The SWOT Analysis: Avoid the Common Trap
15th July 2016
The SWOT Analysis, an exploration of strengths weaknesses, opportunities and threats, is a key step in strategic planning but it is largely misunderstood.
A vital step in any planning is an honest appreciation of the now, the current circumstances facing the organisation. Before you plan to go to a new destination, the path is always influenced by your ‘current location’.
The two critical parts to this analysis are, those issues that the company can control and those the company cannot control.
The company can control its strengths and weaknesses. Decision surrounding recruitment, strategic focus, equipment management style, culture all influence the strengths and weaknesses. Discuss your strengths by asking ‘What are we better at than most? The conversations about the weaknesses starts with the question: What are the issues within our control that will harm our growth or performance if we do not address? These two aspects of the SWOT analysis are non-ambiguous and if the lists are kept short and strategic, can be useful. The resulting strategies should seek to build and exploit your strengths and manage your weaknesses.
However the next part of the SWOT analysis is where most of these sessions go ‘off the rails’. It is a fundamental misunderstanding to start to list possible actions when discussing opportunities. If you go down this path it is likely that insufficient time will be given to the external environment. If your strategy focuses only on the internal issues you may miss significant opportunities for growth that your competitors grasp before you.
The opportunities and threats of the SWOT analysis are an exploration of the external environment in which the organisation operates. What should result here is a list of key trends or events that are taking place, but are outside of the control of the organisation. If the organisation responds appropriately to these trends there may be strategic benefit. If the organisation ignores a negative trend it could adversely impact the organisation.
To avoid the confusion it is best to just list Strengths, Weaknesses and Trends. When these list are developed than you can discuss the options for strategies and actions.
The key message here is avoid the ‘quicksand’ of discussing strategies under the heading of Opportunities. In this context opportunities are trends taking place outside of your control of the organisation. The list of trends you generate may well be the same list that you competitors generate if they are operating in the same environment. What will make the difference is how you respond to these trends.