Nowadays modern organizations manage their business through thoughtful strategies, structured tactics and data-driven decision processes. The period of strategic planning, generally carried out previous to the end of the current fiscal year, is the time in the business cycle where organizations analyze their past, current and future positions in order to review the organization strategies. During this stage, businesses takes a picture of the current situation where the organization is immersed and triggers several analysis processes to review the strategies and their objectives, in order to adjust the plans for the next fiscal year.
One of the most powerful and adopted tools used during strategic planning is the SWOT Analysis. This simple management tool provides managers a framework for evaluating internal and external factors that affect the competitive positioning of the organization, and hence, the strategies defined.
In this post we will provide a brief description of the SWOT Tool, the main features it provides, how to conduct a SWOT analysis and of course links to valuable resources.
What is a SWOT Analysis?
By Wikipedia definition, a SWOT analysis “is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a business venture”. The careful reader can quickly spot that the word SWOT is an acronym derived from the first letters of the factors involved in the definition. The factors can be defined as follows:
- Strengths: characteristics of the business that provide a competitive advantage.
- Weaknesses: characteristics that place the business or in a relative disadvantage compared to others in the same context.
- Opportunities: elements the business could exploit to its advantage.
- Threats: elements in the environment that could cause trouble for the business.
The SWOT Analysis is used for identifying factors that can inform later steps in planning to achieve strategic objectives. The SWOT (Also known as TOWS) can be used by existing businesses or new ventures. The simplicity of the framework allows the analysts to include the desired level of complexity and granularity to the analysis.
How to Carry Out a SWOT Analysis?
The analysis is carried out in two iterative steps, the factors identification loop and the strategic analysis loop.
Step 1 – Identify Factors
The first step consists of analyzing the factors and list them. Users of SWOT analysis need to ask and answer questions that generate meaningful information for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful and find their competitive advantage. Analysts generally start from the internal factors (Strengths and Weaknesses), those under the control of the organization; later they move to the external factors (Opportunities, Threats), those which are contextual and the organization cannot control. The factors analysis can have different levels of granularity. The recommended approach consists of defining a set of questions that the organization needs to answer in order to describe the factors perceived and identified. For example, Mindtools recommends questions like:
- What advantages does your organization have?
- What do you do better than anyone else?
These questions trigger the analytical thinking between the organization teams carrying out the exercise. Plausible example answers could be:
- Experience: Our execs have decades of experience managing production lines.
- Quality: We consistently produce products under high standards.
Another resource for identifying factors is the list of factors provided by Businessballs. With this lists analysis can cover a wide range of industries and businesses.
During the first step of the analysis is recommended that the stakeholders audience involved covers as much areas of the organization as possible. It is important not only to analyze categories with the external/internal perspective but also wearing the different hats of the organization’s tasks. For example:
- It is important to be in the customer’s shoes, through the different stages of the sales funnel.
- It is imperative to be in the employee’s shoes when work/product needs to be delivered.
- It is important to be in the shoes of executives when changes need to be done to the company
- It is important to be in the marketing manager shoes to define which message to transmit to prosp
Different points of view of the factors analysis bring to the table a richer discussion, and hence, a more heterogeneous view of the different aspects that build the organization.
The first step is carried out one or two iterations. If after the second iteration of answering the questions of each factors groups the analysis team still does not reach an agreement, two parallel analysis are triggered and will be the input of the next step.
Step 2 – Strategic Analysis
The second step consists of strategic analysis. Strategy involves setting goals, determining actions to achieve the goals, and allocating resources to execute the actions. This step receives as an input the previous step factors lists by category and the current organization Strategies. The decision makers should consider whether the strategic goals are attainable, given the SWOT factors. If an objective is not attainable, a different objective must be selected and the process repeated.
In its most pure essence, SWOT Analysis will try to apply matching and converting conclusions, this means, matching Strengths to Opportunities and Converting Threats and Weaknesses into Strength or Opportunities.
The line of reasoning during strategic analysis with SWOT consists of evaluating strategies to answer questions like:
- How to take advantage of the Opportunities identified using the organization’s Strengths.
- How to use the organization’s Strengths to correct (or reduce) the organization’s Weaknesses in order to reduce the probability of occurrence of the identified Threats.
- Which Weaknesses can be corrected definitely, and how?
- Which Strengths should be empowered with additional resources?
- Are the organization’s strategies taking into account the external factors ?
Once the analysis team reviews all factors and their impact through the strategies, the analysis is closed. The final outcome consists of the analyzed factors, the different conclusions driven from them and the changes suggested in the organization’s strategies.
Recording the Analysis
One of the required tasks along the SWOT Analysis consists on recording the facts, questions answers, and strategic conclusions. In order to record all the findings in an ordered fashion the academia developed a simple to use report framework called the SWOT Matrix.
The SWOT Matrix is a simple four-quadrant 2×2 matrix where each cell represents one of the factors (Strengths, Weaknesses, Opportunities, Threats). During the first step of the analysis, the analysts answer each factors questions on a separate sheet (1 sheet for Strengths, 1 sheet for Weaknesses, etc.) Once the answers are compiled, the team moves together to the SWOT matrix and summarizes the answers into the findings, and record them in each cell.
This format is ideal to force the team to summarize the answers to the less number of words as possible. Using a one sheet report with the four quadrants matrix, analysts not only are carrying out the analysis, but they are also summarizing the results to be later presented to executives. Once the SWOT Matrix is completed and approved, it is delivered as an input to the Step 2. During step two, the recording is quite linear. The team will carry out the matching and converting process described before. The exercise is simple, the team marks the factors being matched or converted and write the strategic actions over them. In the case where factors inhibit the objective, the analysts record the situation in order to transmit the executives the need of strategic goal reformulation.
Analysts can save time recording their work with SWOT Analysis slides, by using a pre-designed SWOT Analysis template with text placeholders. Normally, this kind of templates come ready with a 2×2 matrix or four-quadrant design and the analysts just enter the information gathered from the analysis into the quadrants. This tooling approach is very useful for 2 reasons:
- While recording the analysis in a template, the team is preparing the final SWOT presentation to the executives on the fly. Iterating over it provides a refined summarized deck, ready for delivering the conclusions.
- Today presentations tools as PowerPoint and Google Slides, allow concurrent collaborative editing, allowing a team to work together over the same copy of the document. This approach is useful for distributed teams.
Another tool used for SWOT analysis recording is the SWOT Canvas. Many tools provide online canvases, we liked Canvanizer.
I this post we provided a brief introduction to the SWOT analysis management tool, its definition, how to conduct a SWOT analysis and some suggestions on how to record the analysis. The SWOT Analysis tool is a simple and powerful framework any executive can apply easily in any organization. Take advantage of this tool during strategic planning and start seeing its benefits in your new updated strategies and goals.