SWOT Analysis Done Right [video]

This article describes the SWOT Analysis. Go here to get your free SWOT Template Download.

I’ve been in strategy sessions or like meetings where SWOT was done the either:

  1. The question at hand didn’t call for a SWOT. So, in this case, a tool was applied to the wrong problem.
  2. Or, a SWOT was done for the right question, but done very, very poorly or completely wrong.

So, I’m going to stick my neck out and propose my approach to a SWOT Analysis, hoping it might be helpful to somebody.

What is SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This approach is used to evaluate the fit between a company’s internal resources and capabilities and external possibilities and threats.

For most companies, it has greater control over its internal environment such as resources, culture, operating system, and people side of things. But, a company has less influence on external factors.

This approach is meant to gauge the fit between the two.

A SWOT is appropriate for the following questions. This is not meant as a manual, but as a general guide.

  1. Given the competitor’s recent release of their product, how might we respond?
  2. What is the current state of our Lean Transformation?
  3. What factors are important to understand in order to more broadly deploy Lean across the company?
  4. Is our team prepared given the current composition and skill set of our team and the challenges ahead?

How to Perform SWOT Analysis?

Step 1

List and evaluate SWOT elements. This can be done using sticky notes or other method. The important thing to do here is to utilize the perceptions of the team and to involve all the right people to participate.

  1. Strengths: A strength is a strength if and only if it is present and meets a critical customer need. The “customer” here is broad and can refer to those outside the company or those within.
  2. Weaknesses: A weakness is a limitation that prevent the company from achieving its objectives.
  3. Opportunities: This relates to any positive or favorable current or future advantage or trend.
  4. Threats: This relates to any unfavorable situation, trend, or change.

Step 2

Unfortunately, most SWOT analysis stop in this next step. What I’m inviting the reader to do is to continue passed this step onto Step 3. But, first, I must describe this step.

Now, we take the strategic factors identified in Step 1. We take each and then rank them across some criteria relevant to the company or firm. The ranking matrix might look like the below:

Step 3

Now, we must match the strategic factors completed in Step 2. This is the section where we satisfy the criteria of “Fit”. This is the section where we turn:

  1. Threats into Opportunities
  2. Weaknesses into Strengths

What I’m describing is pictured below:

After the SWOT Fit Matrix is completed, like the above, then we can dive into what each of the quadrants means.

  1. Quadrant I: In this quadrant, we have matched strategic factors that meet both internal strengths and external opportunities. The strategic factors in this quadrant can drive new business, new products, or new programs within a company.
  2. Quadrant II: In this quadrant, we have matched internal weaknesses relative to external opportunities. The strategic factors in this quadrant can drive where we need to invest or obtain new resources in order to gain competitive advantage.
  3. Quadrant III: In this quadrant, we match internal strengths with external threats. The strategic factors in this quadrant can drive activities that will turn threats into opportunities.
  4. Quadrant IV: In this quadrant, we match internal weakness with external threats. The strategic factors in this quadrant are very important to monitor and be aware of – the firm must be proactive of the strategic factors in this quadrant because, if not, it could very well overtake the companies’ competitive advantage.

In Sum,

SWOT Matrix 
Internal
Strengths Weakness
External Opportunities Strategies that match internal strengths with external opportunities. Strategies that match external opportunities with to minimize internal weakness.
Threats Strategies that maximize internal strength to avoid or capitalize on external threats. Strategies that minimize internal weakness and avoid external threats.

 

What Not To Do

Here are a few things to keep in mind as you facilitate a SWOT Analysis:

  1. Don’t do long lists of factors. Do, at most, 10.
  2. Make sure the prioritization is done well. This step narrows the possibilities and adds necessary constraints.
  3. Involve the right people – this also means – don’t involve the wrong people.

SWOT Template

Here’s a SWOT Template you can download for free. Enjoy.

<embed src="http://vimeo.com/moogaloop.swf?clip_id=9565562" type="application/x-shockwave-flash" width="400" height="300"></embed>

Comments

  1. Bart says

    Hi Pete,
    your 2nd step (= ranking) is what we call in The Netherlands: the Confrontation Matrix.
    I do hope people will include this important second step, as without one ‘consultants’ can hardly justify the major strategic directions selected.
    Success, Bart

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