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The SWOT Analysis: Will it ever die?

Geoff Schaadt

The SWOT analysis has been around, seemingly, forever.

This is interesting only because nothing in the world of business management lasts for more than a couple of years before the big publishers and the HBR glitterati move us on to the next favour of the week. So, how is it that SWOT has been this durable?

The obvious answer: it continues to work better than the alternatives.

But I believe that it goes beyond that.

Are there many other approaches to strategic decision-making that are at least as good as SWOT, if not better? Of course, there are many, many alternatives.

So why is the SWOT so durable?

Two reasons stand out in my mind:

  1. It’s easy to understand.
  2. It creates useful feedback.

What is SWOT?

For the seven people out there who are not familiar with the SWOT framework…

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:

  • weak corporate culture
  • disengaged employees
  • ineffective leadership
  • inefficient processes
  • complex/fragile products
  • poor location
  • inadequate innovation efforts

…think the opposite of everything in the Strength list!

O: Opportunity

A 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.

How about OTSW?

It was pointed out to me a few years ago, by Alastair Mills-McEwan, that he preferred to facilitate SWOT sessions by beginning with the Opportunities and Threats first because Strengths and Weaknesses are only relevant in the context of the external environment.

And in this perception, he is absolutely correct – OTSW is the way to go.

Evaluate issues external to your organization before looking inward.

Unfortunately, people always remember the term SWOT – probably because they think of the word ‘swat’ or perhaps to SWAT teams. But they never, ever remember OTSW. You will have to do that for them!

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 also tends to promote a “short-termist” view of the environment.

Will the SWOT analysis ever die? It’s kind of like the Phillips head screwdriver: it usually works reasonably well when used appropriately (though it is often applied incorrectly and makes an unmitigated hash of things when it is) and an awful lot of people know how to use it. So, no, I don’t think it is going away any time soon.

Ultimately, you should think of the SWOT Analysis as a tool to guide your strategic conversations rather than a straight-line compass to definitive decisions.


 

Phillips Screwdriver: Rev.Dr.Seb via Compfight cc

Comments

My lecturer once debated that TOWS (I think that’s how it’s called) is a better approach to analyzing business situation than SWOT. Yet, I disagree. Environment is changing all the time and the changes are ever more rapid. If we were to use TOWS approach, that would mean our core competences, skills and capabilities would have to change with every change in the environment. That’s just not possible. Companies do have to adapt to the environment, but they do that by slowly, not moving from manufacturing to software development.

Ovi

By Ovidijus on 2016/10/04

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Posted by Geoff Schaadt
Posted on June 26, 2015
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Categories: learning, management, organizational development, process improvement, quality, strategy