How to distinguish between biased and misleading but so common analysis with the real SWOT, that makes it a superb tool for growing your business.
The SWOT analysis has become a set piece of any marketing plan and is used in any good business plan. And yet few are the SWOT correctly made. In the multinational firm I worked for a long time, I could count on the fingers of one hand the times when the SWOT matrix was correctly filled in, the full analysis done and a draft of the action plan even started.
The SWOT analysis is an undisputed model. But when the analysis is botched or incomplete, it can skew the understanding of the competitive context and can be in the end totally counterproductive. It might even be dangerous for organizations, which may be tempted to prioritize irrelevant decisions.
That’s a shame because the art of properly applying the SWOT analysis has nothing insurmountable. I taught the correct methodology to executives at all levels but also for example to department heads of retail outlets, who managed to master the tool and take maximum benefits of it, for the sake of their business and to better engage their teams.
What then is the problem here? lack of time? insufficient knowledge of the tool? inability to make tangible enforcement? Let’s look at the 3 major phases of the development of a SWOT worthy of the name and a few traps to avoid. Whether it’s about product development, sales strategy or brand positioning, the methodology effectively applies if these three phases are considered with equal importance.
Phase 1 Identification of key points and filling of the SWOT matrix
This is the step that everyone knows – or think they know. It is actually about classifying in the correct order the Strengths and the Weaknesses (the brand, the product, the company, the team…) and then the Opportunities and Threats (local market, competition, social and economic environment etc).
This phase is not really the first step! It should be normally preceded by a group reflection on Macro trends and by an analysis called STEEP. Macro trends mark a significant and lasting change at a global level. These trends include mainly the globalization, the digitalization of our lives in all its aspects, the massive urbanization that is emptying our campaigns, the ageing population, the rise of the environmental awareness (and tomorrow animal welfare?) and the political shift between the Western old world and raising Asia. Although they all refer to a wide spectrum, nothing is actually exempting companies to question in what extent these global trends affect or not its customers, employees, partners, competitors and suppliers.
Then comes another level of reflection that uses another scale (country, region, state, conurbation, city). What is used for that is the STEEP analysis, an acronym for Social-Technological-Economical-Environmental-Political. Things happen indeed in these five dimensions and on each of the selected application perimeters (country-region-city…), which necessarily “impact” the company operations. A concrete example: the closing of a big plant near a medium sized urban area. It is a fact that refers to the economic dimension and which is presumably having a negative impact on local activity. Another example can be an increase of the individual income tax, a political decision impacting consumption, savings etc.
A fact may cover several of the five dimensions at once. This would be the case if tomorrow the city of Paris took the decision to close part of its ways to motor vehicles. It would be both political and environmental decision with an obvious economic impact – positive or negative depending on whether we talk about e-commerce or tourism. Without going more into the details, it is impossible to achieve a good SWOT analysis without having previously reflected and agreed on the Macro trends and the STEEP analysis – what they mean for the business in its present context and its future.
Everyone agrees on the fact that Forces and Opportunities have a positive connotation while it is the opposite for the Weaknesses and Threats. Where it gets complicated is when one mixes up internal points (Strengths and Weaknesses) with the external ones (Opportunities and Threats). Hiring staff with little competence is not a threat but a weakness. The opening of a new competitor in one’s neighbourhood is not a weakness, it is a threat (or an opportunity). This confusion will be very harmful for the phase 2 of the SWOT, that is why it is so appropriate not to make any amalgam between internal and external elements.
Selecting the points to transcribe in the four boxes of the SWOT matrix is often the object of a brainstorming session, realized by metaplan or any other method. If proposals for points get abundant, it is crucial to properly classify them as noted in the previous paragraph, but also to synthesize them. It is not always obvious to do it especially when we’re looking for a compromise to satisfy the egos of everyone involved in the reflection. I recommend no more than six points per ‘box’ of the matrix and if possible to prioritize them in order of importance.
The more points there are in each of the four boxes, the more complex to manage the SWOT analysis will become. A clever way to proceed to the selection of the criteria in a reasoned way, is to use a SCRUM poker game (for connoisseurs). It’s a great manner to involve each of the participants, getting them to argue in depth and to involve the whole group in the acceptance of a quality consensus.
One final point regarding this phase, is to resist the temptation to complexify the SWOT analysis by integrating variations such as “external elements inside the internal points”… this would just lose your teams on the way.
Phase 2 “Crosses”
This phase is still rather unknown and pretty much underused, although it is in my opinion the most important one.
Once the team agreed on Strengths, Weaknesses, Opportunities and Threats as it should have been done (considering the STEEP, respecting distinction between internal and external, distinction, prioritization and ranking of points), the task now is to refine the analysis. This phase is known as the “crosses”. These crosses are four and next to the SWOT matrix, they are vertical or diagonal, but never horizontal. They also carry a specific name:
Strengths x Opportunities = the Advantages
Weaknesses x Threats = the Vulnerabilities
Strengths x Threats = the Defences
Weaknesses x Opportunities = the Temptations
You will find many definitions and examples on the Web. Remember that without this step, it is impossible to establish a detailed and serious bridge between the SWOT matrix and any good action plan. Crosses are the essence of the action plan. I would add that based on my experience, Vulnerabilities are in many cases to be consider first because they preserve sometimes the company from imminent danger. The Temptations are more complex to establish but should not be ignored as they point out the risky shortcuts that many companies take when they get over excited by the promises stated by the new digital economy or global trade.
Phase 3 Action plan
As curious as it may seem, this phase does not always happen, and when it is does, there is often no relevant connection between the action plan and the SWOT matrix previously established. It enhances once more the need to secure a good “Crossing” phase, as crosses indicate quite obviously what actions to prioritize.
What’s the point to perform a SWOT analysis if it does not result in a concrete action plan? In reality there is none! However, it seems that the SWOT has become an end in itself in many companies, an “exercise in style” aiming to better shine in “board meeting”, seduce one’s hierarchy and rise in the ranks. It would be so much wiser to reward the ones that deliver plans which make sense, engage the teams and deliver results!
To conclude briefly with the action plan, if the crossings are well made, once again priority actions will appear much more distinctly and clearly. We have all faced stodgy action plans, sometimes intended to impress sponsors but that are almost impossible to implement. These ultimately are destined to clutter our shelves and are a pretty bad return for the time investment.
The comprehensive SWOT analysis requires a certain investment and a strong commitment of the stakeholders.
Well conducted, the exercise can prove to be excellent for federating people and teams, and simple updates will be enough to sustain the model the following years.
A good SWOT is the assurance of an action plan that is limited but relevant, of a roadmap that gives a meaning to everyone and it is also the guarantee that teams will share the same vision and level of commitment.
If you want to know more about the SWOT analysis and about our SWOT workshops, do not hesitate to contact us: firstname.lastname@example.org or +33 681 651 314
Jean-Yves Masse www.engageanddeliver.com