Dive into the world of SWOT with the help of our sister community, Competitive Intelligence Alliance!
Ever heard of SWOT analysis? đ¤¨
Businesses of all sizes can use this strategic planning tool to figure out their strengths and weaknesses. But thatâs not all, because this analytical framework will also help uncover opportunities and threats in your industry.
All-in-all, it's a great way to get a better understanding of the internal and external factors that can impact your org.
Trust me, whether you're a small business owner or a big-time manager, understanding SWOT can be a game-changer for achieving your goals and growing your bottom line. đ°
In this article, we'll be breaking down:
- What SWOT analysis is
- The goals of SWOT analysis
- How to perform a SWOT analysis
- The challenges and shortcomings of SWOT
Letâs go. đśď¸
What is a SWOT analysis?
The four major elements of a SWOT analysis are easy to remember, since each is a part of the SWOT acronym:
- Strengths
- Weaknesses
- Opportunities
- Threats
SWOT is a framework for identifying and analyzing the strengths and weaknesses, opportunities, and threats of any competitive entity. That goes for organizations, products, and individuals.
Wait⌠individuals?! đ¤Ż
Yep, you can run a SWOT analysis on yourself to understand and shape where your career is headed. Very handy for staying a few steps ahead of other candidates during your next job search.
The goals of SWOT analysis
There are a ton of benefits to performing a SWOT analysis. Most often, though, the SWOT framework is used by businesses when they want to better understand how strong their position is in the competitive landscape.
Regularly performing a competitive SWOT analysis and taking stock of where your business (or product) is strong or weak versus competitors keeps you in tune with the wants and needs of the market. That means itâs harder to drift off course and start selling stuff no one really wants. đŽâđ¨
Being aware of opportunities and threats, too, sets you up to make better strategic business decisions down the line. Youâll be well-prepared next time you perform a market opportunity analysis and, whether itâs your marketing strategy or your product development roadmap, youâll know how to move defensively or offensively as best befits your business.
How to perform a SWOT analysis
The primary goal of any SWOT analysis, then, is to take stock of your position in the marketplace, and to inform business strategies.
SWOT analysis does this by drawing out the internal and external factors that can influence success or failure in your business.
Do this, and youâll have yourself a successful SWOT analysis.
Internal and external factors
Standard practice groups your strengths and weaknesses as internal factors, while the external elements of SWOT analysis are the opportunities and threats. Youâre over here, theyâre over there.
That means, while youâre doing your SWOT analysis, you look at the strengths and weaknesses of your own products and processes. Opportunities and threats arise from the industry and are apart from your business.
More important than this black and white divide, though, is that you have useful data at the end of the process. This means doing a thorough analysis that covers all bases.
Weâll get to that in a minute. âąď¸
SWOT vs TOWS
TOWS (threats, opportunities, weaknesses, strengths) analysis has you perform the SWOT âstepsâ in reverse. By focusing on the external environment, and its opportunities and threats first, you gain a different perspective on the market and your place in it, which means more informed business decisions.
But why not just consider every aspect from every angle the first time you conduct the analysis?
Hereâs what we suggest:
1ď¸âŁ Consider the strengths and weaknesses of your competitors (external), as well as of your own business or product (internal).
2ď¸âŁ Consider the opportunities and threats that exist within your own business (internal), as well as from externals that you have no control over (external).
Being thorough, rather than adhering to strict rules about the ârightâ and âwrongâ ways of doing the analysis, will net you the best results.
The SWOT analysis process
Hereâs how itâs done.
Youâll learn all about strengths and weaknesses, both internal and external, from conversations with customers, as well as from the candid opinions of your colleagues.
Youâll begin taking action around internal opportunities and threats by speaking with people inside your business. External opportunities and threats are seized or remedied by dealing with those outside your business.
Here are some example questions to help you fill each quadrant in your SWOT analysis template:
Strengths
Internal (your strengths)
- What does your product do better than anyone elseâs?
- Where are you outperforming your competitors?
- What features do you have that competitors lack?
External (the strengths of others)
- What do customers prefer about competitor products?
- What area is your biggest competitor strongest in?
- What features have competitors implemented better than you?
Weaknesses
Internal (your weaknesses)
- Where could your internal processes improve?
- Are there places youâre falling behind the competition?
- What do customers dislike about your product or service?
- Do you have a problem with churn?
External (the weaknesses of others)
- From your conversations with customers, where do they think competitors let themselves down?
- Do key competitors have any particularly weak features?
- Do they fail to offer a quality experience for their customers?
Opportunities
Internal opportunities
- What unfilled customer needs could your product begin to fill with a low-investment tweak or update?
- Are you making the most of internal ideas, opinions, experience, and talent?
- Do incentive structures adequately reflect the few core goals of the business and effectively drive growth in those areas?
External opportunities
- Are there gaps in the market youâre in a good position to fill?
- Could you move part of your operation overseas where rates, terms, or taxes are more favorable?
- Can you forge contracts with suppliers to create more favorable terms if none exist already?
Threats
Internal threats
- Are your internal processes efficient enough?
- Do staff members lack the necessary time to perform key duties?
- Are you exposed to âperson-riskâ?
External threats
- Has a new competitor just entered the market?
- Is growth in your industry slowing or declining?
- Does the socio-economic situation have negative implications?
- Do consumer trends imply weakening demand for solutions like yours?
PEST analysis
When it comes to market factors that could affect your business, the PEST analysis framework is a useful tool for identifying such external opportunities and threats.
PEST stands for political, economic, socio-cultural, and technological factors. There are variations on the PEST framework, each with increasingly odd names (PESTLE, STEEPLE, LONGPESTLE). But the standard PEST analysis will get you thinking along the right lines all on its own.
Challenges of SWOT analysis
SWOT analysis is a great tool, but itâs not perfect. Perhaps thatâs why itâs so divisive? đ¤
Hereâs a shortlist of some of SWOTâs key challenges.
SWOT analyses use a lot of resources
Since the conclusions from a good SWOT analysis will go on to influence the future of the business thanks to the strategic decisions theyâll inform, itâs important to get it right. âď¸
That means you canât rush. A thorough SWOT analysis, performed well, can take a long time to complete. Especially if your business is large.
Itâs critical to pull input from all corners of the business to ensure no stone is left unturned. While people are sat in a meeting room contributing to the SWOT analysis, though, theyâre not getting on with other work that needs doing. In other words, thereâs a resource-cost to performing the analysis. One thatâll touch every department by the time youâre done.
Successful SWOT analysis needs the right company culture
If your company culture isnât right, people wonât feel comfortable being candid with their opinions. Even once youâve got them away from their desks and into the meeting room where they can contribute.
Want your SWOT analysis to be successful? Then your people need to feel comfortable sharing their opinions on the weaknesses of your businessand products.
Tough to swallow? Bad news - youâll need to hear their opinions on what competitors are doing well (threats), too. So theyâll need to feel comfortable sharing those.
Radical Transparency
This is what Ray Dalio calls âradical transparencyâ. In his book âPrinciplesâ, he talks about how important it is that everyone be âradically transparent about everything, including mistakes and weaknessesâ since this âhelps create the understanding that leads to improvementsâ.
Itâs not always easy to be honest. Actually, itâs pretty difficult. But being honest and open, rather than dishonestly mute, puts the demons in the firing line. Those demons that sit in the shadows, that everyone knows are there, just waiting to cause the destruction of your business, but are too scary for most to turn and look at directly.
With the right culture, you can tear down those hidden harbingers of destruction, but it takes an understanding that honesty isnât personal. That it comes from a mutual place of wanting the business to be better for everyoneâs benefit.
SWOT is time-consuming
Going from the âdata-gatheringâ stage, where youâre collecting opinions and insights, through the implementation stage, to actually seeing results, can take a long time.
Even once all the work is done, communicating back to initial stakeholders how the project played out, what the results were, and how it paid dividends on their initial time investment is important. Thatâs super challenging for time-starved project leaders and members of the C-suite, though.
Whatâs more, since the SWOT process does take time to play out, the competitive landscape may have shifted significantly by the time your strategic planning has borne fruit.
SWOT is hard to make truly objective
The best SWOT analyses donât just consider the strengths and weaknesses of their own brand and products. They consider the strengths and weaknesses of competitors, too.
But they also recognize the danger of bias. âď¸
Businesses can become echo chambers for their own ideas and opinions. Especially if no oneâs doing the work to make sure the culture supports radical transparency and that it stays that way.
Thatâs why itâs important to speak directly to the market itself. Yup, weâre talking about your customers and wider target audience.
Talk to your customers.
Thereâs no substitute for speaking directly to customers and getting them to tell you exactly what it is they love about a competing product, or exactly why they churned, or what attracted them to you in the first place.
It gives you a rock solid understanding of where youâre strong, where you could do better, and what needs they have that no vendor has been able to meet for them yet (hint: these are golden opportunities).
The issue, of course, is that SWOT is already all too easy to turn into a resource hog. Now, weâre suggesting you expend even more resources on it.
How to move forward
Thatâs why, if weâve one tip for conducting successful SWOT analyses, itâs to define a hard budget and timeline for them at the start, and to be aggressive. Then cut both by 20%.
If you end up shooting slightly over, youâll have worked in some buffer in terms of both time and cost. Therefore, you wonât have to abandon the project as a sunk cost and write SWOT off as a complete waste of time and money.
Get SWOT right, see it through to the end, and youâll uncover golden insights thatâll inform near on every strategic aspect of your role.
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