Mals Musings: SWOTTime for a Product Recall
The SWOT must be the most popular strategy-making tool in the world. You are unlikely to come across anyone involved in the business world that will not know this tool.
By on Jun 7, 2010The SWOT must be the most popular strategy-making tool in the world. You are unlikely to come across anyone involved in the business world that will not know this tool. Unfortunately, the popularity of the SWOT is matched by misuse and misunderstanding.
Some think that the SWOT is a summary of their analysis; some believe it is a summary of their strengths and weaknesses; others see it as a way of highlighting problems they need to fix in their business. What is the real role of SWOT and does it deserve the popularity it enjoys?
It is probably the most pivotal tool in the strategy-making process but much of the impact and power of SWOT has been lost over the years. Unfortunately, the so-called doers are responsible for the loss, as they have learned to whiz their way through, arriving at speedy and ineffective conclusions. In recent research, most SWOTs were described as a long list of meaningless, unverified factors that were of limited use in practice.
Every marketing plan starts with a series of analyses aimed at revealing the true current situation the organization finds itself in. Tools like SLEPT, Five Forces, market segmentation and value chain analysis all help organizations gain better insight. If we assume that these steps are done correctly, then this sets up the SWOT nicely. In reality, we know many arrive at their SWOT without any prior analysis. The SWOT should be populated solely from the prior internal and external analyses.
Strength. This is an area, activity or attributes where the organization is stronger than most, if not all its competitors. The critical point here is that it has to be something that is valuable to customers, uncommon and difficult to copy. For example, one company said, We have more branches than anyone else. Interesting, if their customer segments valued this strength; if not, it is a fact not a strength. The importance of this will become clearer as we delve further into the role of the SWOT.
Weakness. These are areas where you are considerably weaker than your competitors and that matter to your customer segments. If all competitors are equally weak, then it is not a weakness for your SWOT. Weaknesses have to be difficult to fix; otherwise, it would be fixed and therefore not be a weakness. Our SWOT should contain difficult to fix weaknesses.
Opportunities. By their nature, opportunities are external to the organization and need to be big enough and around for long enough to strategize against. It is important that the organization is able to take advantage of the opportunity. Ideally, going for the opportunity should not impact the organizations ability to pursue a bigger and better opportunity.
Threats. Threats are long-lasting situations that threaten the organization but are not currently accounted for or mitigated by an action taken by the company. In some situations, another external factor might cancel out a threat. For example, a new tax policy might be mitigated by an imminent change of government.
Assuming we have our SWOT completed and based on our prior analysis, and we have summarised this into a SWOT as per the guidelines above, the next step is what turns WOT into SWOT. A lion does not hunt in water and a shark does not hunt on landfor good reasons. It is time to unleash the power of the SWOT analysis by leveraging our strengths and limiting the damage caused by our weaknesses.
The alignment part of the exercise is the most critical part of the SWOTs role. This is where we marry our strengths to our opportunities and ensure that our weaknesses and our threats do not combine. For example, our strength of heritage and history can be leveraged against the opportunity of growing conservative segments that are weary of new non-performing alternatives.
Likewise, our weakness of having limited branches will be managed by making sure we avoid targeting the customer segments that like to utilize branch networks but instead target customers that like online facilities, an area where we are much stronger. These key alignment issues give very clear direction to aid strategy composition and truly unleash the power of the SWOT. The alignments that come out of this process are the infrastructure for your strategy.