Environmental Scanning

Environmental Scanning Thomas Hong, Ph.D., Remi Alapo, Ph.D., Nancy Glowacki, Ph.D., Danette Shepard, Ph.D., and Gus Rathgeber, Ph.D., University of Phoenix Emerging Managerial Practices March 10, 2008

Environmental Scanning Environmental Scanning Assessment

Presented in the following discourse is an analysis of environmental scanning in relation to predictive models. Hewlett Packard Corporation (HP) was selected for this study to assess the effectiveness of the environmental scanning system employed by HP on factors of organizational design and pragmatic implementation of attribute identified by the environmental scanning system. The analysis of HP focuses on delineation of specific requirements of the organizations environmental scanning system relative to selected predictive models. The paper is presented in five distinct sections. First is an informational overview of the purpose of the environmental scanning process and the key characteristics associated with environmental scanning system. Second is an overview of HP providing a brief history of the company along with the characteristics of the organizational domain. Third is a review of three predictive models for environmental scanning. The selected models are; Lewins Force Field Analysis, Senges Dance of Change Model and McKinseys 7S framework. Fourth is an analysis of HPs environmental scanning system relative to the critical elements identified in the analysis of the three predictive models. The analysis of HPs environmental scanning system includes rationale of why the elements were selected by HP, how these elements interrelate to the effectiveness of the environmental scanning system and how the elements influence HPs adaptability to its domain. The fifth and final section of this paper provides recommendations for changing and improving HPs predictive environmental scanning mechanisms and model on the basis of the included research of predictive models. Overview of Environmental Scanning Environmental scanning is to scan the signal of the new, and the unexpected occurrences in the world (Brown & Weiner, 1985; Morrison, 1992). A study by Aguilar

Environmental Scanning (1967) shows that managers information gathering practices is to scan the collection of external information to decrease the haphazardness of information flow into the organization, and to render early warnings to managers for changing external conditions (Morrison, 1992). The purpose of an environmental scanning model is, first to detect scientific, technical, economic, social, and political trends; second to specify the future potential threats, opportunities, and changes for organizations; third to elevate a orientation in the thinking of both leaders and subordinates, and finally to warn management trends and interactions (Morrison, 1992; Environmental Scanning, n. d.). Effective environmental scanning performance renders decision makers to aware current potential changes are taking place in their organization's external environments ( Morrison, 1992); Strategic Planning, 2005). A scanning activity provides strategic intelligence as a useful tool to determine organizational strategies. The results of scanning activity is to foster an apprehension of the effectiveness of change in organizations, to aid in forecasting, and to bring expectations of changes that bear on decision making process (Morrison, 1992; Environmental Scanning, n. d.). According to Morrison (1992), three levels of environment scanning are evident: the task environment for organizational setting of customers; the industry environment for incorporating enterprises associated with organizations in society; and the macroenvironment that changes in the social, technological, economic, environmental, and political spheres that affect organizations directly or indirectly (Morrison, 1992; Environmental Scanning, n. d).

Environmental Scanning Types of scanning can be identified by directionless scanning by variety of publications for no specific purpose other than to be informed; specified scanning by responding to information to assess its relevance to the organization; and informal scanning by seeking specific information with a relatively amorphous way (Morrison, 1992). Overview of Hewlett Packard Corporation United States-based HP, like the Apple Corporation, had humble beginnings in a California garage where Bill Hewlett and Dave Packard, two Stanford University classmates, developed their first audio oscillator (Datamonitor, 2007). HP selected electronics as their core technology from which they progressed to microwave technology and signal generators. The

company went public in 1957 and acquired a California-based producer of high-quality graphic recorders that would be the forerunner to HPs printer business (Datamonitor, 2007). According to Datamonitor (2007), HP is one of the worlds leading providers of personal computing and related technologies for individual consumers, small and medium-sized businesses (SMBs) and larger enterprises (p. 5). In spite of its reputation and global dominance in its core competence of printers and imaging, HP is a highly diversified global company with approximately 142,000 employees operating in 14 countries (Datamonitor, 2007; HP accelerates leadership, 2005). HP has expanded through acquisition of smaller companies, including the highly publicized and controversial purchase of Compaq under former CEO Carly Fiorina (Datamonitor, 2007). Unfortunately, Fiorinas stormy tenure left HP in a state of organizational disarray that CEO Mark Hurd has been working to rectify since mid-2005 (HP, 2007). According to Jana (2007), HP has ample room for improvement even though the organization is classified as one of the

Environmental Scanning worlds largest IT companies. Hurd views his mission as optimizing the companys ability to

grow and to optimize the efficiency of the processes and structures to support the company. This mission includes transforming HPs culture in closer alignment with HPs values, in contrast to Fiorinas attempt which ran aground because she ignored the founders values (Jana, 2007). Hurds challenge is turning HPs storied HP Way from an innovative tech focus into a customer-centric culture that provides rapid, customized, user-friendly solutions for a variety of customer types (Jana, 2007). Hurd must transform HP from a 20th century rational, technical organization into a 21st systemic organization with more internal, organic structures that can make quick decisions concerning new products (Kotter, 1996). The most recent demonstration of Hurds leadership in this direction was HPs acquisition of Voodoo PC, a Canadian gaming startup run by gamers, rather than techies, who epitomize customer-centric production (Jana, 2007). HPs acquisition of Voodoo demonstrates the results of HPs environmental scanning process as well as HPs strategy to innovate through absorption rather than internal growth. Although HPs customary practice has been for HP research labs to collaborate with HP business groups to commercialize innovations for business and consumer customers (Hewlett Packard, 2007), HPs recent acquisition reflects a fundamental shift in HPs culture (Jana, 2007, p. 17) where more innovations are expected to come from smaller, organic elements that are in close contact with the end-user. The following sections will review several possible predictive models as well as observations, recommendations and conclusions concerning appropriate systemic models that are consistent with this shift in HPs culture and can assist HPs environmental scanning process.

Environmental Scanning Kurt Lewins Force Field Analysis The shift from the innovative tech focus into a customer-centric culture by HP will

require behavioral change. Garvin (1993) describes the process of change management as being skilled at creating, acquiring and transferring knowledge thereby modifying its behavior to reflect new knowledge and insights. Kurt Lewin, a social psychologist, provides a breadth of research that serves as a foundation for actionable change that HP can use to develop a new culture. Paquin and Koplyay (2007) provide an urgency to actionable change, posing that any firm adopting a status quo strategy will be subjected to a dynamic drift that will funnel it through a veld-vortex leading to a black hole, i.e., a no-return zone (p. 28). Schein cautions and cities Lewin, You cannot understand the system until you try to change it. Change is often resisted even when the change has the potential of positive outcomes (Baulcomb, 2003, p. 277) and by moving through a diagnostic phase of change, can lead to more positive outcomes. Lewins Force Field Analysis is one diagnostic approach that is time honored problem solving and action technique (Schwering, 2003, p. 361). According to Lewin, an issue is held in balance by the interaction of two opposing sets of forces those seeking to promote change (driving forces) and those attempting to maintain the status quo (restraining forces). Force field theory suggests a dynamic interaction rooted in the change process lies between these opposing behavioral influences. The theory places emphasis on the driving and resisting forces associated with any change (Baulcomb, 2003, p. 277). Lewins (1951) field theory posits that forces of change must outweigh the forces of resistance for change to occur. Baulcomb (2003) asserts that for change to be sustainable, a planned approach is useful to analyze the organizational dynamics to better understand how to

Environmental Scanning move from the status quo to a new equilibrium (p. 277). Force Field Analysis is a systemic

assessment of the complex forces that provides a framework of factors or pressures that support and oppose change. Kurt Lewin (1951) defined field as the totality of coexisting facts which are conceived of as mutually interdependent (p. 240). According to Lewin (1943), a simple tool provides assistance to leaders to identify driving forces and restraining forces. By strengthening or initiating new driving forces, reducing the restraining force or removing barriers, the organization can be moved through change. Table 1: Lewins Force Field Analysis Status Quo Driving forces Restraining forces

Gap Analysis Through use of a simplistic tool, organizations can explore the potential forces of change to plan a course of action. The process includes: identifying the issue to be analyzed, explore current reality and desired change, seek driving and restraining forces, rank them as to importance, match productive/counter-productive forces, identify priorities and action steps (NC Dept of Transportation, 1998, p. 77).

Environmental Scanning Peter Senges Dance of Change Model Peter Senges seminal work, The Fifth Discipline: The art and Practice of the Learning

Organization launched revolutionary ideas defining the organization as a body where people are engaged in a process of continual expansion of his or her intellectual capacity to conceive ideas to achieve desired results. The organizations culture nurtures patterns of learning so that individual contributions are freely accepted to achieve group aspiration and members continually learn to connect with the collective greater whole (Senge, 1990, p. 101). Senge (1990) dissects the elements of learning organizations into five definite disciplines of Systems Thinking, Personal Mastery, Mental Models, Shared Vision and Team Learning (p. 10). These five disciplines in concert are the means of building learning organizations. Contemporary organizations are faced with the complexities of global competition which results in the need for differentiation and thus the need to embrace the practice of a learning organization. Adaptability to the ever-changing organizational landscape demands more knowledge than one person's expertise provides. The Dance of Change Model Organizations that drive innovation in an effort to overcome challenges that obstruct progress soon realize that by pushing harder against these challenges makes them seem to be more resilient to the change (Bolman & Deal, 2003, p.148). By anticipating these challenges, building capabilities and contingencies that address them, these challenges become opportunities for transformation and growth. The dance of change model subscribes to the foundational theory that an organizations culture defines systems and processes that ultimately limit or stop growth. Senge (1999) describes these systems and processes are functions of three primary challenges:

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1. The Challenges of Initiating - Not Enough Time, No Help (Coaching and Support), Not Relevant, Walk the Talk 2. The Challenges of Sustaining Transformation - Fear and Anxiety, Assessment and Measurement, True Believers and Nonbelievers 3. The Challenges of Redesigning and Rethinking - Governance, Diffusion, Strategies Purpose (Brannon, 1999) Given the changes expected in the world economy associated with the sciences, technology, social values, demographics, the environment, and globalization, the ability to apply predictive measures which target specific elements of the organizations domain allow the organization to harness the collective talent within to work out these challenges. Learning is an inevitable result of the embracing the concept of the 10 challenges. Leaders will know that the organization may not prosper until the culture adapts to the dynamic and ever-changing circumstances within the organizations domain. Organizations pursing transformational initiatives often realize that after initial success, that even the most promising efforts to transform or revitalize organizations-despite interest, resources, and compelling business results are failing (Senge, 2003, p. 49). The Dance of Change Model focuses on dyadic linkages and the unique relationship that develops among team members who engaging in dialogue. People develop a level of trust that guides discussions toward a deeper level of understanding from one anothers point of view. One key component of dyadic exchange is an assumption of a "larger pool of meaning" available only to a trusted group. The notion dialogue acting as the catalyst of group learning has substantial intuitive application to leaders who subscribe to cultivating the subtle aspects of social inquiry (Senge, 1999, p. 248).

Environmental Scanning Organizations must understand how to initiate change and how to make it fulfill its

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commitments to all its stakeholders, over both the short and long-term. The model of the dance proposed by Senge (1999) purports a strategy of organizational introspection whereby "reflection and inquiry skills provide a foundation for dialogue" (p. 249) and that "dialogue that is grounded in reflection and inquiry skills is likely to be more reliable and less dependent on particulars of circumstance, such as the chemistry among team members" (Senge, p. 249). The collective contributions of the members of the organization enable a clearer depiction of the future of the organizations domain permitting the leaders to anticipate and plan more effectively. McKinseys 7S Framework Traditional approaches to organizational framework typically involve three factors: strategy, organizational structure, and systems. Strategy leads to structure, with complex systems leading to performance. McKinseys 7-S model adds four additional factors: style, staff, skills, and shared goals. This model is more than a strategy model, the model is a way of considering and assessing the current state and possible remodeling of organizations (McKinseys 7s model, 2005). The 7-S approach uses these factors to evaluate organizations and make improvements in these key areas to improve leadership. The 7-S approach differs from traditional approaches in that it brings attention to crucial implications of factors that are often overlooked. While typical managers sometimes rely on strategy, structure and systems, the leader must master style, skills, staff, and shared values. (Watson, 1983). These 7 factors can be described as follows (McKinseys 7s model, 2005): 1. Strategy How a company must adapt to the environment in order to capitalize on potential.

Environmental Scanning 2. Structure The way organizational departments are grouped and related to each other.

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3. Systems The processes that are used to identify important issues, make decisions, and accomplish goals. 4. Style How the organizational leaders affect the culture through their words and actions. 5. Staff What skillsets does the organization need in its employees. 6. Skills What areas the organization must excel at in order to accomplish its goals. 7. Shared goals The guiding themes that all individuals understand to be crucial to organizational success. Strategy, structure, systems, style, staff, skills, and shared goals are important in change and sustainability. The first action in using this model for environmental scanning is to determine strategy, then to define the skills that are necessary to achieve the strategy. Finally, an analysis is conducted to determine what changes are needed in the other five factors in order for the change to succeed and be sustainable (McKinsey's 7s model, 2005). McKinseys 7-S can be adopted for scanning and improving the organizational effectiveness of organizations in various fields. This model identifies the roles of stakeholders, identifies knowledge and skill gaps, and evaluates existing structures (Khan, 2004). By evaluating each of the 7 factors as they currently exist, and identifying what they should be in order for the organization to succeed, specific changes can be identified in each factor. The model can also be modified or tailored by organizations. Higgins (2005) revised the original 7-S model by replacing skills with resources and adding strategic performance to create the 8 Ss of Strategy Execution. This helps to focus the model on strategy execution. For some industries, resources are more appropriate than skills. An organization must determine what resources, such as money, information, technology, and time are needed to

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accomplish its goals. This revision of the basic 7-S model is a way to evaluate potential strategy execution, identify necessary changes, and implement strategy throughout the organization. McKinseys 7-S model and adaptations such as the 8 Ss of Strategy Execution provide insights into organizational effectiveness and can provide organizations with a much needed scanning tool to improve performance (Watson, 1983). Effectiveness of HPs Predictive Environmental Scanning System HP is ranked number 14 in the 2007 Fortune 500, with revenues of $100.5 billion for the four fiscal quarters of 2007 (Jana, 2007). In spite of this apparent success, HP has weaknesses that could affect future success and the behavior of the organization, including HPs ability to make products that consumers want, not simply what engineers can design and build (Jana, 2007). Predictive models can help organizations generate operating rules for a clear understanding of the changing trends of the environment. The choice of models depends on the predictive capability each model provides and what the organization requires for specific project analysis. With three separate business units simultaneously conducting operations at the same time and interconnected with one another, Hewlett Packard is not confined to using one predictive model. Multiple models are referenced in order to serve each business unit appropriately. Ahari (1993) defines interconnectedness as the joining of one thing to something else or to more than one thing, as part of a network. An example of interconnectedness occurs when three rooms are connected to form a suite; each room by itself has value and makes its own contribution, but the combination of values exceeds the sum of the parts and creates an entirely new value, much like synergy. Falletta (2005) notes that similarities and difference exist in the the ways in which variables are represented in the organizational models (p.22), but these

Environmental Scanning differences do not necessarily make each model markedly different in addressing the

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environment or situation to which they are attached. This fact makes the identification of specific measures that determine interconnectedness difficult. One specific measure involves the comparison of sales levels of more than one product in the same product market (Srinavasan and deMaCarty, 1999-2000). If HPs level of managerial support and sales are the measureable result, then the chosen predictive model can be validated by monitoring support and actual sales over a specified time frame. HPs corporate market research organization conducts research to test the predictive validity of various models across the organization. Srinavasan and deMaCarty (1999-2000) describe four studies where pairs of HP products in the same product category were compared (Srinavasan & deMaCarty, 1999-2000). The modeling applications reflected a broad range of HP products-personal computers, calculators, and universal frequency counters to name but a fewwith effective controls on variability for marketing support and market presence during the period of evaluation. The measures used by HP proved to be in good correspondence, thereby validating their approach in using various predictive models. HP has used multi-attribute choice models as the cross-validation tools for respondent ratings, rankings, and product profiles (Srinavasan & deMaCarty, 1999-2000). The cross-validation of hypothetical options and actual purchase behavior has been effective; a few prior multi-attribute choice models have been shown to be consistent in making hypothetical judgments and replicating current market conditions (Srinavasan & deMaCarty, 1999-2000). This consistency is critically important in the predictive modeling since validation reflects accuracy rather than simply being notional. One shortfall exists with the models inability to test the validity of a new product or modification of an existing product. Although choice models are able to predict individual choice behavior; their

Environmental Scanning greatest benefit lies in their ability to predict accurately the validity of actual market performance of commercial products and services (Srinavasan & deMaCarty, 1999-2000, p. 30). Recommendations for Change

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The choice of models depends on the predictive capability each model provides and what the organization requires for specific project analysis. Currently, HP is not confined to using one predictive model but multiple models (Srinavasan & deMaCarty, 1999 - 2000) in order to serve each business unit appropriately. This assessment team recommends HP adopts elements of all three predictive models; Lewins, Senges, and McKinseys 7S. Each model possesses unique attributes of purpose and application to improve organizational effectiveness. Lewins model allows leaders to identify driving forces and restraining forces to target change through strengthening new driving forces and remove barriers of opposing forces. Lewins a social psychological approach may provide a foundation for actionable change by HP where leaders apply techniques to develop cultural change based on new knowledge of driving forces. Senges Dance of Change Model is based on learning organization where people are engaged in a process of continual expansion of their intellectual capacity to conceive ideas to achieve desired results. Faced with the complexities of global competition where consumers demand superior quality products, HP needs to adopt Senges model to expand workers collective intellectual capacity to assess probabilities of specific environmental change to achieve strategic objectives. Competing in the global environment, creating learning environment is an essential, and Hewlett Packard needs to harness the combined talent of its members as a means to develop differentiation from competitors.

Environmental Scanning McKinseys 7S model considers remodeling an organization to improve effectiveness

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through strategy, structure, systems, style, staff, skills, and shared goals to achieve organizational change and sustained performance. Using this model for environmental scanning Hewlett Packard will first determine business strategy then define the skills that are necessary to achieve the strategy. HP may use this model to evaluate organizations and only improve leadership but also key areas of the organizational effectiveness in various fields, such as developing new innovative products, marketing strategy, identifying the roles of stakeholders, knowledge and skill gaps, and evaluating existing structures to improve organizational effectiveness. Conclusion One of most important aspects of environmental scanning is consistency of purpose and validation of predictive modeling reflecting real-world accuracy as opposed to being merely notional. The choice of the predictive model is critical to ensure the model is capable of being validated for effectiveness in development of new products or modification of existing products. Application of an error prone model would result in irreparable damage to the companys competitiveness in the market. Selecting a comprehensive predictive model is imperative for HP accurately to forecast market performance of its products to maintain its competitive position in the global market and increase its market share. However, despite the companys apparent success, Hewlett Packard as an innovative technology company reveals weaknesses in developing products which present unique and technologically advanced products to the current market in which consumers demand innovation. This weakness could affect future success and the sustainability of the Hewlett Packard organization. Thus, HP needs to invest and develop sustainable root-core competence, trunk-

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enabling technology, and fruit-core technology that enable the design and production of cutting edge products by implementation of the environmental scanning strategy discussed herein. HP needs to encourage an organizational culture where subordinates conduct simultaneously operations and interconnect with one another of each unit to improve visibility into the emerging market. The key imperative for HP is that a high level of management validate and allow various predictive scanning models as cross validation tools to verify ratings, ranking, and product profiles (Srinavasan & deMaCarty, 1999 - 2000).

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Schein, E.H. (n.d.). Kurt Lewins change theory in the field and in the classroom: Notes toward a model of managed learning. Society for Organizational Learning. Retrieved on March 6, 2008 from http://www.solonline.org. Schwering, R.E. (2003). Focusing leadership through force field analysis: New variations on a venerable planning tool. Leadership & Organization Development Journal, 24(7/8), 361370. Senge, P. (2003). Taking personal change seriously: The impact of Organizational Learning on management practice. Academy of Management Executive, 17(2), 47-50. Senge, P., Kleiner, A., Roberts, C., Ross, R., Roth, G. and Smith, B. (1999) The Dance of Change: The Challenges of Sustaining Momentum in Learning Organizations, New York: Doubleday/Currency. Senge, P.M. (1990). The Fifth Discipline: The art and practice of the learning organization. London: Random House. Srinavasan, V., & deMaCarty, P. (Winter 1999/Spring 2000). Predictive validation of multiattribute choice models. Marketing Research, 11(4), 28-34. Watson, C. M. (1983). Leadership, management and the seven keys. The McKinsey Quarterly, 44-52.