We’ve all been there – the mention of a “SWOT analysis” and your mind starts drifting, pondering what’s for lunch, and hoping for a quick escape from a tedious discussion. It’s true; SWOT analyses often have a reputation for being boring, confined to dusty business textbooks or lacklustre LinkedIn posts from well-meaning managers.
However, despite its bland reputation, SWOT analysis is a tool that businesses have relied on for nearly six decades. It’s time to rescue this strategy from its snooze-inducing status and reveal it for what it truly is: a powerful means of gaining insight and making informed decisions.
Table of Contents
- What is a SWOT Analysis?
- How to Do a SWOT Analysis (+ an Example)
- SWOT Analysis Template
- When to Use (and Not Use) SWOT
- Now What? Making Decisions Based on Your SWOT
- SWOT Analysis: FAQ
What is a SWOT Analysis?
A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is a strategic planning technique used by businesses to assess internal and external factors affecting their current state and future plans. It’s all about context, focusing on both the positive and negative forces that a company encounters internally and externally.
- Strengths (S) and weaknesses (W) pertain to the company itself.
- Opportunities (O) and threats (T) revolve around the industry and competitors.
Think of a SWOT analysis as a way to “read the room” so you can make well-informed decisions. If you’ve ever prepared for a family gathering by considering which cousins will attend and what topics your uncle might discuss, you’ve essentially performed a SWOT analysis.
How to Do a SWOT Analysis (+ an Example)
A SWOT analysis is straightforward at its core. It comprises four boxes for strengths, weaknesses, opportunities, and threats. The recommended approach, as suggested by the Harvard Business Review, is to begin with external factors (Opportunities and Threats) to provide more context before moving on to internal factors (Strengths and Weaknesses).
To illustrate the process, we’ll use an example company, “Midsize, Inc.,” a team collaboration app:
- Gather Your Intel: Start by collecting relevant data to expedite the analysis. Review project plans, reports, performance metrics, and competitor data. Midsize, Inc. has information such as survey results, in-product analytics, and competitive analysis reports.
Discover Opportunities: Identify conditions within your industry or niche that can be leveraged. Key questions to consider include changes in the addressable market, evolving user preferences, macro trends, competitive offerings, and how your strengths can be used to explore new markets.
For Midsize, Inc., they could seize opportunities by collaborating with tech companies, expanding features within pricing tiers, and more.
Identify Threats: Assess the ways competition might impact your market share. Threats often involve new competitors, competitor advancements, and industry trends. Questions to ponder include evaluating direct and indirect competitors, data security, potential market conditions, and supply chain concerns.
The tech industry’s constant evolution poses threats such as new entrants introducing innovative solutions, changing user preferences, and data security concerns for Midsize, Inc.
- Consider Strengths: After gauging external factors, it’s time for introspection. Identify the ways your company excels and meets customer needs. Delve into aspects like your most valuable assets, engagement drivers, plans for improvement, customer choice drivers, strong KPIs, and your team’s skills.
Midsize, Inc.’s strengths encompass high activation rates, a new CEO focusing on user satisfaction, and a growing product management team. - Review Weaknesses: Examine your company’s shortcomings, areas where you fall short of customer expectations, or operational inefficiencies. Reflect on bottlenecks, customer complaints, churn reasons, obstacles to customer selection, and resource adequacy for work completion.
Midsize, Inc. acknowledges weaknesses including marketing team reshuffling, user frustrations with pricing tier limitations, and outdated help documentation.
When to Use (and Not Use) SWOT
While a SWOT analysis is a valuable tool, it’s essential to know when to apply it and when to consider other approaches:
When to Use SWOT:
- When you need a high-level view of your company, market, or department.
- When you have data or research to incorporate into the analysis.
- When you’re making significant strategic decisions, preparing to pivot, or positioning your product against competitors.
When to Skip SWOT:
- If you’re the sole contributor; SWOT benefits from diverse input.
- When you need in-depth insights into a specific issue; opt for a specialised analysis.
- If there’s no clear reason to conduct a SWOT; it’s best to have specific questions, goals, or concerns that prompt the analysis.
Now What? Making Decisions Based on Your SWOT
Once you’ve completed your SWOT analysis, the next steps may vary depending on your team’s focus:
- Marketing teams can use opportunities and strengths to refine messaging.
- Product management teams can prioritise enhancements by considering threats and weaknesses.
- Finance or leadership teams can assess the company’s health by weighing strengths against threats.
- Operations teams can enhance workflows by addressing weaknesses and opportunities.
Conclude your analysis by summarising key takeaways. For Midsize, Inc., this might involve revising pricing tiers and introducing automation to address marketing bottlenecks.
SWOT Analysis: FAQ
Here are answers to common SWOT analysis questions:
- What are the benefits of a SWOT analysis?
- A SWOT analysis breaks down complex issues, uses internal and external factors for informed decision-making, integrates multiple data sources, sets realistic goals, identifies competitive advantages and market opportunities, and can be applied across various business aspects.
- What are the four components of SWOT Analysis?
- The four components of SWOT analysis are Strengths, Weaknesses, Opportunities, and Threats.
- What are the biggest SWOT analysis mistakes?
- Some common mistakes include lack of objectivity, relying solely on SWOT, not validating findings, and not taking action on the insights.
- Some common mistakes include lack of objectivity, relying solely on SWOT, not validating findings, and not taking action on the insights.
A SWOT analysis provides actionable insights for your business. It doesn’t have to be a tedious manual process; you can streamline your competitor analysis and maintain market awareness. Make your SWOT analysis an integral part of your strategic planning and decision-making process.