A recent study showed that US children are continuing to fall behind in the global education rankings, placing 19th in the world in the latest report. Let's hope those same researchers don't get around to ranking our SWOT analyses efforts any time soon.
Like most things utterly familiar, SWOT analysis has been taken for granted to the point that it has become perhaps the most misused tool in the manager's box. A good SWOT analysis is one of the cornerstones of good strategy. A half-baked SWOT analysis (and most of them are) prevents businesses from realizing their full potential and weds them to mediocrity. Let's look at what it takes to move from doing a SWOT analysis nearly right to doing it exactly right-a difference which can jumpstart your strategy.
Behind the Acronym
SWOT analysis is one of the most effective and universally used models in business. Developed in 1971, it provides a simple yet comprehensive method for examining the strategic fit between a firm's internal capabilities (strengths and weaknesses) and external possibilities (opportunities and threats). The acronym SWOT stands for Strengths, Weaknesses, Opportunities, Threats.
Strengths and weaknesses are internal factors we generally have control over. Opportunities and threats are external factors that we can influence.
The SWOT analysis model helps us answer two fundamental questions:
1. What do we have (strengths and weaknesses)?
2. What might we do (opportunities and threats)?
Below are the criteria and guidelines for each of the four categories. The word "group" is used as a general representation for a company, division, business unit, brand, etc. depending on the appropriate application.
Strengths: Strengths are those factors that make a group more competitive than its peers. Strengths are what the group has a distinctive advantage at doing or what resources it has that are superior to its peers. Strengths are in effect resources or capabilities that the group holds that can be used effectively to achieve its performance objectives.
Weaknesses: Weaknesses are limitations, faults or defects within the group that will keep it from achieving its objectives. It is what a group does poorly and where it has inferior capabilities or resources as compared to its peers.
Opportunities: Opportunities include any favorable current or prospective situation in the group's environment, such as a trend, change or overlooked need that supports the demand for a product or service and permits the group to enhance its competitive position.
Threats: A threat includes any unfavorable situation, trend or impending change in a group's environment that is currently or potentially damaging or threatening to its ability to compete. It may be a barrier, constraint or anything that might inflict problems, damage, harm or injury to the group. In general, strengths and weaknesses (internal environment) are made up of factors over which the group has greater relative control. These factors may include the following:
- Skill sets
- Resources (people, money, time)
- Knowledge base
- Processes and systems, including operational and customer-facing
- Staffing practices
Opportunities and threats (external environment) are made up of those factors over which the organization has influence but not control. These factors include:
- Overall demand
- Competitor activity
- Market saturation
- Government policies
- Economic conditions
- Social, cultural, and ethical developments
- Technological developments
Five SWOT Killers
As with any business model, the reason a SWOT analysis is performed is to generate insights about the business and drive planning efforts. There are five SWOT killers that we need to be aware of to prevent our efforts from being an exercise in futility: