ANALYSING YOUR ORGANISATION – THE SWOT ANALYSIS

9 07 2011

In August of last year, this blog asked; ‘Is The SWOT Analysis A Waste Of Time?’ The intention was not to provide the answer but to provoke debate, a debate started in 1997 when Hill & Westbrook asked the same question. That blog has gone on to become, to date, by far the most read article on these pages. I thought that therefore the time was right to share my own view on how this commonly used analysis tool, can be employed (and it isn’t that it is a waste of time).

One of the best known and most popular tools in strategy development is the SWOT analysis. Carried out properly, a SWOT analysis should provide you with a clear picture of your Strengths and Weaknesses together with Opportunities for and Threats to your organisation.

It is important to remember when conducting a SWOT analysis that honesty is vital, the analysis will only be of use if it reflects reality in place of cherry picked facts; what might be instead of what is. It must therefore be conducted in a recrimination free environment, regardless of how uncomfortable truths are.

A further issue with the conducting of a SWOT analysis is knowing how to apply it to the development of your strategy. In fact, in 1997, Hill & Westbrook* reported that a survey of 50 companies showed that none of them applied results from their SWOT analysis in developing their strategies.

Some strategists have wrongly interpreted this as SWOTS being of little value. In fact, they are of great value but only if conducted honestly and then only if applied correctly.

At the ‘intelligence gathering’ (consultation) stage of developing strategy it is important to understand what a SWOT analysis looks like and how to conduct one.

POSITIVE NEGATIVE
INTERNAL STRENGTHS – “what
is working well?”
WEAKNESSES – “what
needs improvement or change?”
EXTERNAL OPPORTUNITIES – “what
opportunities are around us?”
THREATS – “what
obstacles do we face?”

It can be beneficial to use questions to solicit responses otherwise they may be too non-specific. Some generic examples of questions are:

STRENGTHS:

1. What are our assets?
2. Which asset is strongest?
3. What differentiates us from our competitors?
4. Do we have immensely talented people on our staff?
5. Is our business debt free?
6. Do we have a broad customer base?
7. What unique resources do we have?
8. Do we have a sustainable competitive advantage?
9. Do we have specific sales or marketing expertise?

WEAKNESSES:

1. What areas do we need to improve on?
2. What necessary expertise/manpower do we currently lack?
3. In what areas do our competitors have an edge?
4. Are we relying on one customer too much?
5. Do we have adequate cash flow to sustain us?
6. Do we have adequate profit levels?
7. Do we have a well of new ideas?
8. Are we over leveraged (too much debt)?

OPPORTUNITIES:

1. What external changes present interesting opportunities?
2. What trends might impact our industry?
3. Is there talent located elsewhere that we might be able to acquire?
4. Is a competitor failing to adequately service the market?
5. Is there an unmet need/want that we can fulfil?
6. Are there trends emerging that we can profitably service?
7. If we package our product differently, can we extract a higher premium for it?
8. Can we take advantage of the historically low interest rates to refinance our debt?

THREATS:

1. Is there a better equipped (funding, talent, mobility, etc) competitor in our market?
2. Is there an entity who may not be a competitor today which could possibly become one tomorrow?
3. Are our key staff satisfied in their work? Could they be poached by a competitor?
4. Is our intellectual property properly secured (trademarks, copyrights, firewalls, data security plans, etc) against theft & loss (both from internal & external sources)?
5. Do we have to rely on third parties for critical steps in our development process that could possibly derail our delivery schedule?
6. What if our supplier runs out of product and we experience an extended shortage?
7. What if there is a natural disaster?
8. What if our customers go bankrupt?
9. What if our website is hacked?
10. What if we are sued?

Some of these questions may be relevant to you, some might not, be sure to consider the sector in which your organisation operates and any current business trends (models/processes) it employs. For example many businesses relying solely or heavily on a ‘Lean Business Thinking’ model failed to grasp the importance of questions 6 & 7 under Threats and are still struggling to service customers following March’s Tsunami in Japan (think cars and electronics).

Or maybe they saw the danger but failed to apply what their SWOT told them to their strategy, the very thing Hill & Westbrook highlighted as a major problem 14 years ago!

Regardless, the benefits of not only conducting but also applying a thorough SWOT analysis are ably demonstrated through this one issue. It is perhaps surprising that not a single company spotted this flaw in thinking and was prepped to capitalise if/when the inevitable occurred.

*T Hill and Roy Westbrook (1997). SWOT analysis. It’s time for a product recall. Long Range Planning. 30(I), 46-53

© Jim Cowan, Cowan Global Limited, 2011

info@cowanglobal.net

Twitter @cowanglobal

Facebook.com/cowanglobal


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One response

23 07 2011
Alberto Scocco

Thank you very much for the interesting ideas you proposed. SWOT can be really a precious tool to understand, analyze and develop an initial insight.
Alberto

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