Environmental scanning: how developed is information acquisition in Western European companies?

Introduction. A number of theoretical works focus on the potential revolutionary impact of the Internet and other Information and Communication Technologies (ICT) upon Competitive Intelligence, but only a few empirical research papers can be found on it. Is the real impact still unknown, or is it too insignificant to talk about? The present paper searches for the answers to this question both in literature and on the field, focusing on the point where the impact is expected to be the greatest: Information Gathering. Method. Important empirical essays in academic literature were overviewed, including American and also French surveys. Based on literature, hypotheses were established and tested on an existing database, containing information on more than 500 firms collected over two consecutive years. The sample was constructed through telephone interviews and was destined to test the effect of information and communication technologies on several aspects of management. Analysis. Hypotheses were classed into seven groups with respect to the influence of external environment, internal structure and development of IT on the information acquisition activities of firms. Quantitative methods were used to carry out tests on the sample. Results. Internal structure shows only partial influence, but for IT and external environment, the correlation was high. On the other hand, firms are still underdeveloped. Conclusion. The presented results provide better understanding of the level of development of Information Gathering in firms and of the factors influencing it, and suggest new ways for further research in order to understand why firms are still underdeveloped. Environmental scanning: how developed is information acquisition in Western European companies? http://www.informationr.net/ir/11-1/paper241.html[6/21/2016 3:28:29 PM] Introduction 'External Information is a key input in strategic decision-making' (Pawar & Sharda 1997: 111). Competitive intelligence is a set of practices or formalised processes in organizations aiming to gather relevant information about competitors to stay one step ahead in middleand long-range planning (Teo & Choo 2000, Ettore 1995). Information about competitors is merely one piece of all the relevant information, thus scanning must also address technology, success of competitors' products in the market and the whole environment, including economic, legal, cultural and demographic background (Revelli 2000, Hermel 2001) Environmental scanning is predominantly an information acquisition activity (Aguilar 1967), while business intelligence or competitive intelligence are broader terms including information processing and dissemination in addition to information acquisition (Herring 1988). Nevertheless, the terms competitive intelligence and environmental ecanning are both used in this paper, as the focus is on information acquisition, which is common for both competitive intelligence and environmental scanning. This information gathering differs from industrial or economic espionage in strictly avoiding illegal practices. Legality is the key in using the Internet for competitive intelligence, and 90% of strategically relevant information is freely and legally accessible on the Internet (McGonagle & Vella 1998, Revelli 2000). A number of works discussed how information and communication technologies would make easier and more effective competitive intelligence, Chief Executive monitoring or environmental scanning (Huber 1990, Bournois & Romani 2000, Revelli 2000, Choo 2001, Benczúr 2002). However, these works often present only a theoretical perspective, without providing field studies. As Teo and Choo observed, 'there is little empirical work on the impact of Internet on CI' (2001: 67). Z. Karvalics observed a lack of papers not only for empirical works, but also for the entire topic. 'Corporate Input Information is hardly covered by the literature compared to Internal Information Flow' (Z. Karvalics 2001: 76). This means that a lot has been written on how information systems process business information inside organizations to help workflow, communication, knowledge management and decision-making, but only few focused on the input interface of these systems to external information. (Input information is the term used to define external information that has an impact upon decision-making in companies.) This statement can be easily verified: if one types 'business intelligence' into Google, it provides some 45,000,000 references. If we test major internal information sources: 'business intelligence AND ERP' provides more than 10,000,000; 'business intelligence AND CRM' more than 15,000,000; 'business intelligence AND data warehousing' more than 7,000,000 million. On the contrary 'business intelligence AND environmental scanning' provides only 11,400 occurrences, 'business intelligence AND competitive intelligence' 225,000, while Environmental scanning: how developed is information acquisition in Western European companies? http://www.informationr.net/ir/11-1/paper241.html[6/21/2016 3:28:29 PM] 'environmental scanning' itself has 232,000 references and 'competitive intelligence' little more than 2,000,000. In fact, there are two important questions: first, how do companies really manage input information, and secondly, why are there so few studies on it. This paper aims to investigate what companies really do; how do they benefit from the Internet to gather strategically relevant information and what factors may be identified that are responsible for the (under)development of environmental scanning. Earlier empirical works are reviewed first, then seven groups of hypotheses, derived in part from the literature, are verified by means of a large survey of companies. The theoretical basis of environmental scanning and competitive intelligence is not discussed here, but the interested reader may find good summaries among the referenced papers (Aguilar 1967, Choo 2001, Correia & Wilson 2001). As for a general approach from the point of view of strategic management we recommend the chapter on the Environmental School in Mintzberg et al. (1998). Earlier empirical works Environmental scanning emerged in the 1960s, when company executives began to speak about it openly and it became part of strategic planning (Russel & Prince 1992). But it was only in the 1980s that business intelligence systems and management information systems appeared, promising more effective use of external information. Competitive intelligence had quite large and interesting literature at that time, which is where the following literature review starts. It is not a presentation of the state of the art, it is rather the overview of the most important empirical works. The emphasis is more upon what was examined than on what was found. With this approach, the intention is to look for the reasons for the lack of empirical work. Studies before the World Wide Web The first study to be mentioned is Fulds (1985). The findings therein were based on a questionnaire, nineteen pages long, answered by only thirteen leading planning and market analysts. The study concluded that the most wanted information were return on products, marketing strategy and production costs, independently of sector. He also found that most competitive intelligence systems were rather underdeveloped. Later, Fuld completed the study (1988) with personal and telephone interviews, which showed that competitive intelligence had become more widely known over the course of three years, but systems were still underdeveloped. The other important result was that competitive intelligence was just as important for small companies as for large ones. In the same year Sutton (1988) published his results on 308 surveyed firms. The most wanted information was found to be price, and the best source was the seller Environmental scanning: how developed is information acquisition in Western European companies? http://www.informationr.net/ir/11-1/paper241.html[6/21/2016 3:28:29 PM] himself. Only 3% of companies had fully developed competitive intelligence systems. Fann and Smeltzer (1989) found contrary results to Fuld's. After forty-eight interviews with small firm executives, the paper concluded that the surveyed executives did not use competitive intelligence systems for either strategic or operative decisions. Gelb et al. (1991) had a different approach to input information. The biggest problem was not information gathering itself, but the lack of existing technologies that support decision making as to the accuracy of information. Findings were based on twenty interviews with industrial firm executives. Folsom (1991) focused on identifying sources of information. He concluded after 101 interviews with commercial company executives that information mostly comes from customers, suppliers and the other company owners. We have to mention also Brockhoff (1991) who made eighty interviews with marketing and research and development directors in Germany. Focusing on technological scanning, the study found that all participants thought it important to know about technical development of competitors, but only 50% had a system to monitor competitors' developments. In 1989 Prescott and Smith realised the largest ever survey on competitive intelligence up to that time. They sent a questionnaire to 172 companies, and all the questionned Competitive Intelligence Officers were members of the Society of Competititive Intelligence Professionals (SCIP). The sample, therefore, was not representative for all firms, competitive intelligence techniques were well over-represented, but the ninety-five returned questionnaires contained many interesting details. Focus, average length and budget of competitive intelligence projects were investigated, and the profile of the average project participant was addressed, with the analysis of its tasks and sources. The competitive intelligence systems were clearly underdeveloped in these companies, too, but they knew about the potential gains. The most serious problems included the lack of experts, insufficient involvement of executives and ethical/legal issues. In the conclusion, the following prerequisites were suggested for successful competitive intelligence: 'Institutionalise competitive analysis' (involvement of the whole company), 'CI should be project based', 'CI personnel should be result oriented', 'No research finding stands alone' (findings should be integrated into a knowledge bank, modifying or reinforcing what is already known), 'Recognise decision makers' comfort zones' (anticipate managers' expectations when results are presented. If findings do not meet expectations, managers tend to dismiss them.) (Prescott & Smith 1989: 13) Environmental scanning: how developed is information acquisition in Western European companies? http://www.informationr.net/ir/11-1/paper241.html[6/21/2016 3:28:29 PM] The paper of Subramanian and Ishak (1998) was received by the journal in October 1995, so it does not mention the World Wide Web. However, the study, based on eighty-five returned questionnaires has, among many others, two relevant findings. First, it identifies the most important types of information in different sectors: sales by products for pharmaceutical, consumer products and retailing companies; strengths and weaknesses of competitors for banking, services, transportation and utilities; new products and services in development for automotive, health care, computers and telecommunication, etc. Secondly, they compared Return On Assets with the level of development of competitive intelligence and concluded, that 'high-performing firms exhibit more advanced competitor analysis systems than low-performing firms' Subramanian & IsHak 1998: 19.