The SWOT analysis is probably the archetypal marketing or business planning tool, the origins for which seem have been lost in the mists of time. Some credit an American business thinker, a guy called Albert Humphrey, who worked at the Stanford Research Institute (now SRI International) for its invention. However, whilst he developed other tools, he never laid claim to the SWOT analysis, so the origins remain obscure. SWOT like a number of other frameworks for strategic thinking is pretty battle-hardened having been around since the 60’s and 70’s.
When to use it
The identification of SWOTs is critical to the planning processes because the issues identified can often inform the detail of the planning processes and the actions that need to be taken to achieve the company’s objectives.
Interestingly (or perhaps otherwise), in the 70’s and 80’s one client of Albert Humphreys was WH Smith and the work he did there, aligning budgeting to long range planning, is reputed to have laid the ground work for the Investors in People scheme.
The model and what it achieves
SWOT is a strategic / business planning tool used to help an organisation identify its strengths, weaknesses, opportunities and threats related to:
- The organisations current competition;
- The external environment within which it operates.
The components of the SWOT analysis break down into two camps. The strengths and weakness are generally internally related, whilst opportunities and threats commonly arise from the external world. The name is an acronym of the four parts of the model:
- Strengths: characteristics of the business that give it an advantage over others.
- Strengths might include: a strong brand or image, reputation, patents, cash in the bank, experience, unique or proprietary skills or technologies and much else
- Weaknesses: characteristics of the business that place the business at a disadvantage relative to the competition.
- Weaknesses might include: a high cost base, old and ageing plant and equipment, poor customer service and insufficient cash – the list is long
- Weaknesses might include: a high cost base, old and ageing plant and equipment, poor customer service and insufficient cash – the list is long
- Opportunities: elements in the external business environment that the company could exploit to its advantage.
- Opportunities might include: an untapped new market, an emerging invention or new product or service, taking over a struggling competitor
- Threats: elements in the external environment that could cause trouble for the company.
- Threats might include: a potential recession, interest rate increases, changes of government, changes in technology, disruptive technologies and players, a dominant player taking over a competitor to become even more dominant
How to use
As a young engineer many years ago, a short while after starting a new job making diamond tools, my MD introduced me to SWOT analysis and asked me to come up with my version of what I thought the company SWOTs were. What I didn’t know at the time was that he’d asked the same question of the entire management team, and a number of other engineers. Once he had all the replies, we had an “away-day” and began the process of putting a 5-year strategic plan together. This was the first business plan and SWOT I was ever involved in. I still have it! I’ve even gone and dug it out to reproduce below!
It’s so old it was done on a dot matrix printer! But (hopefully) no less insightful for that!
And whilst the above “SWOT only” approach can still be deployed, these days we’d typically start with a PESTEL analysis followed by a Porter analysis and use the results from those discussions to feed into the opportunities and threats sections of the SWOT.
With the opportunities and threats sorted we’d brainstorm, either individually or collectively, the strengths and weaknesses of the company. It’s more expensive and time consuming, but if you have the time and inclination, I’d also involve key customers in establishing their view of your company’s strengths and weaknesses. Their view is often found to be different to the company view and as such often very enlightening.
Having worked through the implications of what going on in the outside world, what you’re good and not so good at, the results of the PESTEL, Porter and SWOT analysis become the bedrock for developing the objectives, targets and (most importantly) the actions that you need to take in order to develop a robust and executable business plan.
Related tools and ideas
Tools that SWOT can be used in conjunction with, or the results that can feed into it, include:
Recommended references
- Readings in Strategic Management – Ashe & Bowman (great book lots of different case studies)
- Business Guru’s – Ian Wallis – a snapshot of about 30 different business gurus
- Mastering the Rockefeller Habits – Verne Harnish (cheesy title but great easy to read book)
