scan, perhaps in preparation for a new planning cycle. Continuous systems use the active scanning mode of data collection to systematically inform the strategic planning function of the organization. The rationale undergirding active scanning is that potentially relevant "data" are limited only by your conception of the environment. These data are inherently scattered, vague, and imprecise and come from a host of sources. Since early signals often show up in unexpected places, your scanning must be ongoing, fully integrated within your institution, and sufficiently comprehensive to cover the environments important to your decision making process.
Since the question specifies “how I” understand ES, the best definition I would use is : Environmental Scanning is the art of systematically exploring and interpreting the external environment to better understand the nature of trends and drivers of change and their likely future impact on your organization.

Some techniques used for ES: Other than basic techniques such as S.W.O.T. analysis here are some other methods used for gathering data for ES:
Morphological analysis
Morphological analysis is a technique developed by Fritz Zwicky (1966, 1969) for exploring all the possible solutions to a multi-dimensional, non-quantified problem complex.
As a problem structuring and problem solving technique, morphological analysis was designed for multi-dimensional, non-quantifiable problems where causal modeling and simulation do not function well or at all. Zwicky developed this approach to address seemingly non-reducible complexity. Using the technique of cross consistency assessment (CCA), the system however does allow for reduction, not by reducing the number of variables involved, but by reducing the number of possible solutions through the elimination of the illogical solution combinations in a grid box.
MA has also been employed for the identification of new product opportunities. The technique involves mapping options in order to attain an overall perspective of possible solutions. It comprises the two main activities: a systematic analysis of a current and future structure of the area including the gaps in that structure, stimulation for creation of new alternative, which could fill the gaps and meet any needs.
Scenario planning
Scenarios are one of the most popular and persuasive methods used in the Futures Studies. Government planners, corporate strategists and military analysts use them in order to aid decision-making. The term scenario was introduced into planning and decision-making by Herman Kahn in connection with military and strategic studies done by RAND in the 1950s.
It can be defined as a rich and detailed portrait of a plausible future world, one sufficiently vivid that a planner can clearly see and comprehend the problems, challenges and opportunities that such an environment would present.
A scenario is not a specific forecast of the future, but a plausible description of what might happen. Scenarios are like stories built around carefully constructed plots based on trends and events. They assist in selection of strategies, identification of possible futures, making people aware of uncertainties and opening up their imagination and initiating learning processes.
One of the key strengths of the scenario process is its influence on the way of thinking of its participants. A mindset, in which the focus is placed on one possible future, is altered towards the balanced thinking about a number of possible alternative futures.
Although it is a very rewarding method it is also very demanding. The difficulties in its use can arise from a lack of clear focus, purpose or directions. As a result too many scenario stories can be created and/or their content may not be directly related to the strategic question.

Future history
A future history is a postulated history of the future. Some science fiction authors construct as a common background for fiction. The author may include a timeline of events for this history. A related field is alternate history, which assumes that the events at a critical point in past history turned out differently and then draws a fictional future timeline from that event.
Monitoring
It is a process that aims at evaluation of events, as they occur or just after. It involves activities like scanning, detecting, projecting, assessing, responding and tracking. Monitoring is one of the fundamental activities performed by Futures Studies.
Content analysis
This technique is used for the systematic and objective study of the particular aspects of various ‘messages’. Such ‘messages’ can be found in books, journals, newspapers, private letters, publications of political parties, reports, surveys, interviews, television, Internet and so on. This method, in order to be reliable and valid, needs to be performed with high competency.
Back casting (eco-history)
It is a technique that often is pointed out as an opposite to forecasting. It involves identification of a particular scenario and tracing its origins and lines of development back to the present.
Back-view mirror analysis
It builds upon the assumption that any future oriented group process has to manage peoples’ difficulties in thinking into the future. These difficulties can arise from the fears as well as from the lack of experience in futures thinking.
Back-view mirror analysis allows dealing with the fears related to the future by creating a new perspective that looks to the past instead of starting the process in the present. The method is used to perform qualitative analysis of the past using both quantitative and qualitative data.

Cross-impact analysis
The method was developed by Theodore Gordon and Olaf Helmer in 1966 in an attempt to answer a question whether perceptions of how future events may interact with each other can be used in forecasting.
As it is well known, most events and trends are interdependent in some ways. Cross-impact analysis provides an analytical approach to the probabilities of an element in a forecast set, and it helps to assess probabilities in view of judgments about potential interactions between those elements.
The technique can be used by individuals and groups at an elementary qualitative level as well as it can be employed to perform more complicated and intensive quantitative analysis. One of its strengths is that it forces the attention towards “chains of causality: x affects y; y affects z”. On the other side it can be very fatiguing and monotonous.
Futures workshops
Future workshops were developed by Robert Jungk in order to allow anybody to become involved in creating their preferred future rather than being subjected to decisions made by experts. Future workshops are very strongly action oriented. They aim, first to imagine the desired future, and then to plan it and implement it.
Future workshops have four distinctive phases: 1. In the first preparatory phase the issue that will be considered is identified and the structure and details of sessions are arranged. 2. The operative phase involves clarification of the issue considered and articulation of negative experiences in the present situation. 3. In the fantasy stage participants verbalise their desires, dreams, fantasies and views about the future in a free idea generation session. The participants are asked to forget all the limitations and obstacles of the present reality. 4. The last step involves: analysis of the feasibility of ideas and solutions generated in the fantasy phase; recognition of limits and barriers for implementation and discovering how they can be overcome.

Failure mode and effects analysis
Failure mode and effects analysis (FMEA) is a safety analysis method first developed for systems engineering which examines potential failures in products or processes. It may be used to evaluate risk management priorities for mitigating known threat-vulnerabilities.
FMEA helps select remedial actions that reduce cumulative impacts of life-cycle consequences (risks) from a systems failure (fault).
Measured Action
Measured Action is an action that improves Production Capability by a measured amount, (e.g. if X hours of overtime then Y additional files transmitted). Measured actions enhance FMEA by perfectly matching calculated risks with calculated contingencies to ensure a specific outcome.
Futures biographies
This method, also called futures imagining, aims to create individual imaginaries, to gather peoples’ views on the future and to examine them in the study of collective future. Peoples’ expectations and opinions are considered as an important indication of possible goals and to possible directions that can influence peoples’ actions and in result steer the future. Futures wheel
The method is a form of structured brainstorming that aims at identifying and packaging secondary and tertiary consequences of trends and events. A trend or event is placed in the middle of a piece of paper and then small spokes are drawn wheel-like from the centre. Primary impacts and consequences are written in circles of the first ring.
Then secondary consequences of each primary impact are derived forming the second ring. This ripple effect continues until there is a clear picture of implications that the event or trend can have. Futures wheel is a very simple but powerful technique for drawing out people’s opinions and ideas. However, it is sensitive to underlying assumptions.

Relevance tree
It is an analytical technique that subdivides a large subject into increasingly smaller subtopics. The relevance tree has a form of a hierarchical structure that begins with a high level of abstraction and moves down with greater degree of detail in the following levels of the tree. It is a powerful technique that helps to ensure that a given problem or issue is broken into comprehensive detail and that important connections among the elements considered are presented in both current and potential situations.
Simulation and modeling
Simulation and modeling are computer-based tools developed to represent reality. They are widely used to analyse behaviours and to understand processes. Models allow demonstration of past changes as well as the examination of various transformations and their impact on each other and other considered factors.
They can help to understand the connections between factors and events and to examine their dynamics. Simulation is a process that represents a structure and change of a system. In simulation some aspects of reality are duplicated or reproduced, usually within the model. The main purpose of simulation is to discern what would really happen in the real world if certain conditions, imitated by the model, developed.
Although modeling and simulation became even more popular with the development of computing technology, application of these techniques have certain limits. Models represent a simplification of a system that is being examined; therefore the results need to be carefully considered.
As the complexity of real systems increases models need to be more and more complex to represent the reality most accurately. In result, they may become increasingly difficult to understand and to be operated. Their complex nature can cause problems with using and managing results.
As models constitute a simpler version of reality, certain factors can be omitted, and in consequence can lead to mistakes. Such mistakes are not easy to be found and corrected.

Social network analysis
Social network analysis (also sometimes called network theory) has emerged as a key technique in modern sociology, anthropology, Social Psychology and organizational studies, as well as a popular topic of speculation and study.
Research in a number of academic fields have demonstrated that social networks operate on many levels, from families up to the level of nations, and play a critical role in determining the way problems are solved, organizations are run, and the degree to which individuals succeed in achieving their goals.
Systems engineering
An interdisciplinary approach to engineering systems that is inherently complex, since the behavior of and interaction among system components is not always well defined.
Defining and characterizing such systems and subsystems, and the interactions among them, is the primary aim of systems engineering. On very large programs, a systems architect may be designated to serve as an interface between the user/sponsor and systems engineer.
RADM Grace Hopper, USNR was quoted as saying "Life was simple before World War II. After that, we had systems."
Visioning
Visioning is a popular method in the studies of desirable futures and the one that gives emphasis to values. It is extensively used in urban planning. The visioning process is based on the assumption that images of the future lead peoples’ present behaviours, guide choices and influence decisions. Images of the future can be positive or negative and cause different responses according to the perceptions.
Vision is usually seen as a positive, desirable image of the future and can be defined as a compelling, inspiring statement of the preferred future that the authors and those who subscribe to the vision want to create.
There are a number of issues that need to be addressed while using the visioning method. Vision comprises peoples’ values, wishes, fears and desires. In order to make the visioning process work it is necessary to ensure that it is not making an idealistic wish-list; that vision is an image of the future shared by a whole community; and that the vision is translatable into reality.

Trend analysis
Trend analysis is one of the most often used methods in forecasting. It aims to observe and register the past performance of a certain factor and project it into the future. It involves analysis of two groups of trends: quantitative, mainly based on statistical data, and qualitative, these are at large concerned with social, institutional, organisational and political patterns.
In the quantitative trend analysis data is plotted along a time axis, so that a simple curve can be established. Short term forecasting seems quite simple; it becomes more complex when the trend is extrapolated further into the future, as the number of dynamic forces that can change direction of the trend increases. This form of simple trend extrapolation helps to direct attention towards the forces, which can change the projected pattern.
A more elaborated curve that uses times series analysis can often reveal surprising historical and current data patterns. The qualitative trend analysis is one of the most demanding and creative methods in Futures Studies.
As trends never speak for themselves, the identification and description of patterns is partly empirical and partly creative activity. The most challenging part of qualitative trends analysis is identification of a tendency early, as recognition of a mature trend is “relatively useless” in influencing anyone’s behavior.
Adaptive role-playing
Although similar to decision theory, game theory studies decisions that are made in an environment where various players interact. In other words, game theory studies choice of optimal behavior when costs and benefits of each option are not fixed, but depend upon the choices of other individuals.
ALL-Win Win collaborative efforts require group decision support systems (GDSS) that enable the knowledge management community of practice to assure sustainable mutually-beneficial results.

What are the potential problems of implementing it in a Sri Lanka Context?
There are several reasons why it may not be possible to implement environmental scanning in an effective manner in Sri Lanka.
General Reasons:
The sheer volume of information may be overwhelming, resulting in an information overload in which important pieces of information may be overlooked or missed. There are also many sources of information that scanners may not be aware of, and so they may miss potentially important information. Navigating the ocean of existing information is also difficult because of the sometime lack of organization and completeness of that which is presented. Even in the best of circumstances, information may no longer be timely by the time scanners are able to locate it. This is particularly true of rapidly changing markets that are influenced by technology or regulatory changes.

There are also problems with environmental scanning related to interpretation of the information that has been gathered. Determination of relevance, familiarity with the topic and information sources, language usage, time limitations, and accuracy of information all play a role in the analysis process. In addition, an overemphasis on scanning could have negative effects on an organization. This could be due to the focus on a defensive strategy to external forces rather than a continuation of process improvement and growth within the organization.

Specific Reason for a chosen Product: Take an example of a new brand of milk powder. (1) Detailed information with regard to the formula used by competitors, accurate information with regard to distribution network and turnover of stocks may not be available from retailers. There is almost no officially published information in this regards. (2) Taste preferences are difficult to determine due to non availability of suitable population of samples. For example a person purchasing from an urban supermarket may be willing and able to sample and comment but a rural purchaser from a village “boutique”, will not be able to do this. Their taste may differ drastically. (3) Regulatory and pricing formulas are almost impossible to predict for the future with any form of accuracy. Government taxes and duty structures are changed on an ad hoc basis and with very short notice and currency fluctuations also affect the imported raw materials.

(4) Cultural preferences and even colour and packaging preferences change to large degrees in different areas and the population numbers are often too small to accommodate all these changes. For example smaller packets of milk that can be purchased for daily requirements are becoming essential now due to cash flow problems experienced by householders. Very basic packaging has to be used for such items (to reduce the cost) and this in turn can result is spoilage and wastage.

(5) Distribution costs can change overnight with sharp increases (and sometimes decreases) of transport costs due to changes in fuel prices.

(6) Lack of ethics among dealers and distributors can result in them giving preference to faster selling and more popular brands and using their limited resources for a bigger revenue generating brand. Thereby affecting your distribution and sales.

(7) Very slow redress through the judicial system often making it impractical to take distributors and retailers to court to ensure honoring of trade agreements. Hence promoting further abuse by them.

(8) Credit and availability of funds for ambitious advertising and marketing campaigns which are linked to the success of your brand at the planning stage, may suddenly become unavailable due to changes in fiscal policy.

(9) Inability of Governments in “developing countries” such as Sri Lanka to adhere to long term policies and goals will result in the relevance of researched information changing overnight in some cases.
Aim of ES
The aim of scanning work is to provide robust information (trends and emerging issues) to enable you to build a long term context for your strategic planning today.
Unless you scan you WILL always be reacting / in crisis management / putting out bush fires.
If you are looking for new ideas that don’t yet exist, don’t talk to normal people because they’re just consuming what is available today – find the weirdo’s and see what they are doing, what they’re making on their own, and say gee-is there something I can mainstream from this ?
Tom Kelly – Founder Ideo