SWOT - the most used and mis-used strategic toolNov 12, 2020
When I did a google search on SWOT i received 37,400,000 results in 0.49 seconds so I thought it’s a topic that interests people on internet.
Today, many CEOs are struggling with adapting to this new reality that has been forced upon us:
Figure 1: Where should I go?
Today it is not only the CEO that needs to understand strategic management but the whole leadership in an organisation.
Figure 2: Where should I take my team?
In our earlier blog we wrote about the importance the organisations re-think before they re-start. The famous management consulting organisation Toffler & Associates call the time we are in for the BIG WAIT. It can go on for 6 - 30 months independent of vaccine or not.
From the Google search SWOT is being used across the world. We have seen so many SWOT-analysis that are so poor executed that it becomes dangerous to draw conclusions.
What is SWOT?
SWOT is the abbreviation of Strengths, Weaknesses, Opportunities and Threats. It’s a strategic planning tool that are bridging the internal strengths and weaknesses with the opportunities and threats in the business landscape.
The SWOT analysis technique is credited by Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from many top companies. The goal was to identify why corporate planning failed.
Figure 3: SWOT - the most used and mis-used strategic tool
Professor Igor Ansoff, known as the “father of strategic management”, did also quite a lot of research why strategic planning is not working. He came up with the concept of Environmental Turbulence and draw the conclusion that the SWOT-anaylsis can be helpful up to turbulence level 1 - 3. That is when the business landscape are extrapolative. When the environmental turbulence level are above 3 it is called turbulent work and using SWOT in a turbulent business landscape can be dangerous.
Figure 4: Definition of environmental turbulence levels (ETL)
Before starting using the SWOT as a tool to carve out the Best Way Forward (BWF) it is key to understand the level of turbulence that your business landscape consist of, today and in the future.
The following map is called Super System Map and it highlights the different capabilities that is needed for a successful business.
Figure 5: Super System Map with environmental turbulence levels (ETL)
Many business landscapes can today be defined as extrapolative and the usage fo SWOT can work. Why is so many initiatives still failing in doing a proper and valuable SWOT-analysis. Most important is that a proper SWOT-analysis is a TEAM activity. It’s impossible to do on its own. Trust with in the team and that the tema consist of the “right” people is fundamental
Defining the Business Landscape today and tomorrow and setting a strategic horizon that could be +3y, +5y or evan +10y depending of the environmental turbulence will make the SWOT-analysis so much easier to conduct.
The following picture will help you defining and clarify the your business landscape and the 4 swot-elements:
Figure 6: Definition of the system that should be analysed
When starting the SWOT-analysis it is necessary to define your objectives. In general, we have found these objectives but please define you own:
- Find your strongest strengths
- Find your weakest weakness
- Find the greatest opportunity
- Find the largest threats
- Decide on the Best Way Forward (BWF)
- Create strategic alignment around the BWF
We have seen the following benefits when it comes to a proper SWOT-analysis:
- Make conclusions that are actionable and doable and those conclusions will create resilience and later sustained profitable growth
- Collaboration effort spikes motivation which is needed for strategic alignment
- The SWOT-analysis will serve as a guide for day-to-day decision making
Defining the 4 swot-elements:
Strengths are something that the organisation possesses today. Relative to the competitors the organisation is stronger than the them. The objective is to mine out the three or four strongest strengths.
Weaknesses are something that the organisation has today and they are hindering the organisation to become successful. The objective of the SWOT-analysis is to define the there or four weakest weaknesses.
Opportunities are something is outside of the organisations power to influence. It’s something in the business landscape that exist or will be developed as a future need. The objective will be to define the there or four largest opportunities.
Threats are something also outside of the organisations power to influence. It’s something in the business landscape that exist or will be developed as a future threat. The objective will be to define the there or four largest threats.
Here are some other problems that we have seen:
- Mixing of the 4 swot-elements
- Strengths are not strengths
- Weaknesses - What weaknesses?
- Opportunities - not pursued strengths?
- Threats - not identified
- Not symmetric or weighted
- Often it is not 3x3 or 4x4. Larger matrix will be too complicated
- Difficult to draw conclusions like the strongest strengths
- Very low motivation and understanding of why in the team
- Check list mentality
- Just an activity and no real momentum
- So what?…mentality
In order to be successful in executing a SWOT the following must be taking into consideration.
Key Take Away #1:
Clarity and understanding makes the journey easier
- Conduct a just-in-time team training about SWOT
- Set the expectations
- Define the Business Landscape, today and future
- Define the 4 SWOT-elements
- Decide on the size of the matrix - 3x3 or 4x4
- Give clear examples
Key Take Away #2:
Carve out and decide upon the SWOT Matrix
- Revisit the size of the matrix - 3x3 or 4x4
- Take your time to populate the SWOT-matrix
- Don’t try to do more than 4x4
- Use consensus to align the team
Key Take Away #3:
Go all the way, make sure to finish
- Don’t stop with only the SWOT elements make the SWOT Matrix
- Finalise the SWOT-matrix and draw conclusions
- Define the Unique Selling Point (Strongest strengths)
The following picture is an example of a complete SWOT-matrix:
Figure 7: An example of a SWOT-matrix
From the SWOT-matrix above the following conclusions can be drawn:
- Strongest strengths is S2 since it score 12.
- Weakest weakness are all three weaknesses since they all score -12
- Largest opportunity is O1 & O2 since they score 0
- Largest threat is T2 since it scores -3
- A growth strategy must start by minimising the weaknesses. The opportunities will be very costly to pursue due to the weaknesses. Strengths vs weaknesses is 27 vs -36.
- It will also be needed to either turn threats to an opportunity or block them from enter into the organisation. Opportunities ve threats is -2 vs -7
- The organisation unique selling point (USP) can be described as:
“The good collaboration with suppliers will enable the organisation to pursue new markets.”
Benefits of the SWOT-Matrix
- The SWOT-Matrix enables conclusions that are doable
- Valuation inside the SWOT-matrix will change priorities
- Makes the SWOT -analysis becomes more alive
- The SWOT-Matrix creates a fact-based action plan. In the example above it is clear that weaknesses needs to addressed first
- Also to come up with protection against threats.
Today, when the environmental turbulence level is below 3 it would be a great idea to assess your strategy and also to define a new strategy since we are in the great wait. Resilience is a key success factors for many organisations.
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