the inside/out management tool!
the inside/out management tool!
SWOT analysis is a simple but useful tool which helps managers to reflect on what’s good and bad, today and tomorrow, inside and out!
The SWOT acronym stands for Strengths, Weaknesses, Opportunities, Threats. It’s a classic, management tool/technique which is used to help managers with their analysis. This can be analysis of an entire organisation, of a unit or team, or of brands or individual products/services.
As with most management models, tools and techniques, SWOT analysis helps to provide structure to our thinking. It enables us to understand contexts and complex issues or situations. It also encourages us to ask questions as part of our analysis and to inform our planning. Of course, they are valuable to the extent that they help us structure our thoughts, but they don’t replace the need for us to get the right people together to help us you do that thinking!
SWOT originated in the 1960’s as a tool to assist strategic planning. At first the idea was to assess an organisation using a slightly different acronym: SOFT. Whatever an organisation was currently good at, was classified as Satisfactory (later re-labelled as Strengths). What the organisation was currently bad at was a Fault (later re-labelled as Weaknesses). In both acronyms, anything good expected to happen in the future is deemed an Opportunity, whereas any poor projections are Threats.
SWOT analysis uses a two-by-two matrix to help us consider a situation from several perspectives. It encourages us to think about our existing situation, highlighting both positives and negatives, either internal to the organisation or externally. Likewise we can use it to help us think about what the future might bring, again from both perspectives.
For example, along the top row, think about your organisation’s current situation. Identify and list things that you think are good or bad. If it’s currently good, list it as a Strength. If it’s currently bad, list it as a Weakness.
Along the bottom row think about the future, again in terms of potentially good or bad things that might impact on the organisation. If it’s likely to be good, list it as an Opportunity. If it’s likely to be bad, list it as a Threat.
The merits of SWOT analysis are based on the fact that it’s a relatively simple tool to understand and use. It encourages us to think about a range of quite complex factors to inform our planning and decision making. However critics argue that it can be overly simplistic. So perhaps SWOT is most effective when it’s used in conjunction with other tools.
For example, the external context is often developed using a PESTLE analysis, which focuses on anything that may impact the organisation from its wider environment. This tool encourages us to think in more detail about such external factors, either: political, economic; socio-cultural; technological; legal; or ecological. Combining both tools, you may decide to use a PESTLE analysis to help gather information on these areas, then categorise them as either future opportunities or threats.
Having spent some time thinking through each of the four areas, you now need to draw some implications from your analysis:
Strengths – How they can be sustained and further developed?
Weaknesses – how do you reduce their possible impact? Can you get better at any of these areas?
Opportunities – How can you prioritise these to create the biggest impact?
Threats – How can you eliminate or significantly reduce these?
SWOT analysis is a means of structuring your thinking but as with any structure it has weaknesses. To guard against possible limitations of the process, get together the right people to ask and answer the questions. When possible strengths, weaknesses, opportunities and threats have been identified, build an evidence base behind the analysis, check and challenge the assumptions that have been made.
Reg Revans, the father of action learning, suggested that in any analysis situation it is vital to ask three “who’s”:
When you get the right people together then tools like SWOT analysis can be a great way to capitalise on their expertise, insights and experience.
SWOT analysis provides a tool to help you know your business inside and out – literally. Developing an understanding of your environment is a crucial step towards developing your strategy and providing the information and intelligence to inform your Business Goal Setting process.
Organizations don’t exist in a vacuum. The business industry environment is constantly changing and being aware of those changes is a crucial skill. Using the PESTLE and SWOT analysis tools together combines the assessment of the external context with the strengths and weaknesses of the internal environment. This provides a comprehensive overview from which to plan your strategy and goals.
You can find out more about business planning by reading our series on the subject, starting with business goal setting.
To help you think differently we’ve developed an e-guide packed with problem solving exercises. “What’s the problem” is designed to help you find the right problems then take steps to address them.
What’s the Problem is a comprehensive guide to problem solving, complete with these 9 essential tools: