Firms need new ways to monitor their environment

Everybody knows that companies need to monitor their external environment in order to identify potentially disruptive changes and respond to them before it is too late. The story of the boiling frog is a much-used analogy that warns firms to the dangers of ignoring changes—even small ones—happening in their environment.

Not surprisingly, our research has found a positive link between ‘monitoring intensity’ (that is, how much time and resources a firm spent on monitoring its external environment) and performance. This was particularly the case for firms operating in volatile and turbulent environments. However, our research has also uncovered a surprising finding: within the sample of firms that did a lot of environmental monitoring, there was a lot of variance in performance—some were performing well and some were not. This implied one of two things: (a) Environmental monitoring is only one of the many factors that influence performance; and/or (b) It is not how much environmental monitoring that you do that is important but how you do this monitoring.

Monitoring for the 21st century

We explored the differences between those firms that did a lot of environmental monitoring and were successful versus those that did a lot of monitoring but were not successful. It appears that many firms still monitor their environments by using practices, tools and techniques that were developed in the post-war era when the outside environment was not as volatile and fast changing as it is today.