There are lots of tools to help you through your strategic thinking and planning process. So many it’s hard to choose sometimes - really hard. This post is dedicated to using one of those tools well, the SWOT Analysis.
I can feel it.
I’m already losing you and this is only sentence six.
Hear me out though. You need to ask yourself, have you ever really SWOT? (For my internet friends, "Do you even SWOT bro?") If you do it well a SWOT has the power to bring people together, save your company time and help you get the most bang out of whatever your budget looks like - including a low/no budget operation.
A strategic tool is only as good as the information and the intention that goes into it. A lot of business owners stick their noses up at the idea of going through the process of a SWOT. They think that a SWOT is too rudimentary or not powerful enough to handle the complexities of their business. I blame MBA's (who I have much love for and have been a professor to) and business gurus too for ruining this tool.
I vehemently disagree that the SWOT analysis is too simplistic. I think it's perfectly simplistic and more often than not, business owners make things too complicated for their own good.
That's not you of course.
I think the SWOT is a great tool for organizing ideas, identifying your business model (you’d be surprised to see how many business think they are in one kind of business but in reality are in a totally different industry) flushing out themes and core competencies, and even helping to identify your competitive advantage.
The goal of the SWOT is to get information out in the open so that you can make decisions. The SWOT will not make decisions for you. This is so important you have to read it again. The SWOT will not make decisions for you. It’s not a decision making tool (that link takes you to a really great and free decision making tool) and I’m not thrilled about some people using it as an “icebreaker” for strategy talks. Let’s give Albert Humphrey and his SWOT the respect they deserve!
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The S and W should be internal questions - the things that are happening in your business. The O and T should be external questions - what’s happening around your business. You’ll see a SWOT in lots of shapes and formats but that’s just working space. Your SWOT can be a list or a matrix. What matters is the intention and content.
Let’s start with Strengths.
When you are thinking about your strengths it’s important to think about why your customers buy from you. If you can get to your customer’s why you’ll be able to communicate with them more effectively and consistently deliver awesome value. Here are some other questions you should be thinking about in terms of your strengths.
What’s your unique value or unique selling proposition.
Are you doing anything that your competitors can’t reproduce - like your level of customer service.
Are you a low-cost producer?
How do you differentiate?
Are you creating barriers to entry to insulate yourself from future competition in any unique way?
Do your customers say that you do anything really well?
Next are your Weaknesses.
Don’t approach this like you would if you were answering an interview question for a potential dream job. No fluff here! You need think about how you’re delivering value to your customers or clients. There are always parts of the business that can get more efficient or capabilities/capacities you can improve. In terms of creating a meaningful strategy the more honest and raw you can be about your business, processes and systems the better the decisions you will produce. Here are some questions you should answer honestly in terms of your business's Weaknesses:
Are there improvements that can be made to better compete with your strongest competitor?
Are there products/markets/services you should be avoiding?
Are you measuring success in any kind of definitive way? If you do, are there factors in your businesses that aren’t measuring up?
Are there parts of your business that lead to lost sales/revenue?
Is there waste and where is it coming from?
Are there core capabilities you should have that are keeping you from being more successful?
On to Opportunities.
Opportunities are new chances for your business to either continue to differentiate or to reinforce your competitive advantage. The goal being an increase in revenue or market share if an Opportunity is pursued. A great place to start looking for Opportunities is to glance back up at your Strengths and Weaknesses and start comparing what’s going on in your business to the businesses you compete with. Here are some questions to get you thinking about your Opportunities:
Are there new or interesting trends in your market?
Are your customers tastes or expectations changing?
Are there new technologies in your market?
Are your customers getting the most value out of the current set of solutions offered?
Are there new pains that customers are suffering from?
Sorry to use a word while it’s being defined but: Are there any opportunities to better serve your market that can be done only by you?
Last are the Threats.
Threats are external factors that could influence your business that you can’t control. They are negative factors that could impact your business alone and even your potential industry. Threats are factors that could have a negative impact on your business in terms of both decreasing revenue and operations interruption. Here are some questions to get you thinking about your potential Threats:
What external factors put your business at risk?
What obstacles does your business face?
How stable and predictable is your supply chain?
Are you protected from changes in technology?
Is your market changing? How?
How have your competitors reacted to decisions your business has made?
What does your current and potential competitive landscape look like?
After you’ve answered these questions and maybe even a few that weren’t listed you are probably asking yourself, now what? Well first thing is to go back through your SWOT and to try to frame everything you listed in terms of your competitors. Next is to try to make each component as specific and as clear as possible. Remember you are trying to use this information to create strategy and make decisions. Being clear and specific is important! Then make sure that everything here is as close to factual as possible and that it’s a reality now not a want or wish. Use dollar amounts, inventories, sales, time, and any other way you are quantifying your business activity. Lastly is to make sure that everything in your SWOT is as action oriented as possible - action words are your friends here.
After you’ve brainstormed your SWOT and have gone back through and polished it up you can start to use what this information. This is the information you should be using when you are starting to create short-term and long-term strategic plans/actions to grow your business. The purpose of the SWOT was to get you laser focused on the most critical parts of your business.
Now that you’re focused you can make better decisions in your business. Start by going through and trying to prioritize your most pressing opportunities. Decide which opportunities you are going to engage and set the goals and actions in place to start the allocation of resources and work to achieve those goals. Measure everything! Go back through your strengths and try to rate them. This will give you an idea of how to better differentiate and position your business to strengthen your unique selling/value proposition. Take a look at your weaknesses and really try to create systems to improve them. You’re supposed to use this SWOT as a springboard.
The worst thing you can do is nothing after you complete the SWOT!
So the next time this comes up in your business or in your profession, I want you to calmly pull up this blog post and drop the SWOT gauntlet down in your group. You'll be a strategy hero.