Environmental scanning or information gathering is often considered the first step of strategy formulation. This essay reviews and critiques two contemporary research studies in this field, one quantitative-the other qualitative, to show that strategic leadership can be understood from both external and internal perspectives.
Managers today face increasing uncertainty in their external environments as global competitors enter new markets and technology levels the playing field. Environmental scanning or information gathering is often considered the first step of strategic decision making, followed by managerial interpretation and organizational adaptation (Daft & Weick, 1984). Detecting change earlier than one’s competitors is thought to be a competitive advantage.
Aguilar (1967) was the first corporate strategy scholar to define the practice of environmental scanning as a top management practice that sought to obtain relevant information about events outside the organization that might be used to guide the organization’s future. While the practice of environmental scanning to enhance managerial choice has been examined by strategists for nearly four decades (Child, 1972; Hambrick, 1982; Daft, Sormunen, & Parks, 1988), only recently has scanning been considered within a framework of managerial decision-making. This essay examines two scanning studies in this vein that use different methods, one quantitative-the other qualitative. To compare these two approaches, this paper will: (a) summarize the research purposes, frameworks, and findings of each study, (b) consider how each author attempts to control for researcher bias, and (c) critique these two research approaches as to their advantages and disadvantages in helping us understand environmental scanning in the context of strategic leadership.
Two Research Studies
A quantitative study values empirical measurement, seeks to isolate universal causes and effects, and understand a phenomena from the outside. By contrast, a qualitative study values local expression, and seeks to understand phenomena from the inside out (Flick, 2002).
The Qualitative Study
Nastanski (2004) developed a qualitative study to glean insights from senior executives in the technology industry on the relative value of environmental scanning to their companies. The questions which guided this research were two fold: (a) What is the relative value of active scanning to senior executives? (b) Do executives value any of the individual elements in the scanning process in regards to decision-making? Nastanski chose a qualitative Delphi technique to poll a panel of industry experts with respect to these questions (Clayton, 1997).
A concise list of eleven action oriented elements of scanning was developed from the research literature for use in the expert survey. Out of a list of 150 executives in 114 high technology companies, Nastanski chose 21 subjects who met the qualifications of leading companies that operated in “high-technology/rapid change environments with similar degrees of turbulence in their competitive, environmental and customer elements” (p. 429).
Over the course of two survey rounds, the experts in this study reached a consensus at a level of 95 percent or higher that: (a) “the concept of active scanning offers an effective treatment for organizations struggling with interpreting market turbulence” (p. 434), (b) five of eleven elements were extremely important to interpreting their environment, including “high interaction with customers,” “maintaining an outward view,” “sensing change early,” “meaningful interpretation of change,” and “communicating the implications of change.”
The Quantitative Study
Hough and White (2004) developed a quantitative study “to explore the relationship between environmental change and managerial scanning…in the context of strategic decision making” (p. 782). Rather than study general “managerial recollections” about scanning, their study used a day-long behavioral simulation to study “actual scanning behavior” of 172 managers from a diversified technology company (p. 782).
Their aim was to reconcile two divergent views of environmental scanning found in the research literature. An information-processing perspective supports the proposition that scanning goes up among managers in linear proportion to perceived environmental turbulence. By contrast, a social cognitive perspective proposes that decision-makers become overwhelmed with the volume of data from uncertain environments and reduce their scanning in dynamic environments. Hough and White (2004) hypothesized a third relationship: that scanning completeness will be non-linearly related to environmental dynamism (u-shaped), being more active in dynamic and stable environments than in moderate environments.
The Hough and White (2004) empirical study found that scanning was related to environmental dynamism in all three ways, linear, u-shaped and inverse u-shaped fashioned, based on the functional position of the manager, whether manufacturing, sales and marketing, or general managers. It is important for top management teams, therefore, to “remember that the approach used gathering and processing information is very individualized” (p. 789).
Controlling for Researcher Bias
An important feature of both quantitative and qualitative studies is reducing researcher bias. In quantitative studies, this is done through establishing a research design that might prove its internal reliability and external validity. In qualitative studies, researcher bias is minimized through careful attention to questionnaire design and data coding.
In developing a qualitative Delphi survey, Nastanski sought content and face validity from four executives outside the target group who had significant survey experience. These members set the parameters for the panel consensus at a range of one interval from the medium. At the same time, Nastanski acknowledges the use of scanning elements from the literature and presumes the subjects “have reasonable (and similar) understanding of active scanning concepts, which may not be true” (p. 431).
Hough and White’s qualitative study likewise sought to insure its reliability by (a) defining an independent variable of scanning completeness and an outcome variable of environmental dynamism, and (b) measuring control variables of information-gathering preferences, functional background, and simulated position. Building on this design, regression analysis was able to pinpoint where relationships were statistically significant.
Advantages and Disadvantages
Each study has its advantages and disadvantages, based on the inherent strengths of its research design. Both studies offered insight into the field of managerial decision making with respect to dynamic or turbulent environments. Nastanski’s qualitative study interprets the relative priority managers might place on various elements of the scanning proposition, while Hough and White’s quantitative study measures how managers apply environmental scanning in different conditions of environmental dynamism.
Both studies have their disadvantages, given their inherent designs. Hough and White’s quantitative study illuminates the manager’s response to uncertainty through scanning. Its empirical design, however, excludes factors that also might affect environmental scanning, such as organizational size, product life-cycle, industry context or firm strategy. By contrast, the breadth and standardization of Nastanski’s Delphi study failed to tap the richness of the qualitative contexts of environmental scanning in the technology sector. In depth personal interviews might have shed further light on managerial discretion, with respect to rapid-change environments.
Environmental scanning is a vital practice of strategic groups to help their organizations recognize and adapt to external change. This essay examined two contemporary studies of environmental scanning, one qualitative, and the other quantitative. Both research studies provided insight into the critical role of managerial discretion in maintaining the external focus of the organization. The Nastanski (2004) qualitative study illuminated that managers valued environmental scanning due to its ability to meaningfully interpret change and maintain an outward view. The Hough and White (2004) quantitative study illuminated the behavioral side of environmental scanning and how managers from different functional backgrounds have a propensity to vary its use based on their company’s orientation. While both methods have their limits, both quantitative and qualitative, or hard and soft research should be used to enhance sense making activities and organizational performance.
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Dr. Jay Gary is president of PeakFutures.com, a foresight consulting group. Over the past twenty years he has helped non-profits, foundations, civic leaders, and strategic alliances to create more promise filled futures. He also teaches strategic foresight, innovation and leadership at the graduate level and through professional development courses.