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Environmental Scanning: How CEOs Can Stay Ahead of the Curve and Beat the Competition

Ken Gosnell
Updated Jul 01, 2022

This four-step environmental scan can help CEOs gain a competitive edge and stay proactive about the future of their businesses.

A leader’s biggest regret can be missing a clearly identifiable trend or failing to make a single change that would have been essential to making a key pivot or decision. In business, the CEO has the responsibility to see opportunities.

“Environmental Scanning” is a business term used to help leaders survey the landscape of competitors, customers and new innovations for products and services. In the same way, faith-driven CEOs should be looking for opportunities to make a difference in the lives they lead and in those who come into contact with the company.  The CEO who is prepared to lead in the future is one who prepares today.

Introduction to environmental scanning

One of the most essential roles a CEO will fulfill in a company that stays current is the ability to scan the horizon, pay attention to the changes that are occurring, and build a strategy to meet the marketplace’s new demands. Environmental scanning allows the leader to move out of the view of the immediate day-to-day and take a macro view of the organization. The environmental scanning process will move an organization from reactive mode to a proactive mode as they pre-adjust to meet market changes and new customer expectations. 

Although many business leaders have never conducted an environmental scan, there are several ways to conduct a scan of the external factors that impact a business. The most popular is known as Porter’s Five Force Model. Harvard Business School professor and consultant Michael Porter first described this model in a 1979 Harvard Business Review article. In it, he describes forces outside a business that significantly impact its performance and operations. Those factors include:

  1. Threat of substitute products or services
  2. Bargaining power of suppliers
  3. Threat of new entrants
  4. Bargaining power of the buyers
  5. Rivalry among existing competitors

This kind of analysis can offer a quick assessment of your business, with each area given a rating of strong, moderate, or weak.

An environmental scan enables the company’s leaders to be ready to react and respond to changes in the marketplace. A watchful leader is not only able to react to changes that will influence the business but also turn those opportunities into positive results. This can include innovations that propel the company to reach new customers and markets. 

There are many different factors for leaders to consider when scanning the horizon for components that can impact business performance. When thinking about the responsibilities of being prepared for the future, CEOs and leaders would do well to remember the words of one of our greatest presidents, Abraham Lincoln, who said: “You cannot escape the responsibility of tomorrow by evading it today.”  

The future will come to the business and the marketplace whether companies or leaders are prepared for it or not. Stuck in past business models and frameworks of thinking, many businesses choose to ignore external changes. Because of the inability of the leader to understand the signs of the time, the company misses opportunities, which ultimately can mean lagging profits, lower production and lesser outcomes.

Many companies that were once successful and seen as leaders in their fields have closed their doors because they did not correctly identify changes in external forces. When companies are not prepared for changes that are thrust upon them, they often fall behind. If the situation is bad enough they end up shuttering their operations because they could not change fast enough to retain market share in comparison to those who wisely adapted to external forces. Many of the companies that have closed due to external forces could have remained a leader in their field if the leader and the organization had paid attention to the landscape of external forces and adapted their business model to meet new demands.

In contrast, the CEO and leader who prepares their organization well by developing a proper perspective of what the business really is all about can adapt during changes in the eternal forces in the marketplace. This is why I led my company, CEO Experience, to encourage well-prepared CEOs and other business leaders to conduct an environmental scan once a year to review shifts that can and will impact business performance.  

The 4 elements of environmental scanning

Staying alert and keeping watch are two concepts that will help CEOs to stay ahead of changes in the marketplace. Below are four areas that CEOs should watch for to remain an alert leader in their business. 

Examine the areas to become aware of and to be prepared for coming changes to the market. Well prepared CEOs can use these changes as a platform to conduct an external scan of their environment to be ready for any potential change that might impact the business.

1. Shifts

CEOs and leaders should pay attention to early shifts of behaviors and shifts in thinking. Leaders should help their teams by training them to pay attention to the shifts that are happening around them. Leaders should conduct a scan of the changes of thinking about the value of your product or the way you do business, as well as a review of the shifts occurring in the culture or community. Well-prepared CEOs should always consider others before themselves. Leaders who will lead in the future understand what others are thinking before everyone recognizes what others have thought. With that in mind, leaders should seek to get into the minds of their customers and potential customers to understand their desires before others articulate their demands. 

When a business examines what a customer wants before the customer knows what they want, the business is sure to be wanted. Steve Jobs once reminded the team at Apple: “Some people say, ‘Give the customers what they want.’ But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d asked customers what they wanted, they would have told me, “A faster horse!” People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

One of the ways to read things that are not on the page is to pay attention to the shifts that are happening in the mind of the consumer. CEOs must stay current on culture with the idea that everything they read can help them read between the lines and discern what is coming next. 

2.  Starts

In business and life, there is always something new that is happening.  Changes often create a sense of urgency to act. In business, existing companies would be wise to pay attention to new things or starts in the marketplace. This scan could include new entrants into the market, newly developed products, or new attitudes or desires of customers. 

One example of a new start in the fast-food industry in the past few years was when McDonald’s started offering a one-dollar menu of some of their items on their menu.  Other fast-food chains became aware of this new start and quickly followed suit, so as to not lose market share based on customers flocking to McDonald’s lower-priced menu. The starts of others can help existing companies know when they should begin something new.  

3. Substitutes

Every business leader should conduct a scan of new or better substitutes for your business and product. As an old proverbs states, “there is nothing new under the sun,” so no company or organization should feel that they have the one and only unique product. It is important for leaders to identify how the consumer might substitute another’s product for theirs, and what changes they should make in their current product to stay ahead of the competition. 

There are always false substitutes that will come into the marketplace, seeking to mirror your products and services. Some of those substitutes can happen locally, but in a worldwide economy many substitutes can also happen internationally. This warning should inspire the well-prepared CEO to build products and services that are not easily replicated or duplicated. In fact, if your business or product is able to be duplicated in a short period of time, this means you have not built your business to last. CEOs who wish to become market leaders must strive to build and produce products that are not easily mirrored.  

4. Signs

The well-prepared leader is one who pays attention to the signs present in the culture. A scan of these signs would include a review of the economic, social and judicial changes that would impact the business. A leader should review any signs of new things that will impact their business or how they do business at the local, national and international levels.  

There are always signs of what is coming if leaders will open their eyes to see. CEOs should train and teach their teams to notice signs from the customer about changing expectations which might come in the form of new or more complaints and new suggestions for more features of a product.

Another place to notice signs is to pay attention to the stock market as a potential sign of how well the economy is doing or which types of industries are on the rise.

Another area to review might signs of change from the generational workforce completed by studies to how new workers are responding to assessments and studies. Every well-prepared leader will pay attention to the signs that are before them so that they can stay on track to building a successful organization not only for this day but for days to come.    

Environmental scanning is an indispensable preparation tool

A quick environmental scan can help the CEO and the company they lead to gain a competitive edge. Such an evaluation can enable leaders to see the changes, pivots and movements that either will impact the business or determine which can be harnessed to help propel their business forward.

This four-step environmental scan can be a quick assessment of changes and shifts in the market that any CEO can conduct with their team to help their organization stay or get ahead. The well-prepared leader is an alert and aware leader who can see things before other leaders can see them. This kind of leader can make changes because they see things more quickly than others and will quickly change from just being in a market to becoming a market leader for that market.  

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Ken Gosnell
Ken Gosnell is the CEO and Servant Leader of CEO Experience (CXP). His company serves CEOS and leaders by helping them to have great experiences that both transform them and their organizations that enable to go further faster. Ken is the publisher of the CXP CEO Executive Guide that is designed to help leaders learn faster by encouraging to give themselves a monthly learning retreat. His monthly CEO retreats have helped thousands of CEOs and their leadership teams to enhance strategic, operational and people accomplishments. He is an author, keynote speaker, executive coach, and strategic partner with CEOs and successful business leaders. Connect with @ken_gosnell on Twitter.