Managers need to do environmental scanning to anticipate and interpret changes in their business environment. The term environmental scanning refers to the screening of large amounts of information in order to detect emerging trends and to create a set of scenarios. Companies that scan their business environment are proven to achieve higher profits and revenue growth compared to companies that don’t.
The importance of environmental scanning was first recognized by life insurance firms in the late 1970s. At that time, the demand for life insurance was declining, and the insurance firms had failed to recognize that there was a fundamental change in family structure in the U.S. Young families in the late 1970s tended to be dual-career couples and they increasingly prefer to remain childless for a longer period of time. Because the families were smaller, the demand for life insurance declined.