By Emil Bjerg, journalist and editor of The European Business Review
Forbes calls SWOT analysis the “Most Overlooked Business Tool”. Here, we guide you on how you can use the method and implement goals with the SMART framework.
This is the fifth article in our series on methods to navigate a volatile present and future. We’ve previously covered megatrends, scenario planning, the Delphi method and systems thinking.
Here, we cover a method that’s as quick and easy as it is potentially impactful. By offering insights into a company’s strengths, weaknesses, opportunities, and threats, SWOT analysis is a great tool for planning, prioritizing and strategizing resources. As Forbes writes “SWOT analysis is one of the most efficient tools for quickly auditing a business at any stage and determining necessary next steps.”
What is SWOT Analysis?
SWOT Analysis dates back to the 1960s, where it was developed as part of a research project at Stanford University led by Albert Humphrey. It was conceived as a method to understand why corporate planning failed. The framework has since evolved, adapting to the complexities of the modern business environment but retaining its fundamental principle of examining internal and external factors affecting organizational success.
SWOT analysis aids companies of all sizes in outlining internal and external factors that could impact the company’s future. Strengths and weaknesses describe internal factors, while opportunities and threats are external. Let’s have a look at how to identify a company’s SWOT before we delve into how you can use the method in your organization.
Strengths (Internal Factor): Your business’s strengths are the unique factors that set you apart in the marketplace. This could range from having an unparalleled product to outstanding customer service leading to high retention rates. Attributes like strong branding, innovative capabilities, or even a high-profile CEO contribute to this. These are the facets that have been finely honed over time and represent the areas where your business excels, reflected in your current strategies and market presence. Recognizing these “green” areas allows you to leverage them to maintain and enhance competitive advantage.
Weaknesses (Internal Factor): Conversely, weaknesses are, evidently, the aspects of your business that detract from your value proposition and hinder your competitive edge. They could manifest as operational inefficiencies, outdated systems, or gaps in the customer journey leading to poor after-sales communication. These are internal shortcomings that, when left unaddressed, can obstruct your business’s efficiency and growth. Typically marked by reluctance or concern within your strategic evaluations, these areas require immediate attention and remediation to avoid significant roadblocks.
Opportunities (External Factor): These represent the external chances your business can leverage for growth and expansion. Emerging technologies, market trends, or potential partnerships fall into this category. Identifying the right opportunities through SWOT allows businesses to align their internal strengths and overcome weaknesses, ensuring readiness to capitalize on these chances. These are usually the aspects that energize and excite you, ideas that have a prominent place in your strategic planning and future aspirations.
Threats (External Factor): Threats are external factors that pose a risk to your business’s stability and future prospects. These could be anything from changing market demands, regulatory changes, to increasing raw material costs. While businesses can’t directly control these external factors, identifying them in a timely manner can potentially set you apart from the competition.
An easy five-step guide to apply SWOT analysis
Carrying out a SWOT analysis is straightforward and accessible to anyone – from solo entrepreneurs to start-ups and large companies. To make the process even smoother, here’s a five step guide to applying it to your organization.
Begin by dividing your analysis into four distinct parts, placing internal elements – strengths and weaknesses – at the top, and external elements – opportunities and threats – at the bottom. This can be done either digitally or with physical paper, but having this matrix helps identify, collaborate and strategize. You can find a template for a SWOT matrix here.
The aim is to design your SWOT to be as simple to comprehend as it is to create; therefore, it’s recommended to use bullet points and it’s not necessary to go into extensive detail. Here are the essential steps to perform a SWOT analysis:
- Create a diverse team: Unless you’re a solo entrepreneur, gather a diverse group from various departments within your organization. This could include representatives from HR, sales, marketing, operations, and other relevant sectors. It’s also recommended to include colleagues with different levels of seniority. The diversity helps bring in unique insights and perspectives to ensure a well-rounded analysis.
- Define clear objectives: Before diving into the SWOT analysis, clearly outline what you aim to achieve with it. This could range from understanding market position, exploring new initiatives, to strategic planning for upcoming projects. Clear objectives will guide the focus and relevance of the analysis.
- Identify and categorize: After defining an objective, list out all relevant factors under the four categories: Strengths (what your company excels at or unique resources), weaknesses (areas where your business may be lacking or could improve), opportunities (external factors or trends you can capitalize on), and threats (external challenges or obstacles). Use brainstorming sessions and draw from diverse sources for a comprehensive view.
- Analyze and prioritize: Once you’ve populated the four quadrants, review and prioritize the items based on their significance and urgency. Focus on the most impactful factors that align with your strategic objectives. This way, you address the most critical aspects first.
- Develop and implement action plans: From here, convert the insights gained from your SWOT analysis into actionable strategies. Set specific, measurable goals and assign responsibilities to ensure these plans are carried out. Regularly revisit and update the SWOT analysis to reflect changes in your business environment and progress toward your goals. It’s important to remember that the effectiveness of a SWOT analysis lies in its implementation.
But how to implement action plans? A SWOT analysis is often combined with the SMART framework for implementation.
Implementation with the SMART framework
The SMART framework is a great tool that can significantly enhance the actionability of insights and goals derived from a SWOT analysis. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound. Here’s how this framework can be applied following a SWOT analysis:
- Specific: Each action plan or strategy derived from the SWOT analysis should have a clear, specific goal. This means being precise about what you want to achieve, who is involved, where it will happen, and the reasons behind it. Instead of setting a vague goal like “increase sales,” a specific goal would be “increase sales in the North East region by 10% within the next quarter.”
- Measurable: The goals should be quantifiable to track progress effectively. This involves defining metrics or indicators of success that allow you to measure the extent of your achievements. For example, if your strategy aims to improve customer satisfaction, you might measure success through customer satisfaction surveys or target a specific increase in your ratings.
- Achievable: While goals should be ambitious, they should also be realistic and achievable. This means considering the resources available, such as time, money, and personnel, and setting goals that are feasible within these constraints. It ensures that the team remains motivated and focused.
- Relevant: Each strategy should align with the broader business objectives and the insights gained from your SWOT analysis. This ensures that every action contributes towards the overarching goals of the organization and leverages the strengths and opportunities identified while addressing weaknesses and threats.
- Time-bound: Finally, each goal should have a clear timeline or deadline. This creates a sense of urgency and helps prioritize resources and efforts. A time-bound goal outlines when the results can be expected, which aids in planning and keeps the team on track.
Applying the SMART framework to the strategies derived from your SWOT analysis ensures that the action plans are clear, focused, and feasible. It facilitates better planning, execution, and monitoring of the strategies, leading to more effective management and utilization of resources. By aligning the action plans with this framework, organizations can ensure that their strategic efforts are directed, measurable, and aligned with their overall objectives, ultimately leading to more successful outcomes.
When to use SWOT
Need inspiration on when to get started using SWOT analysis? The method can be used in a lot of context, but is particularly beneficial in several key scenarios.
SWOT is generally a go-to methodology for companies looking to prioritize and allocate resources. It’s ideal prior to implementing significant changes or as part of a broader change management strategy. It’s also a relevant method to use before kicking off new business ventures or initiatives.
Further, a SWOT analysis is useful to identify potential areas for growth and improvement or when needing a comprehensive view of your business’s performance. It’s a versatile tool, designed to provide insights into various aspects of projects, scenarios, or overall business health, making it a valuable instrument for strategic planning across different contexts.
We hope this introduction helps you see how SWOT analysis can be useful in various situations. Use it when planning big changes, starting new projects, or when you want to understand your business better.
