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Environmental Scanning and Analysis: A Brief Examination of the Hospital Industry

by Information Uncover


Many authors have written about the importance of examining the external environment for early signs of future opportunities and threats. An integral part of this type of examination is Environmental scanning. Environmental scanning, in general, is a process where an organization monitors organization-external information by having persons read, peruse, or use some other method (computer identification and extraction for example) to examine externally generated information. Talking with people outside the organization is also part of environmental scanning.

The information gained through scanning is analyzed to generate business or strategic intelligence. This strategic intelligence can be used to establish future, plausible scenarios. These scenarios can enable a hospital to better identify signs of future opportunities and threats. This identification could allow the hospital to improve its strategic management. Improving it's strategic management can help the hospital better meet its business goals.

In the health care industry, environmental scanning has been important for some time, because the health care industry has always been impacted heavily by a number of external forces that can create opportunities and threats. These forces include competitor forces, regulatory forces, market forces, technology forces, and other environmental forces. Extensive examination of these and other external forces is useful in creating scenarios for analyzing the possible impact of future external forces.


Classifying information, received from external sources, helps in the strategic analysis. Different classification schemes have been used over the years. Probably the best known classification scheme is the “STEP” scheme. In this scheme, the “S” represents the "social” category; the “T” represents the “technology” category; the “E” represents the “economic” category; and the “P” represents the “political” category. An analyst can also use a scheme we call the Business System Model Scheme.

As implied by the name, this scheme is associated with a model we use for business analysis. And we designed the category scheme specifically for categorizing business information. In using the Business System Model Scheme, an analyst assumes that the elements of an organization’s external environment can be described using ten categories.

The ten categories are as follows: Market (MAR), Technology (TEC), Litigation (LIT), Regulatory (REG), Government (GOV), Political (POL), Foreign (FOR), Competitor (COM), Collaborative (COL), and Management (MAN). To use the Business System Model Scheme, an analyst might first build computer folders for each one of the ten categories for a specific industry.

And after examining relevant information, the analyst would then decide which piece of information best matches a given category. The analyst would then deposit the appropriate information in the appropriate folder. The information piece might be a copy of an article, a summary of an article, an abstract of an article, an excerpt from an article, the title of an article, or some other representation of the information.

Also, as part of his environmental scanning process, the analyst might frequently talk with people who have knowledge of, or opinions about, the industry and those forces in the external environment that might affect the industry. And when the analyst felt that someone had given him or her some important industry related information, the analyst would summarize that information and deposit the summary in the appropriate category-related folder.

The analyst would then analyze the information in the categories. And by interpreting the information and adding value based on experience, the analyst could arrive at strategic intelligence that indicates plausible, future scenarios that could produce identifiable future opportunities and threats.


Suppose an organization felt that knowing the dominant force in an industry would enable the organization to determine the most likely source of future opportunities and threats associated with the organization’s industry. Further, suppose the organization felt that categories containing the most abundant, relevant information could be considered the dominant force in the industry.  And suppose the organization felt that the category containing the most industry-related information for a year represented the dominant force for that year.

For example for a given year, call it year X, let’s assume that for its industry, the organization wanted to determine which one of the ten categories mentioned above contained the most industry-related information during year X. Let’s say that the organization instructed its analyst to first construct computer folders using the ten category names mentioned above, then look for appropriate industry-relevant business information to put in the folders.

For online sources, the organization could make use of text mining methods to automate the process of extracting and depositing information in the category-folders. The organization could establish a set of keywords and phrases for each category. The organization’s analysts could then use this set of keywords and phrases to search year-X information sources for publications containing the keywords and phrases. And once the relevant information was found, the analyst could deposit (or program a computer to deposit) some representation (summary, excerpt, first paragraph, etc.) of the information in the appropriate category-folder.

Once the analyst had a year’s worth of information, the analyst could determine, after analysis, which category contained the most information. This category would represent the dominant force for the industry. At least this category would be the category getting the most attention. And further analysis would probably indicate that even if this category doesn't represent THE dominant force, the category probably represents one of the most important forces in the industry. And the analyst would most likely conclude that this force category will be associated with important industry future opportunities and threats.


To give you an example of how an analyst could determine the hospital industry’s dominant force, let’s consider a 2004 hospital-industry-related research study we did at the beginning of 2005 using an online database system. That online system is the pay-for-use system, Factiva. Factiva is is owned by Dow Jones. You may recall that Dow Jones is the company that publishes the Wall Street Journal and Barron’s. Along with other types of publications, Factiva gives a researcher access to approximately 400 U.S. newspapers.

The represented newspapers include the Wall Street Journal, The Houston Chronicle, The Dallas Morning News, The Denver Post, and The New York Times. (Dialog and LexisNexis are also pay-for-use systems that give an analyst access to a significant number of information sources. All three of the online systems -- Factiva, Dialog and LexisNexis -- provide very powerful search engines.)

How We Did the Study

Using a set of keywords and phrases, we established for each one of the Business System Model categories mentioned above, we defined Factiva-appropriate search statements. For example, here are some of the keywords associated with the technology category search statement:   “technology,” “science,” “engineer,” “developmental,” “design,” “patent,” and “research.” And the search statement for the technology category looks like this: (hospital or hospitals) near50 (technolog* or scien* or engineer* or developmental* or design* or develop or patent* or research*).

Here’s an explanation of the search statement: Reading from left to right, you first see a set of parentheses containing “hospital or hospitals.” Let’s call words in a parenthesis a "term." Then the first term in our search statement insures that any publication identified by the statement contains one of the words “hospital” or “hospitals” since we want the identified publication to always somehow address hospitals. Next you see “near50.” 

Near50 is a proximity operator that allows the researcher to identify text within publications where one word or term is within fifty words of another word or term. So, again, reading the search statement from left to right, the statement directs the search engine to identify text where at least one of the words “hospital” or “hospitals” is within fifty words of any one of the words appearing in the second set of parentheses.

Within the second set of parentheses starting with “technolog*,” you see an asterisk (*) attached to most of the keywords or keyword roots. The asterisk instructs the search engine to look for all text containing forms of a keyword or keyword root, where the leading characters of the word in the text are identical to those in the keyword or keyword root, up to the asterisk. For example, “technolog*” instructs the search engine to identify text containing “technology,” “technologies,” “technological,” etc.

Among online database system users, this kind of use of a symbol to locate text containing different forms of a keyword or keyword root is sometimes called truncation, assuming, of course, that the symbol is recognized by the search engine as a truncation device. And sometimes, using a symbol in this fashion is referred to as using a “wildcard.”

Now here is another search statement example: This example is for the “market” category mentioned above. Here, we used the following search statement: (hospital or hospitals) near50 (market* or demand* or price* or supply or service* or leading* or distribute or patient*). The words “supply,” “demand,” “service,” and “price,” are some of the keywords this statement looks for.

The Study Results

Using the two search statements shown above, along with eight other search statements established for the remaining eight categories, we ran searches to determine which category received the most attention in the approximately-400 U.S. Factiva newspapers during 2004. The pie chart below shows the results.


Note: This is a 2004 chart. The labels on the pie slices are abbreviations of the ten         categories described above. For example, MAN represents the management category and  COL represents the collaborative category.

As you can see in the pie chart, the market category received the most attention at 29%. Since this was the case, we felt we could assume that the market forces were the dominant forces during 2004. The government was in second place with 19% of the attention, meaning that the government was the second dominant force in the hospital industry, based on the
U.S. newspaper articles. And the percentages associated with the other categories were as shown. 

A hospital could use this type of information to help design its overall business strategy. The hospital would assume a future scenario where market forces play the most significant role in the hospital's environment. And the hospital would focus more on market forces than on the other forces, when designing its marketing strategy. For example, the hospital could investigate the keywords or keyword roots of the “market” search statement to determine which one of the keywords or keyword roots in the statement received the most attention. The hospital could then use this information to better focus its marketing efforts.

In our 2004 study, we determined that keywords with the root word “service” received the most attention in the newspaper articles, when compared with the other keywords in the “market” search statement. So a hospital would have done well to have focused more on strategic activities associated with hospital service, rather than on some of the other strategic activities.

Prior to 2004, the quality of hospital service received a lot of attention in the press. In 1999, the Institute of Medicine (IOM) reported that approximately 98,000 medical errors occur per year. And a 2004 USA TODAY article indicated that the estimated 98,000 per year death-related medical errors continued to occur.

Along with the quality of services, the costs of hospital services received a lot of attention during and prior to 2004. And the costs of hospital services are receiving even more attention today. Historically, the costs of hospital services have received attention mainly from health maintenance organizations, insurers and employers. However, as the consumer began paying more out-of-pocket for hospital and other health care services, the consumer began paying more attention to the costs of these services.

Knowing that the consumer is paying more attention to the hospital costs, and considering our environmental scanning results above, we can establish some plausible, future scenarios. For example, one of our scenarios could be the following: Patients will use hospitals that give them the best service for the price the patients have to pay. Establishing scenarios like this can allow the hospital to perceive future opportunities and threats.


Environmental scanning and analysis can provide important information to a hospital. For example, the above scanning and analysis results indicate that building a strategy around service quality, while giving due consideration to the service price, might give a hospital a competitive advantage. Indeed, the results show how using environmental scanning and analysis methods can enable a hospital to gain insight into the future. This insight can enable the hospital to establish scenarios that can illuminate possible, future opportunities and threats. Identifying opportunities and threats will give the organization the capability to enhance its strategic management.