SWOT – The most abused analytical technique in management
As most business people would know SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.
Traditional SWOT analysis is possibly the most widely known and among the most utilized means of situation analysis. A SWOT analysis is used to assess the fit between a company’s internal resources and capabilities (its strengths and weaknesses) and external possibilities (its opportunities and threats).
The technique can be applied to many areas of a company, including products, divisions, and services. The simplicity and ease of using this model have made it a popular technique, particularly for determining a company’s ability to deal with its environment.
However, it is also arguably the most misused, misapplied, abused and poorly understood analysis method in management today.
Have a look at the diagram below.
Most people undertake the first SWOT that, to be honest, provides executives with little insight and no options as to their competitive abilities. It is so easy to fill in four boxes and persuade yourself you have done analysis!
The real SWOT (as originally developed by Harvard Professor Ken Andrews) will always deliver insights and options for good decision making. It is a little harder to do however every client I have worked with using this “proper” SWOT has uncovered invaluable insights and options as to its competitive ability.
So how can you improve your use of SWOT Analysis?
Step 1: The first step in utilizing a SWOT analysis to understand each of the elements.
a. Strengths: Strengths are those factors that make an organization more competitive than its marketplace peers. In other words, those factors that differentiate you from your competitors. It is where the company has a distinctive advantage at doing or what resources it has which are superior to the competition. Listing what you believe are your strengths is simply an exercise in patting yourself on the back! Strengths are what differentiates you from your competitors. Your customers, suppliers and third parties know your strengths well compared to your competitors.
b. Weaknesses: A weakness is a limitation, fault or defect within the company that can prevent it from achieving its objectives. They occur when the company performs poorly or has inferior capabilities or resources compared to the competition. Again, your customers, suppliers, and other third parties would be aware of your real weaknesses.
c. Opportunities: Opportunities include any favorable current or prospective situation in a company’s environment such as a trend, change or overlooked need, which supports the demand for a product or service and permits a company to enhance its competitive position. Opportunities are equally valid for all players in your industry – not just you!
d. Threats: A threat includes any unfavorable situation, trend or impending change in a company’s environment that is currently or potentially damaging or threatening to its ability to compete. It may be a barrier, constraint, or anything that might inflict problems, damages, harm or injury to the organization. Again, these threats are equally valid for all the players in your industry.
Once you have completed your list in each of the four boxes, the hard work now begins.
Step 2: You now need to match each of the boxes with possible strategies you could undertake –
a. Matching your Strengths and market/industry Opportunities – what are some activities/strategies you could develop?
b. Matching your Weaknesses and market/industry Opportunities – what are some activities/strategies you could develop?
c. Matching your Strengths and market/industry Threats – what are some activities/strategies you could develop?
d. Matching your Weaknesses and market/industry Threats – what are some activities/strategies you could develop?
This is not easy to do and requires thinking.
Below is an example of a completed SWOT.
Once you have completed your SWOT, you will notice some common themes in the activities/strategies you have available. These common themes become what I call your strategic imperatives. You should address these in the coming 12 months as they will provide you with a competitive ability based on your current market fit.
Each year, business executives need to repeat this process as your fit will no longer be the same – and neither will your marketplace!
EXAMPLE: SWOT Analysis for Cannondale Bicycle Corporation