The Dangers of Traditional SWOT Analysis

It’s that time of year again. And no, I’m not talking about Christmas shopping. It’s only September, for God’s sake!

I’m talking about strategic planning.

This is the time of year to pause a little longer than usual and think about what it will be like to win next year. It is when we look to the future to determine where our organizations need to go and what we must do to get there in the next calendar year. This is when we identify our top three to five strategic goals, set out the specific action steps needed to achieve them, and determine a realistic timeframe for reaching our destinations.

For most companies, conducting a SWOT (strengths, weaknesses, opportunities, and threats) analysis is an integral part of the strategic planning process. And it can be very useful because an accurate SWOT identification plays an important role in determining the subsequent steps in the planning process.

For those unfamiliar with SWOT, strengths are those areas in which we excel that others cannot easily copy. These include things like financial and human resources, infrastructure, administration, price, delivery time, brand strength, customer service, product quality, etc. Weaknesses are risks or limitations that get in our way. Anything that is a strength can also be a weakness if we don’t perform well in that area.

Opportunities represent possibilities that we can capitalize on or take advantage of. They come in all shapes and sizes and can arise as a result of market trends, new technologies, changes in the political or economic environment, competitor actions, and more. Threats consist of events in the external environment that give us cause for concern. For example, what are our current competitors likely to do, and where might unexpected competitors come from? An opportunity can also be considered a threat if our competitors are better positioned to take advantage of it.

When used correctly, SWOT is a powerful planning tool. Unfortunately, many companies misuse it by getting stuck in old thought patterns about problems and threats instead of looking at where the company needs to go and focusing on winning.

A primary goal of strategic planning is to determine what can do, not what you can’t. However, instead of looking for new and better ways to add value to their customers, many companies use the SWOT process to focus on blaming competitors, the economy, or other external factors for things they cannot control. As a result, they end up spinning their wheels instead of getting real traction to get the company to its destination.

The key to using SWOT effectively is not just identifying your strengths, weaknesses, opportunities, and threats. It is asking the right questions and using the information you discover appropriately.

For example, when considering your organization’s strengths, ask questions like:

• Where have we really been able to excel?
• Is there something we have that we don’t use/do enough?
• Is there something we can develop quickly that we can take advantage of?
• What do others consider our greatest strength?

When considering the weaknesses:

• What has gotten in our way in the past?
• How do we get in our own way?
• What processes do we have to identify weaknesses in the organization and how well do these processes work?
• What processes do we have to address these deficiencies and how well do these processes work?
• What functional silos are scattered throughout the organization?
• Are we monitoring market signs and signals that can support our expectations, if any, and provide strong evidence when new paths are desirable or necessary?

When identifying potential opportunities:

• Is there a product, customer relationship, or market presence that we can take better advantage of?
• Is there something we would look for if we had more resources (people, dollars, time, etc.)?
• What are our competitors most concerned about that we will do? We should?
• What signals are critical to assess our relationships with our market and customers?
• How diverse is our portfolio of business relationships and opportunities? Are there numerous ways to be successful?
• What investments are we making whose primary returns will be long term?
• Are our plans formulated in a way that supports adaptation to new or evolving market opportunities, including unexpected opportunities?

When considering threats:

• What worries us the most?
• Are new or different competitors likely to emerge?
• Is there a possible supply problem?
• Do we have good relationships with employees, suppliers and customers?

It is also worth analyzing and reviewing how you carry out the SWOT process itself. Not just after the fact, but while you’re involved in the process. For example:

• What proportions of our organization’s resources are devoted to maintaining and improving the status quo?
• How much time do we spend leading and nurturing new directions?
• What new efforts have we started in the last year? What efforts have we stopped?
• Is our long-term thinking focused on the critical few things that matter? Are we carefully avoiding the many possible deviations?
• Do we have the people and financial resources to execute our plans successfully?
• Do short-term problems and opportunities frequently run ahead of long-term plans and undermine progress?
• It seems that the rest will be easy once we have finished our plans?

Becoming a leader in today’s chaotic markets requires organizations that are fast, flexible, and highly adaptable. Those who anticipate and plan for change instead of reacting after the fact.

A SWOT analysis can help you achieve this strategic agility, but only if you use the information to break old thought patterns and make strategic decisions based on where you’re going rather than where you’ve been.

Next year will be here before we know it. What are you waiting for?