Making SWOT Analysis Relevant
Is your organization extracting the most from SWOT analysis or is this strategic
analysis tool treated as a necessary, but useless technique. A SWOT analysis
can be a valuable tool for any organization, large or small. This article will help
your organization avoid the pointless SWOT analyses that are all too common
today and obtain the intended benefits from this strategic tool. A new SWOT
analysis approach will be introduced that can build significant business value of
for your organization.
SWOT Explained
Albert Humphrey developed the SWOT analysis technique in the 1960’s. The
SWOT provides a structure to analyze a company’s planned objective. It
identifies areas internal and external to the company that will affect attainment of
the objective, either positively or negatively.
The classic SWOT diagram is a two by two matrix. The x-axis is divided into
positive and negatives factors and the y-axis is divided into internal and external
factors. The four quadrants in the SWOT matrix are: strengths, weaknesses,
opportunities, and threats. Strengths are defined as internal capabilities that will
help the organization achieve the objective, while weaknesses are internal
attributes that harm the organization’s achievement of the objective.
Opportunities are external forces that will help the organization achieve the
business objective, while threats are outside factors that will negatively impact
objective achievement. The organization is expected to identify and analyze
significant factors in each quadrant.
Strengths
Factors
Weaknesses
Factors
Opportunities
Factors
Threats
Factors
Figure 1: The SWOT analysis matrix
Reengineering Your SWOT
A proper SWOT analysis goes further than listing factors that will impact
attainment of an objective. A SWOT will only prove valuable if it contains
information that the organization can act upon. The main detriment for many
SWOT analyses today is that they play no role in guiding decision-making. If you
are not going to do anything as a result of your analysis, why waste time
developing it?
There are a number of techniques that you can utilize to make SWOT analysis
more valuable to the organization. One useful approach is to analyze each
SWOT factor for its impact on the objective. Examine the strengths and identify in
detail how key strengths will support objective achievement. Ensure that each
corporate function plays their part. For example, if manufacturing to tight
tolerances is a leverageable strength, ensure that manufacturing understands
this is important to the organization’s success. Get the manufacturing team
committed to build on this capability or establish greater process controls to
guarantee this strength is maintained so the corporation’s strength remains a key
leverage point. Other questions to examine include: how important is a given
strength to the objective, does the strength carry enough weight that it can
ensure success, or, are additional resources required to maximize leverage?
A second approach is to conduct an analysis of the weaknesses identified.
Prioritize them according to degree of negative impact on the objective. For those
with high negative impact and high degree of likelihood, develop a plan to correct
the weakness before it has a major detrimental effect on your objective.
The same approach should be applied to the external factors that have been
identified in the SWOT analysis. Rather than just list the opportunities, prioritize
and identify how the key opportunities can be exploited in order to achieve the
objective. What innovative approaches are required to ensure that the
opportunity delivers the expected positive impact? Remember that an opportunity
only exists, if acted upon. To the extent the company can leverage the
opportunity, the more likely the corporation will succeed. For example, if expert
clinical opinion has the potential to support a successful launch of a product,
make sure to leverage your strong relationship with thought leaders to explain
the benefits to patient care.
Threats come in many forms other than the competition, though certainly this is a
primary threat. As with other factors, identify how these negative external factors
will affect the company and develop approaches that can mitigate the threat or
possibly even turn a threat to the company’s favor. If a threat is important enough
to be prioritized, it is important enough to warrant organization focus. An ignored
threat is more dangerous than a managed threat.
Advanced Analyses
One advanced analytical approach is to match a company’s strengths to an
opportunity. In today’s marketplace companies need every edge they can obtain.
Rather than rely on luck or hope that the environment will be conducive to your
objective, act upon the opportunities by utilizing your strengths to drive
attainment of the objective. It’s only an opportunity if acted upon.
Another analytical approach is to compare a company’s weakness to its threats.
There may be situations where a threat and weakness align against the
company, resulting in even greater negative impact. Once identified, it is
important to initiate contingency planning to minimize the impact of a threat
exploiting an organization’s weakness. Ignoring the implications and failing to act
upon this “stacked deck” sets the organization up for failure.
Some Helpful Hints
By now it should be apparent that a SWOT analysis can be a useful tool for
identifying factors that can positively or negatively impact the outcome of your
organization’s plans. Here are a few considerations that should help you to get
the most out of this analysis.
First, don’t make lists for each quadrant. Make sure that each strength,
weakness, opportunity or threat factor is defined in sufficient detail to prioritize,
and potentially, to act upon. “Our technology” is a terribly worded strength.
Phrasing this in greater detail could be useful in many ways. For instance it may
provide marketing with an important benefit that can be communicated to
customers. Or stating the technology’s impact on the customer could stimulate R
& D to develop additional features that fully address a customer need, meet the
needs of customers in an adjacent market, or evaluate how a competitor’s
technology fails to meet the customers’ needs. Table 1 provides additional
examples of poorly written factors and well-defined factors.
SWOT
Characteristic
Poorly defined
factors
Well-defined factors
Sales coverage Ability of our sales team to translate complex
messages into easy-to-understand customer
benefits to close sales.Strengths
Technology The abc approach of our technology provides
acceptable accuracy while allowing treatment
at a significantly lower cost per treatment than
the competition.
Weaknesses Customer
service
Our reticence to establish leasing options
reduces our ability to capitalize on a growing
market segment, which is currently being
aggressively pursued by the competition.
Green
movement
Aligning our products with environmental
group objectives can provide credence to our
unique positioning versus the competition.Opportunities
Customer
awareness
Building on the existing and growing customer
awareness on the clinical and economic
impact of medication errors could stimulate
customers to give preference to our products.
Reimbursement The impending reimbursement ruling can
significantly limit the types of patients that can
be treated with our products.
Threats
Industry
consolidation
The vertical integration resulting from the
acquisition of the Smith Company by Jones
Inc. will reduce our effective market by 15%.
Table 1: SWOT characteristics for a product launch plan
Second, prioritize each SWOT factor. No organization has the capability or
resources to act upon the ten or twenty SWOT factors typically identified. In order
to drive business value, the SWOT factors need to be reduced to a manageable
few. Prioritization could occur for each SWOT factor, or across the entire SWOT
matrix. The key is to reduce the number of factors that the organization will
analyze in detail to five or less.
Adding A New Technique To The Classic SWOT Analysis
I prefer to prioritize based upon positive factors and negative factors. This gives
me two distinct lists. The top 3 positive factors are labeled as Key Leverage
Factors (KLF). These three KLF’s are the areas where I focus my energies. By
their nature, KLF’s are those strengths or opportunities that will drive attainment
of the business objective. However, KLF’s cannot be left to chance, so as a
result, a plan is developed for each KLF, looking in particular for programs that
will allow the company to fully leverage the situation for success. This is why it is
so important to prioritize and limit your SWOT characteristics. Who would have
the time or resources to develop twenty plans?
The top 3 negative factors are labeled as Key Vulnerability Factors (KVF). KVF’s
are those weaknesses or threats that contain the highest likelihood or most
significant impact of preventing attainment of the business objective. As with
KLF’s, KVF’s the organization needs to develop a plan of action so that the KVF
impact can be mitigated.
When planning for either KLF’s or KVF’s, a common approach will work. A
proposed action plan is as follows:
• Define the problem or opportunity.
• Assemble the organization functions necessary to scope the problem or
opportunity.
• Collect the data.
• Develop a plan of action.
• Resource and implement the plan of action.
Integrating your KVF’s and KLF’s into your business plan will assist the
organization in achieving the business goal.
Conclusion
The SWOT analysis is a valuable strategic tool for any organization if it is
performed correctly. It can efficiently package the key drivers for success or
failure of many different business objectives. While the SWOT is commonly used
to analyze strategic activities, it is useful for product or service launches, major
resources investments, or key R & D technology decisions. To make the SWOT
analysis useful, remember to state your strengths, weaknesses, opportunities
and threats in enough detail to allow you to develop KVF’s and KLF’s. Once
completed, develop a plan of action to ensure your objective’s success.
© Foresight Business Consulting, Inc. 2008