It’s one of the best-known business analysis tools but one of the most misused. It features in almost every business plan ever written, but the authors seldom know how to truly utilise it.
Used correctly, SWOT is a powerful tool that can protect a business from threats and allow it to exploit new opportunities, yet sometimes we spend too much time admiring ourselves (or our business strengths) in the mirror and we ignore our weaknesses. SWOT analysis is an ideal way to force some self-study and open the mind to new strategies to improve the business.
So where does it all go wrong?
Most companies fail in their use of SWOT because they are not strict enough with the application of the analysis.
Strengths can all too often become an overinflated version of a sales message. When reviewing your company’s strengths, you should not look at it in a way that you hope your customers think of you but rather from a foundation of honesty. If your strength is that you pay your staff less and therefore can pass the savings on to your customers, don’t overlook that, or worse don’t sweeten it by stating something vague like “by improving and streamlining our processes we can stay profitable while ensuring our customers get the best value”. SWOT is an internal tool and you should call a spade a spade, or you won’t get full value from the analysis. By hiding the “truth” of a situation you may inadvertently cover up a weakness. In the above example, your report may fail to point out that there is a chance that because you pay your staff little they may jump ship to a competitor.
In terms of weaknesses, and as with all areas of the SWOT analysis create an exhaustive list but be sure to prioritise the list or you may be overwhelmed and lose focus. Every business has areas that need to be worked on, the important thing is knowing which issues are critical to success and which are minor problems. Only with correct and in-depth analysis can you hope to discern the difference.
When questioning an opportunity, it is critical to ensure that thorough study has been made and you have all the figures correct and in order. If they are inflated, or downright wrong it may not be an opportunity at all. All opportunities should be expanded in your overall business strategy, if not they will just remain chapter headings with no plan to exploit them.
When looking for threats, it’s common and correct to cast your gaze externally. Perhaps a new competitor has moved into your region, or a supplier is struggling to meet your demands. As with the other areas of this analysis, you must always create an expansive list and then narrow that down into a manageable list of actions.
The SWOT analysis must always be used at the correct level.
If not, it can be a waste of your time. For instance, why do a company-wide report if your real focus should be on the latest product your R&D team has been working on. Prioritise the ideas that have been fully costed and work on them first, ensure they meet the purpose of the brief when creating the SWOT analysis and that they don’t overstep or miss the brief completely. Put less specific or un-costed ideas to one side for future expansion and further analysis.
When you do all that you can really start to improve your business knowing you are dealing with well-reasoned and well-researched data.