If you’ve been in business any length of time you’ve likely heard of SWOT Analysis. Short for Strengths Weaknesses Opportunities and Threats, a SWOT analysis is designed to provide a business with well rounded insight into any new initiative a business might be considering or to address a situation which might be dragging it down. The analysis, designed to be collaborative, helps businesses analyze complex issues and identify the best solutions to those issues.
The origin of SWOT is somewhat murky. Some credit Stanford University researcher Albert S. Humphrey as having developed the process in the 1960s while working on a research project. Other credit Edmund P. Learned, C. Roland Christensen, Kenneth Andrews and William D. Book who, together, authored the book, Business Policy, Text and Cases in 1969.
Be that as it may, when Humphrey first worked with the process, it was known as SOFT or Satisfactory Opportunity Fault and Threat. Luckily it morphed into SWOT which is a good thing. Can you imagine a bunch of business people getting all soft and touchy feely with their serious business analyses? Yea, that would never stick.
To create a SWOT analysis, one creates a 2X2 table. The top row, which contains the cells Strengths and Weaknesses, applies to internal considerations. The bottom row, which contains the cells Opportunities and Threats, applies to external considerations. Generally, strengths are characteristics that help a business grow and weaknesses are internal elements which can take away from business success. Opportunities and threats are external in nature and focus on elements that either growth positive for the business or growth negative.
In developing a SWOT analysis for a particular topic, specific considerations can be looked at for each of the four elements of the analysis. For strengths, considerations such as a businesses advantages, its ability to outperform the competition, its uniqueness or resources, how the market perceives the business’s strengths, elements that always insure a sale or other positive growth metric are achieved and what the businesses unique selling proposition is must be identified.
When looking to identify weaknesses, considerations such as known or necessary improvements that must be made to areas that are lacking, business practices and processes which should be avoided, how the market perceives a businesses weaknesses and which elements of a business always lead to the loss of a sale or result in a negative growth metric must be identified.
For opportunities, a business should look at market trends which could identify a new direction for the business, how changes in technology or market sentiment can improve outcome, the effect government policy might have, how trends such as population shifts, lifestyle changes or social patterns lead to new opportunities.
Finally, for threats, a business should examine elements such as obstacles faced, competitor activity which detracts from or steals business growth, expected standards or product quality that has shifted market wide pointing to the need for a change, technology which might be leapfrogging that of your own business and potential unhealthy financial situation either internally or externally in the market that could have a negative affect.
In identifying the elements within each of the four quadrants, a business must be extremely concise and specific including only factual, verifiable statements otherwise it becomes a kitchen sink scenario and will suffer from unworkable bloat. Each SWOT analysis has to apply to a specific situation or project rather than attempt to solve an overly broad, less black and white company-wide issue. It can, however, aid in the development of a company’s positioning within its market segment.
Effective SWOT analysis will lead to the development of growth positive business strategies that will sustain a company’s long term success as well as steer it clear of areas which may detract from that positive growth.