SWOT analysis is one of the most popular and widely used management tools there is. Creation of the framework is credited to Albert Humphrey (1926-2005). His goal was to assess all of a business’ strengths and weaknesses, as well as the potential opportunities and pitfalls to help develop a robust business strategy. It’s easy to implement and understand which is why it’s so common. As your business develops and grows this simple framework will give you a way to observe the bigger picture to develop strategies to maximise the opportunities and defend against threats.
SWOT analysis (or variations of the framework) seem to be the cornerstone of lots of strategy workshops and senior management away days. Put this tool in your virtual toolbox, it’s worth learning how it works and how it can be used to help your business.
What is SWOT Analysis?
A SWOT analysis is often depicted as 4 squares, 2 at the top and 2 at the bottom. This is referred to as a ‘2 by 2’ (2×2). The headings Strengths and Weaknesses are on the top with Opportunities and Threats underneath, the capitals of these 4 words are where the acronym SWOT comes from.
It can be used at the project level as well. It helps to specify the objectives or a particular venture and identify the internal and external factors which are favourable or unfavourable to achieve the project objectives. Used in conjunction with other project planning tools, this can make a great way to summarise a project.
SWOT analysis is used across all industries and in all sizes of businesses. I’ve been involved with providing SWOT analysis for many different types of enterprise including non-profit organisations, governmental units, international businesses and individuals. It seems to work fine no matter what we throw at it.
It can be used to cover a wide range of topics including analysis for marketing plans, business plans, risk analysis, corporate planning, strategic planning, product launches and many many others.
Consider adding to your analysis the competitive landscape. Think about where you sit in the industry you are in in relation to your competition. This can be included in the SWOT and for extra insight look at the strengths, weaknesses, opportunities and threats that the competition has given your planned strategy (i.e. if I do this what options will they have and how will that affect the SWOT). Just a note about who you compete with; ask your customer, don’t assume who you think your competitors are actually are your competitors in the eyes of the customer.
A Stupid Waste of Time
In lots of the lectures and training sessions I’ve given I’ve joked that sometimes SWOT can stand for a Stupid Waste of Time. This is because I’ve seen everything going in every box because it’s simultaneously a strength, weakness, opportunity and threat. This is of very little help to anyone.
It’s not surprising that if you SWOT the whole universe everything goes in every box, you go round in circles and get nothing but frustration. Particularly true if you’ve paid a facilitator and your senior team to participate it can seem like a stupid waste of expensive time.
Don’t SWOT the whole universe. Take your time and define the thing it is that you’re looking to analysis. If you don’t your SWOT might be a Stupid Waste of Time. #SWOT @RichardMBrooksTweet
To stop this happening I’d recommend putting boundaries around the model. Having a clear definition about what it is you’re using the tool to analyse. If it’s conducted in a group it’s worth appointing a facilitator to challenge the participants’ thinking and make sure the team aren’t jumping ahead in the process. In the template I’ve made as a free download I included some help for you/your team in case you’re doing this yourself.
Free SWOT Analysis Template
I’ve made a SWOT Analysis Template for you to download for free. It’s saved in various popular formats and the download links are below. Feel free to use it, would really appreciate a link, shout out or tweet if you do.
How to SWOT Analysis
The methodology for creating a SWOT analysis is as follows.
Give the SWOT its Boundaries
Decide on the objective of your SWOT analysis. This is by far the most important step and worth spending time on to get right. Avoiding the ‘stupid waste of time’ problem we talked about above to make sure the reason you’re doing a SWOT analysis is well understood by the team and easily understandable to all who work on it.
If you have the problem of putting all ideas in all quadrants and the team can’t agree with anything then revisit the question you’re trying to solve.
Do your Research
Whatever you are planning to do the SWOT analysis on do your research. Get to know what’s happening.
A good source of research is simply talking to people. Try to talk to as many people/stakeholders as possible to get different perspectives on the same topic. If you’re researching a large company or industry there’ll be a wealth of information online.
Your local business school may be able to help you dig out information that. Culture eats strategy for lunch so find out what the culture is like at a company you’re looking into. Research the employees who hold respected positions within the company by reading the About Us page on their website. Stalk them on social media. What are their posts like? Are they proud to represent the brand? Some company leaders may have been interviewed (check youtube) or written books and articles that give you insight into their thinking.
Depending on the vertical you work in and the size of the companies you might be researching investor relations may be able to help. All businesses who are listed on international stock markets have to publish detailed information about their financial standing and strategy. These can be found at places such as Yahoo Finance, Bloomberg, London Stock Exchange and Gartner. There’s also social media (LinkedIn, Twitter and Glass Door for instance) but these must be taken with a huge grain of salt.
Identify the Strengths
Identify and list out all of the strengths you can think of. At this point there’s no need to prioritise as this comes later.
Think about what your company does well and how it stands out from its competitors. Think about how other people would describe your company, what would they say is unique about your firm?
There are tangible and intangible strengths to consider. Examples of strengths for your business could be; your brand, having great customers, a strong balance sheet, unique technology, exclusive contracts, diverse customers, R&D capability, the list will be specific to your business.
If you’re preparing a SWOT for a project consider: If the company has the necessary skills in-house? Has a budget been assigned to the project?
What are the business benefits of completing the project?
Will the project require new technology or equipment?
How experienced is the project team on similar projects?
Identify the Weaknesses
These are things that stop a company from performing at its optimum level, think of them as items that put your business at a disadvantage to others. They are the opposite of your strengths and often directly relate to them. Examples might include; being limited to one supplier, poor access to capital, geographic location, inefficient processes, poor talent, logistical issues and company culture.
Worth noting that as the picture of your company changes it is highly probable that this part of the SWOT is the first to change as these will be the first items you address following a SWOT Analysis.
If you’re preparing this research for a project consider: If the budget is correct? What are the opportunity costs of the project? Will it be outsourced? Is the project plan realistic?
Both the strengths and the weaknesses look at and catalogue the internal parts of your business or project. The external is captured by looking at the opportunities and threats.
Opportunities are everywhere, but you’ll need to find them. In this context, they normally come from the outside of your company or project and you’ll also have to look into the future.
Think about what opportunities exist for you to capture new market share or revenue/margin. Opportunities can come from all sorts of places (often from chaos) so there really are no bad ideas here. These are different to the internal strengths of your business and are not necessarily easy to define. Be aware that an opportunity for one aspect of your business could be a threat to another, avoid the temptation to put items in both the opportunity and threat box.
Opportunities are diverse by nature but could include new technology, social change, training programs, partnerships, new legal frameworks, trade deals, a diverse marketplace and a change of government policy.
Looking for Threats
The last piece of the SWOT jigsaw is the threats. These will be external factors that you have no control over. You will need to put contingency plans in place in order to defend against their impact (if they occur).
Threats are often from an external perspective, they could cause a threat or cause a problem for your business. Examples of threats could include rising unemployment, threat of recession, forward integration of suppliers, new entrants, increasing competition, higher cost of capital and the uncertainty of global markets.
Consider this quadrant through the lens of your competition. This will be dynamic as they respond to your strategy and new threat emerge. It can also be looked at through game theory where we can experiment with different competitor strategies and the impact on your own operations.
SWOT in Practice
Now that your SWOT is complete it’s time to create some actions and put the strategy in place. The first step is to look at the strengths and apply them to the opportunities to take immediate advantage. After that examine how the strengths can build defences against the threats you identified. This will create a list of (relatively) easy wins which should be assigned to your team and progress monitored.
Next comes weaknesses. Identify where external opportunities help you to combat your own internal weaknesses. They’ll be crossover here and you’ll get bonus points for maximising an opportunity and minimising the impact of a threat at the same time.
When you have completed the steps above, you will have separate lists. Ideally, these lists can be displayed side-by-side so you can have an overall picture of how your business is running and what issues you need to address first. If you consider each list item has an effort and impact associated to it, you’ll be able to focus company resources where the largest return for minimal effort is possible.