Harvard Business School Working Knowledg e Archive

Scanning for Threats and Opportunities

"All managers scan, but they often do so passively," say the authors of Peripheral Vision: Detecting the Weak Signals that Will Make or Break Your Company. This excerpt outlines tips for seeing both the forest and the trees.

A medical device company challenged itself with a provocative question: "What emerging drug therapies could replace our device business?" With this question, the company expanded its scope from looking at competing medical device makers to a much broader set of competitors and customers. Once the scope has been expanded, however, how can managers begin to answer such questions? To test its hypothesis, a team from the company was charged with creating a therapy or business model that could destroy its existing business.

This required team members to actively scan for new ways to think about the market, emerging technologies, and new business models. The question focused attention beyond traditional direct competitors in medical devices to potential rivals in drug therapies and relevant corporate and academic research. The team also needed to look beyond current customers and competitors, to scan consumer attitudes toward drug therapies in comparison with medical devices, and to consider the broader social and regulatory forces that could reshape the environment. To see more of the periphery, the organization had to change how it scanned.

In this chapter we consider how the organization can look in these new directions. To see new parts of the periphery, managers must use different scanning approaches . . . . [We] offer a portfolio of scanning methods to capture and amplify the weak signals within targeted zones of the periphery: inside the firm; customers and channels; the competitive space (competitors and complementors); technologies, political, social, and economic forces; and influencers and shapers.

Active scanning
There is a difference between active and passive scanning. All managers scan, but they often do so passively. They keep their antennae up and wait to receive outside signals. They are continually exposed to a wealth of data ranging from the fuzzy impression of trade rumors to harder evidence from sales reports, trend studies, and technology forecasts. Managers monitor key performance indicators and other metrics for assessing accountability, maintaining control, and guiding Six Sigma initiatives.2 (Although these systems may have constituted active scanning efforts when they were designed, most are now automated and passive.)

Although managers using this passive approach may feel in tune with the periphery, this may be a delusion. Because most of the data comes from familiar or traditional sources, this mode of scanning tends to reinforce, rather than challenge, prevailing beliefs. Because these metrics are tightly specified and focused on current operations, they are the antithesis of active scanning. There is no room for exploration. This passive stance narrows the scan and dulls the curiosity. Unexpected and unfamiliar weak signals will probably be lost.

Active scanning, in contrast, is often in response to a specific question, such as that asked by the medical device manufacturer. . . . Active scanning reflects intense curiosity and emphasizes the further-out and fuzzier edge of the periphery. For example, an advertising agency and its clients may passively scan results from television ad campaigns or trends in the industry. But managers could actively seek the answer to the question: "What are the consequences of more people surfing the Web and becoming increasingly skeptical of advertising?" Active scans often are hypothesis driven. If critical issues are involved, there should be multiple hypotheses.3 Organizations entertaining multiple theories will more probably mount search parties using teams of outsiders and insiders, with diverse portfolios of methods. They use the scientific method of first proposing a hypothesis and then observing, speculating, and testing.

Selecting random magazines: Directed versus undirected scans
In directed scans, managers seek an answer to a specific question, but active scanning also can be undirected. Undirected scans involve more open exploration. For example, Buckminster Fuller developed a very personal and systematic approach to scanning the periphery. Whenever he was at an airport, he would randomly select a magazine from the stands in the bookstore and read it on his plane ride from cover to cover. On one trip the magazine might be about gardening, on another about fashion or airplane design. With each trip, Fuller learned something new and saw the world in a different way. Many managers could benefit from adding such vicarious reading discipline to their travel routines, especially now that we customize our computer screens and newsletters to report only what we deem relevant. Undirected searches may offer answers to questions that we do not even recognize or know how to formulate.

Active scanning is often in response to a specific question.

Active, open-ended scans are particularly important in turbulent environments where unexpected, outlying data might become more important. In complex environments, the scanning must be hypothesis driven but also open-minded. In stable environments passive scans might suffice, while in slowly changing environments a passive, open-ended approach could work. But, ideally, your organization uses both approaches as needed.

Splatter vision: Seeing the forest and the trees
Some combination of directed and undirected search may be ideal. The FBI, for example, trains its agents to use a scanning approach called "splatter vision." This involves scanning a crowd for would-be assassins by looking into the distance and not focusing on anyone in particular. Once the agent fixes a general gaze, he or she looks for deviation or change. Is someone restless, looking around too much, slowly putting a hand into a coat pocket? From among hundreds of faces, the agent seeks a lone assassin; suspicious activity then triggers a more intense focus.4 By balancing directed and undirected scanning, a single agent can spot signs of trouble across a fairly large area.

When applying splatter vision to business, managers might use a broad hypothesis to help to focus attention, but they must also remain open to new information that might fall outside this original hypothesis. An organization might have a set of surveillance units broadly scanning the globe to answer strategic questions, combined with ad hoc task forces or mobile SWAT teams that can be directed to explore specific hot spots. This approach permits a wide scope of vision without requiring the cost and complexity of carefully monitoring every square foot of the globe in detail.

Scanning strategies for specific zones of the periphery
Different areas of the periphery, as shown in figure 3-1, require different scanning approaches. Some are staples of competitive intelligence, technology forecasting, and market research. Others draw on new technologies for searching the Web or for achieving deeper insights into consumers through metaphor elicitation, lead-user analysis, trend tracking, and other approaches. We look at each of these areas of the periphery in turn and offer guidelines for practical approaches.

Start scanning inside
The active scanning process can start with the insights locked inside the company. In many organizations, this internal knowledge is not well connected to decision makers. For example, a CEO at one company was collecting information about a tangential competitor. At a senior management team meeting, the VP for manufacturing casually mentioned that this same rival had been buying equipment similar to their own, a sign that it intended to compete head-on. This competitive intelligence was within the firm, but until this meeting the VP didn't understand the strategic issues well enough to know that it was valuable. The scale and scope of organizations create problems of uncoordinated, distributed intelligence. Literally, the organization doesn't know what it knows and cannot bring the collective insights to the surface and coalesce them meaningfully.

Different areas of the periphery require different scanning approaches.

The larger the company, the more points of contact it will have with the periphery. Salespeople are in constant touch with customers, development teams hear gossip at trade shows, retail sales clerks register complaints and requests for new items, and finance people are aware of competitors' capital needs. Each point of contact has the potential to be a valuable listening post. For example, most companies have call centers, but many treat these call centers as costs to be minimized rather than as useful listening posts. Often, these contact people lack the expertise to recognize and interpret the weak signals appropriately.

To improve the ability to capture the peripheral insights within the organization, there must be (1) appropriate and visible channels for sharing information, (2) wide knowledge of the questions guiding the scan, and (3) incentives for actually sharing useful information. People must engage in frequent and free dialogue for the necessary connections to occur spontaneously. This, in turn, requires a culture of trust, respect, and curiosity, plus the recognition that information sharing is crucial. Too many companies still operate in a mode where information is shared on a "need-to-know" basis only.

Excerpted by permission of Harvard Business School Press from Peripheral Vision: Detecting the Weak Signals that Will Make or Break Your Company. Copyright 2006 George S. Day and Paul J. H. Schoemaker; all rights reserved.

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George S. Day is the Geoffrey T. Boisi Professor of Marketing and Codirector of the Mack Center for Technological Innovation at the Wharton School, University of Pennsylvania.

Paul J. H. Schoemaker is Research Director of Wharton's Mack Center for Technological Innovation, and founder and Chairman of Decision Strategies International, Inc.

Figure 3-1: Capturing weak signals from the periphery

Figure 3-1

Excerpted by permission of Harvard Business School Press from Peripheral Vision: Detecting the Weak Signals that Will Make or Break Your Company. Copyright 2006 George S. Day and Paul J. H. Schoemaker; all rights reserved.


2. This is also true of the fully developed system of metrics found in the Balanced Scorecard strategy map framework for illustrating how strategy links intangible assets to value creating processes. See Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Boston: Harvard Business School Press, 2004).

3. The case for having prior hypotheses was well made by James M. Utterback and James W. Brown, "Monitoring for Technological Opportunities," Business Horizons, October 1971, 5-15.

4. Wayne Burkan, Wide-Angle Vision: Beat Your Competition by Focusing on Fringe Competitors, Lost Customers, and Rogue Employees (New York: John Wiley & Sons, 1996), 85-86.