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Re-visiting the SWOT Analysis

Geoff Schaadt

The first implementation of the SWOT Analysis seems to have been put to use somewhere in Southern France roughly 28,000 years ago by a local cave dweller who was evaluating the wisdom of pursuing a strategic move to the hunting of saber tooth cats.  At least it seems, to those who pay attention to the business publishing industry, to have been around that long.

The long history of SWOT

Actually, the use of SWOT has been linked back to a series of conferences held at Stanford University in the 1960’s and 1970’s.  Or it came from the Harvard Business School during the 1950’s and 1960’s.  Or it was formalized and accepted in it’s current form during the 1980’s.  The point is, in terms of business training and writing, it has been around “forever”.

So why hasn’t this tool faded away like so many other business strategy flavour-of-the-week tools?

It is simple to comprehend and apply very quickly – while still providing a framework for some reasonably deep and nuanced thinking on strategic issues.

What is SWOT?

SWOT is a framework typically used to evaluate the ability of an organization or firm to deal effectively with its environment.

The format is a quadrant-based matrix for evaluation with sections comprised of:

S: Strength – This is something that the organization/firm/group is good at doing or a characteristic that gives it an important capability.  It can be a skill, a competence, or a resource.  Maintain and build upon these:

  • best product
  • great HR practices
  • your location
  • superior technology
  • brand recognition
  • customer service
  • consumer experience
  • great managers

W: Weakness – The opposite of Strength.  Something that the organization/firm/group lacks, does poorly, or a condition that puts it at a disadvantage.  A weakness may or may not make an organization competitively vulnerable, depending on how much it matters in the competitive battle.  Eliminate, quarantine, or minimize these:

  • think the opposite of everything in the Strength list!

O: Opportunity – Any favourable situation in the organization’s environment.  It is usually a trend or a change of some kind, or an overlooked need that increases demand for a product or service.  Seek ways to capture these:

  • emerging new markets
    • internet
    • international
    • new segments
  • new technologies
  • partnering opportunities
  • exiting competition
  • cheaper inputs

T: Threat – Any unfavourable situation in the organization’s environment that is potentially damaging to its strategy.  It could be a barrier, a constraint, or anything that might cause problems. Mitigate or avoid these:

  • new competition
  • shifting consumer preferences
  • currency fluctuation
  • political environment
  • regulations

Internal v. External

The other important aspect in evaluating this matrix is noting that the “Strengths and Weaknesses” components are internal to the firm while the “Opportunities and Threats” are external to the organization.

Or, viewed another way:

Internal = Controllable Factors

External = Uncontrollable Factors

 

Swot analysis-618x389

 

Checklist

A basic list of items to provide a catalyst for your discussions:

  • markets
  • competition
  • financial resources
  • facilities
  • talent
  • technology
  • communication
  • services
  • management
  • culture
  • technical  trends
  • political environment
  • social environment
  • economy

It’s just a tool

Always bear in mind that the SWOT Analysis is just another tool to use as you refine your strategic thinking.

Because the premise is easily grasped, it can be very valuable to use in a group setting.  By engaging many people, the tool can be effective at uncovering a variety of items under each category that one person, working alone, might not have discovered.

However, this same simplicity can undermine the results.  It is a highly subjective exercise, and, given independently to ten people, will return ten different results.  It is also highly dependent on short-term data – this is not an activity that is done one day and is still applicable two months later.

Ultimately, you should think of the SWOT Analysis as a tool to guide your strategic thinking – not to direct it.

 

What’s your experience with this tool?  Have you used it effectively or been disappointed with the results?

Comments

Geoff, in my thinking, a SWOT is only affective once the results are analyzed to validate the actual characteristics of the problem - a SWOT identifies only the potential characteristics of the problem.
This is done by comparing internal strengths and weaknesses against external opportunities and threats in order to try and define strategies for each of these points of comparison.
- Strengths to Opportunities Strategies. How can the strengths be used to exploit potential opportunities?
- Weaknesses to Opportunities Strategies. Can an opportunity eliminate or mitigate a weakness?
- Strengths to Threats Strategies. How can strengths ward off potential threats?
- Weaknesses to Threats Strategies. Can threats be avoided?

By Allen Black on 2011/01/24

Great points Allen.

Another simplified way of viewing the interaction between the four elements might be:

Threat + Strength = Green Light
Opportunity + Strength = Green Light
Opportunity + Weakness = Yellow Light
Threat + Weakness = Red Light

By Geoff Schaadt on 2011/01/25

SWOT remains an effective tool.  My own two observations are that:

OTSW is the best way to do it in a facilitated session because internal Strengths and Weaknesses are only relevant in the context of the External Opportunities and Threats.  Accordingly, focusing on OT first allows workshop participants to then have an idea of the environment within which S and W are indeed S and W.

Secondly, it takes good facilitation skills to ensure that the W’s are not an overly long list while the S’s are relegated to the “committment of staff”!  Geoff’s guidelines will help here.

By Alastair Mills-McEwan on 2011/01/27

That’s great feedback Alastair, I’ve never really thought about the OTSW approach, but you are right on target.

“Committment of staff” - that’s great!

By Geoff Schaadt on 2011/01/27

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About this Article

Posted by Geoff Schaadt
Posted on January 21, 2011
4 Comments

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Categories: innovation, leadership, management, strategy