What is a SWOT?
‘Proper planning and preparation prevents poor performance. ’
Stephen Keague – Irish author
The aim of this section is to explain the benefits of performing a SWOT analysis on your organisation. It is not how to perform a SWOT – which can be found on the internet and in management books – but why SWOTs should be done and who should conduct them to achieve the best outcome.
What is a SWOT analysis?
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an organised list of a business’s greatest strengths, weaknesses, opportunities, and threats. It is a planning tool which businesses can use at any time to assess a changing environment and respond proactively.
Here are some important SWOT concepts:
- SWOT analysis is part of a business review.
- Strengths and weaknesses are generally internal to the business – for example, internal resources and capabilities such as people’s skill levels, business processes and assets.
- Opportunities and threats tend to be external to the business – such as the economy, competitors, new technology and suppliers.
- Strengths and opportunities are positive to the business.
- Threats and weaknesses are normally negative to the business.
- The outcome of a SWOT analysis should result in a dynamic action plan, not a static statement.
The major problem with a SWOT is that too often it results in a list of statements for each of the four components. It is not an action plan. This is the challenge for management. Each of the four sections of the quadrant are linked to each other, so a list of actions can be created. These are shown below.
Figure 6: Four Quadrants of a SWOT
Here are the six questions that should be asked:
- Strengths – Weaknesses: What actions can be implemented using the organisation’s strengths to overcome the identified weaknesses?
- Opportunities – Threats: What actions resulting from the identified opportunities can be used to overcome or reduce the threats?
- Strengths – Opportunities: What are the actions that can leverage off your organisation’s strengths and take advantage of the identified opportunities?
- Strengths – Threats: Using the organisation’s strengths, what actions can eliminate or reduce threats to your organisation?
- Opportunities – Weaknesses: Considering the opportunities, what actions can be taken to overcome the organisation’s weaknesses?
- Weaknesses – Threats: What actions are required to overcome the organisation’s weaknesses, to assist in preparing to face threats, both now and in the future?
Action Plans from a SWOT
In answering these questions and forming the resulting actions, plans can be developed which can then become part of the strategic business plan. Performing a SWOT analysis is a vital part of creating a business plan and should be done every 12 months. I recommend conducting a strategy review meeting at least once a year, beginning with a SWOT analysis. In my experience, SWOT sessions should be performed with the management team, preferably with an independent facilitator. The independent facilitator is less likely to have a personal agenda and can impartially manage the discussions. When a new client first meets with me, we normally complete a SWOT session. This session may extend over two to three meetings depending on what is found. This establishes the groundwork for understanding the business and the foundations of a business plan.
In over 15 years in our logistics business, we only performed a SWOT session twice. Looking back, this was a major strategic error. We missed out on opportunities and failed to act on some of our weaknesses. There were many reasons for this, including the reluctance to face the brutal facts, less than rigorous discipline by some partners and reluctance to seek professional external advice and assistance. We did, however, compile an annual budget in which our performance was measured each month but, in hindsight, a SWOT with a corresponding business plan would have been more beneficial.
When was the last time you performed a SWOT analysis session with your team?
Were the resulting plans of action completed?
Did they form part of the business plan?