08/02/2023

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The Dangers of Traditional SWOT Analysis

The Dangers of Traditional SWOT Analysis

It’s that time of year again. And, no, I’m not referring to Christmas shopping. It’s only September, for gosh sake!

I’m talking about strategic planning.

This is the time of year to pause for a bit longer than usual and think and about what winning will look like next year. It’s when we peer into the future to determine where our organizations need to go and what we need to do to get there in the upcoming calendar year. It’s when we identify our top three to five strategic objectives, lay out the specific action steps needed to achieve them, and determine a realistic timeframe for reaching our destinations.

For most companies, conducting a SWOT (strengths, weaknesses, opportunities & threats) analysis is an integral part of the strategic planning process. And it can be very helpful because an accurate identification of SWOTs plays an important role in determining subsequent steps in the planning process.

For those not familiar with SWOT, strengths are those areas where we excel that are not easily copied by others. These include things like financial and people resources, infrastructure, management, price, delivery time, brand strength, customer service, product quality and so on. Weaknesses are the risks or limitations that get in our way. Anything that constitutes a strength can also be a weakness if we don’t perform well in that area.

Opportunities represent possibilities that we can capitalize on or leverage. They come in all shapes and sizes and can pop up as a result of market trends, new technologies, changes in the political or economic environment, competitor actions, and more. Threats consist of events in the external environment that give us cause for concern. For example, what are our current competitors likely to do, and where might unexpected competitors come from? An opportunity can also be considered a threat if our competitors are better positioned to take advantage of it.

When used properly, SWOT is a powerful planning tool. Unfortunately, many companies misuse it by getting stuck in old patterns of thinking about problems and threats rather then looking ahead to where the company needs to go and focusing on winning.

A primary goal of strategic planning is figuring out what you can do, not what you can’t. However, rather than looking for new and better ways to add value to their customers, many companies use the SWOT process to focus on blaming competitors, the economy, or other external factors for things they can’t control. As a result, they end up spinning their wheels rather than gaining any real traction to move the company toward its destination.

The key to using SWOT effectively is not just identifying your strengths, weaknesses, opportunities and threats. It’s asking the right questions and using the information that gets uncovered in an appropriate manner.

For example, when considering your organizational strengths, ask questions like:

  • Where have we really been able to excel?
  • Is there something we have that we don’t use/do enough?
  • Is there something we can develop quickly that we can leverage?
  • What do others consider our greatest strength?

When considering weaknesses:

  • What has gotten in our way in the past?
  • How do we get in our own way?
  • What processes do we have for identifying weaknesses in the organization, and how well do these processes work?
  • What processes do we have for addressing these deficiencies, and how well do these processes work?
  • What functional silos are scattered across the organization?
  • Are we monitoring signs and signals from the marketplace that can both support our expectations, if appropriate, and provide strong evidence when new paths are desirable or necessary?

When identifying possible opportunities:

  • Is there a product, a customer relationship, or a market presence that we can better leverage?
  • Is there something we would pursue if we had more resources (people, dollars, time, etc.)?
  • What are our competitors most worried we will do? Should we?
  • What signals are critical to assessing our relationships with our market and customers?
  • How diverse is our portfolio of business relationships and opportunities? Are there numerous ways to succeed?
  • What investments are we making whose primary returns will be in the long term?
  • Are our plans formulated in ways that they will support adapting to evolving or new market opportunities, including unexpected opportunities?

When considering threats:

  • What are we most concerned about?
  • Are their new or different competitors likely to emerge?
  • Is there a potential supply problem?
  • Do we have good relationships with employees, vendors and customers?

It also pays to analyze and review how you conduct the SWOT process itself. Not just after the fact, but as you’re engaged in the process. For example:

  • What proportions of our organization’s resources go towards maintaining and enhancing the status quo?
  • How much time do we spend leading and nurturing new directions?
  • What new efforts have we started in the past year? What efforts have we stopped?
  • Is our long-term thinking focused on the few critical things that matter? Are we vigilantly avoiding the many possible diversions?
  • Do we have the people and financial resources to execute our plans successfully?
  • Do near-term problems and opportunities frequently preempt long-tem plans and undermine progress?
  • Does it seem like the rest will be easy once we have finished our plans?

Becoming a leader in today’s chaotic markets requires fast, flexible and highly adaptable organizations. Ones that anticipate and plan for change rather than react to it after the fact.

A SWOT analysis can help you achieve this strategic agility, but only if you use the information to break away from old patterns of thinking and make strategic decisions based on where you’re going rather than where you’ve been.

Next year will get here before we know it. What are you waiting for?