What is SWOT Analysis?
A SWOT analysis is a management tool that enables a leadership team to manage change. The name SWOT is an acronym of four key areas of a business, product, or operation under a management team’s focus, specifically its strengths, weaknesses, opportunities, and threats.
Typical applications of SWOT analyses include product or competitor evaluation, go-to-market strategies, product or service requirements planning, and even personal development planning. A facilitated SWOT analysis asks team leaders to identify the good and bad in current operations that can be controlled and considered internal to the business, strengths, and weaknesses.
It also asks team leaders to identify the good and bad in future operating environments that are outside the control of the business, and are considered external, opportunities, and threats. Facilitation is a key skill in the effective application of a SWOT analysis.
It’s best to prepare questions in advance that address each of the four analysis areas, and then administer them to participants in a combination of one-on-one and group sessions.
A SWOT analysis can provide a framework for reviewing the strategy, position, and direction of a company, product, or even an individual’s career. When facilitated effectively and governed by prioritized success metrics, a SWOT analysis can be a key link in a strategic planning chain that leads to positive actions.
How to Perform a SWOT Analysis?
Here’s an example of SWOT analysis:
Finding The Strength
We all like to put ourselves in the best light possible.
Strengths are the most comfortable part of a SWOT analysis because we’re being given the opportunity to compliment ourselves and validate our worth.
Psychologically, it’s very appealing. In traditional SWOT capture sessions, we sometimes don’t challenge ourselves as much as we should when creating a list of strengths. Without effective and ideally independent facilitation, we are likely to create random lists of strengths with equally weighted elements, representing variable impacts to the business.
For example, one strength might be, “Our top product sells in the market with 30% margin,” while another strength might be, “Our top salesperson looks great in a suit,” not equivalent strengths.
When creating a list of strengths, you’re looking at internal factors. You need to focus solely on benefits or advantages that are inherent to you, your teams, or your business. You should think about strengths that contribute measurable value or are directly connected to the creation of value. No matter what the object of your SWOT analysis is, your list of strengths should be unique to your organization or business and not easily replicated.
Consider some of the following questions when thinking about your strengths.
What are the things that we produce or do really well? What resources do we have that distinguish us in our market? What are the most important processes and skills that we bring in relation to our business? What unique knowledge and perspectives do we have that make us stand out over our competitors? What financial characteristics of our business are superior to our competitors? What customer relationships do we have that foster goodwill and brand loyalty?
A common problem with internal factors is that sometimes they can be viewed as both a strength and a weakness. For example, sometimes a brand is considered a strength, but while a company’s brand value might be the best in its industry, its brand image might be relatively poor.
Having clear and focused definitions of each factor, such as brand value versus brand image, instead of just brand, can help eliminate a generic factor name appearing in multiple lists of a SWOT analysis. The more action, or parametrically oriented the factor, the easier it will be to assess and evaluate.
Shoring Up Your Weaknesses
Acting on the weaknesses you identified in your SWOT analysis is a little trickier, not least because you have to be honest enough with yourself about your weaknesses in the first place.
Going back to our example, some of these weaknesses are very challenging to act upon. Going up against the considerable purchasing power of rival chain restaurants can be very difficult for smaller, family-owned businesses. The restaurant is also struggling with its limited reach, the restrictions of a modest advertising budget, and is also failing to leverage the potential to increase sales by allowing customers to order food online through delivery apps like Foodler or GrubHub.
However, that’s not to say all hope is lost. It might be harder for our example business to compete with a chain, but there are plenty of other ways small companies can be more competitive – such as by developing strong, meaningful relationships with customers, which was not only one of the company’s strengths but also something chain restaurants simply cannot offer.
The Opportunities section of your SWOT analysis is by far the most actionable, and that’s by design. By identifying opportunities by evaluating your organization’s strengths, you should have a ready-made list of targets to aim for.
In the example above, increasing consumer appetites for ethically produced, locally grown ingredients is a major opportunity. However, our restaurateurs cannot rest on their laurels – there’s still work to be done. In this example, this may involve investing in technical expertise to take advantage of the opportunities presented by food delivery apps, or sourcing has locally grown produce more aggressively in an attempt to reduce costs.
It’s also important to avoid hubris or complacency in your opportunities. Even if you have an iron-clad advantage over every other business in your industry, failing to devote sufficient time, money, or personnel resources in maintaining that advantage may result in you missing out on these opportunities over time.
Every business opportunity will differ, but it’s vital that you create a clearly defined roadmap for capitalizing upon the opportunities you’ve identified, whether they be internal or external.
Anticipating and mitigating the threats identified in your SWOT analysis may be the most difficult challenge you’ll face in this scenario, primarily because threats are typically external factors; there’s only so much you can do to mitigate the potential damage of factors beyond your control.
Every threat, and the appropriate reaction to that threat, is different. Regardless of the specific threats, you’ve identified in your SWOT analysis, responding to and monitoring those threats should be among your very top priorities, irrespective of the degree of control you have over those threats.
If you’d like to get a format for SWOT analysis, you can download our free market research kit that includes a SWOT format as well.
Need professional help with doing a SWOT analysis for your business? We are here to help you. Just contact us and we will take care of the rest.