SWOT Analysis - death by bullet-point!

SWOT analysis may be the most frequently used analytical tool in business; the preserve of management courses the world over, rolling off the corporate tongue with ease. But it is also the most frequently under-utilised analytical tool, all-too-often met with a collective rolling of the eyes, with an output that all-too-often ends up as an appendix in the strategic document to which it is contributing. 

I have seen SWOT analysis taught and used in academia, business, and the military, and have been consistently underwhelmed with what invariably becomes a glorified bullet-point list. This article recognises that ‘analysis’ is the operative word, and takes it to the other end of that spectrum, where a comprehensive analytical approach pulls SWOT from an appendix to front-and-centre in the planning process. The approach – which contains few revelations – is built-up throughout the article, through three stages: What? So What? Now what? It takes the recognisable four-box matrix to something that resembles the model below, with SWOT at its heart working through stages of analysis to produce a comprehensive plan:

Stage 1: What?

The first stage in undertaking this more comprehensive SWOT analysis is essentially the exercise in its entirety in most instances: identify your strengths and weaknesses (internal), opportunities and threats (external). To develop this from an arbitrary bullet-point exercise to an analytical one, there are a couple of principles from which to work. Firstly, incorporate a number of other tools to provide frameworks for identifying S,W,O and T, immediately providing structure to your brainstorming effort. The originator of SWOT, Albert Humphrey, structured the analysis around six programme-planning categories of: product, process, customer, distribution, finance and administration.[1] We have far more tools in our arsenal, and the below all complement SWOT:

·         Value Chain Analysis: for identifying internal S&W, e.g. firm infrastructure, HR, technology, procurement, logistics, operations, marketing & sales, service.

·         Porter’s 5 Forces: for exploring S,W,O&T in your specific industry based on competition, the threat of substitutes, the threat of new entrants, and the power of buyers and suppliers.

·         PESTLE (or STEEPLED or PRESTCOM): to identify O&T based on political, economic, social, technological, legal, environmental, ethical, demographic and geographical dimensions.

The second principle with which to work adds real analytical value by considering further dimensions to each factor identified in these frameworks, namely: the extent, relevance/impact, probability and timeliness of each. This is fundamental to a worthwhile SWOT analysis. To what extent is a strength a strength, and how relevant is it? What is the likelihood of a threat being realised, what impact will it have and when will it happen? It’s also worth remembering that strengths should focus on your real core competencies and areas of competitive advantage – put the definitions (here and here) on the wall, and if a competitor does something better than you, think twice about the extent to which it is a strength.

Visually, in order for this to be most impactful and to aid analysis, it is necessary to present as many of these dimensions as you deem relevant. The simplest way is to just rank the list, with the strongest strengths at the top; but, here are some other ideas:

1.       Tabulate: with each factor (e.g. strength 1, strength 2) on a row, use columns to record the extent, relevance/impact, likelihood and timeliness (e.g. on a scale of 1-5). This has the advantage of being straightforward, and the table can also quickly be sorted by any of the variables.
2.       Spectrum/timeline: use a spectrum, from strongest to weakest, or a timeline, and plot factors along the line using height above, and depth below the line to indicate probability, impact, or whatever you deem relevant.
3.      Bubble chart: with the size of the bubble representing the extent of the S/W, the X-axis representing impact, and the Y-axis representing relevance/probability. This is a great way to visualise a number of dimensions all at once.
4.       Probability-impact matrix: similarly, the familiar probability-impact matrix can be used particularly effectively for O&T. On this matrix, impact is on the X-axis and probability on the Y-axis, with each O&T plotted accordingly. The most important will cluster in the same area (shaded red).[2]

In reality, the method that you use will be determined by the variables that you deem to be most relevant, but the importance of visualisation should not be underestimated both in terms of its utility in the analysis process, and also for presenting your findings: compare the bubble chart to the bullet-point list – which is more impactful?

So this first step has already taken us beyond where most SWOT analyses end: we have added analytical value by using frameworks to brainstorm S,W,O & T, and have arranged those in such a manner that we can easily identify which are the most significant, impactful and timely.

Stage 2: So what?
This next crucial question can be answered by exploring how all of these factors are related – for example the strategic fit between a company’s strengths and the opportunities in its external environment – and this is where SWOT as an analytical tool starts to come to life. This stage essentially breaks down to four or five questions intended to identify particular approaches to opportunities and threats[3]:

This can be done in painstaking detail: taking each question in turn and considering each factor against each other. Another set of matrices can be used, one for each question, laying out, for example, all of the strengths and all of the opportunities, ranked by their extent (as identified previously) on a scale of 0-5. A similar score (0-5) can be given for the extent to which each strength can contribute to each opportunity, with the numbers multiplied together to give an overall score. More simply, + signs and 0s could be used to identify where there is a link. Both approaches are shown below:


In the first example, S1 is the greatest strength and O1 is the biggest opportunity; but S1 can make no contribution to O1 and hence is of limited relevance. Here, S1-O2 and S3-O1 are identified as the single areas that can most readily be capitalised upon; and it is also important to identify combinations of strengths that contribute to an opportunity (e.g. S1/2/3-O2). Adding up the totals in the O rows will help to re-assess what the best opportunities are, namely the ones to which most strengths can apply, and also to re-assess what the most useful strengths are, namely those that contribute to the most opportunities; with the above now showing that perhaps O2 is the one that can most readily be capitalised upon.

As well as a score, each combination of factors should also result in a statement, outlining how they are related and what that means, or the ‘so what?’ For example: “Our company has a strong track record of delivering power generation projects in a number of African countries (S2), where there is a growing market for power generation equipment across the continent (O2) – we will capitalise on that growth by leveraging our reputation, existing relationships and distribution channels to expand across the continent.”

Now the company may have planned to capitalise on that opportunity anyway, but what this process has done is help to clarify where the priorities lie: which opportunities is the company best-placed to exploit? Which weaknesses need addressing most urgently? The end point of this stage combines the generic approaches within each segment of the matrix, shown below, with the statements, ordered by priority as established throughout this stage. Again, this can be presented as simply as a list of actions, or it can be shown on a timeline – this is particularly useful, as shown below, for planning.

So we have now explored the relationships between all of the SWOT factors, prioritised these, and developed a series of intent statements that demonstrate how we can leverage our strengths and invest in our weaknesses to capitalise on opportunities. Now what?

Stage 3: Now what?

It is at this stage that the notion of strategic fit is taken a little further: exploring the extent to which the company can match its resources and capabilities to the external opportunities available to it, or to mitigate the threats facing it. The previous stage prioritised a series of intent statements that outline how, where and when the company can best deploy its strengths, or where it must be most wary of its weaknesses – now it’s necessary to look at how to enact these statements, and how much should be invested in each relative to the other opportunities and threats identified. 

One method that is useful when considering business development plans, specifically talking about capitalising on opportunities, is to consider the ARCs that are required: Assets, Relationships and Capabilities. Capitalising on each opportunity and mitigating each threat will require various combinations of ARCs; things such as:

• Assets, e.g. finance, physical space, machinery, intellectual property.
• Relationships, e.g. partner organisations, customers, suppliers, industry bodies, government bodies.
• Capabilities, e.g. skills and human resources, organisational capabilities.

Approaches within each segment:

S-O ARCs	Focus on maximising what is already in place; investing to consolidate strengths.
S-T ARCs	Focus on reinforcing existing resources where necessary to defend against threats.
W-O ARCs	Invest in internal barriers to growth, things that are holding you back.
W-T ARCs	Address critical issues in your business – some will be urgent. Divest others.

So for each of the statements made in the previous stage, it is necessary to identify what is needed in order to make that statement a reality. This now forms the basis of a detailed action plan, grounded in our recognition of the most significant strengths, weaknesses, opportunities and threats, the relationships between those, and what we need to do in order to address them.

To continue the example of a power generation company seeking expansion in Africa, then they might consider ARCs in one country as follows:

·         Assets

o   Expand warehousing and engineering facilities in Uganda.

o   Invest £X in facilities, £X in human resources, £X in marketing, etc.

·         Relationships

o   Strengthen relationship with UKTI representative for Uganda.

o   Strengthen relationship with Regional and District administrations in Uganda.

o   Strengthen relationship with industry bodies, e.g. Ugandan National Chamber of Commerce and Industry.

o   Maintain relationship with Ugandan distributor.

·         Capabilities

o   Recruit salespeople with experience of the industry in Uganda.

o   Recruit or up-skill Ugandan engineers.

And by the time this point is reached, the company has a clearer idea about strategic fit with its assets, relationships and capabilities, and where these can be brought to bear in its external environment based on all of the analysis that has gone before.

Conclusion

This approach to SWOT analysis demonstrates that it can be more than the mandatory bullet-pointed exercise in the appendices of a strategic or planning document; and that it can, in fact, be front-and-centre in the planning process.

Interestingly, the model as originally laid out by Albert Humphrey emphasised using SWOT as a first step, and developing the factors identified into actions and accountabilities for organisational change. I fear that it has got lost somewhere along the way, perhaps through overuse and over-familiarisation.

This article outlines the approach to its fullest extent, and it is recognised that to carry it out in this manner would involve a large number of people, probably for a whole day, and require massive amounts of paper and post-it notes. The first criticism levied at such an approach is probably along the lines of ‘analysis paralysis’ – why take a simple tool (and indeed its simplicity is oft-cited as one of SWOT’s main strengths) and over-complicate it? I would flip that argument on its head: why take a complex environment – with interplay between strengths, weaknesses, opportunities and threats – and simplify it to the point that it is of little value beyond the appendices?

Regardless, this approach is not prescriptive. It is intended to demonstrate how comprehensive SWOT analysis can be, to reinforce its utility, reinvigorate its use and progress thinking in this direction the next time a SWOT analysis is undertaken.

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[1] Humphrey, A (2005), SWOT Analysis for Management Consulting.

[2] This particular example comes from the Project ROI blog here: http://projectroi.blogspot.co.uk/2011/05/swot-analysis.html

[3] This matrix is commonly referred to as TOWS. The best article I have seen on this is Weihrich, H, The TOWS Matrix - A tool for situational analysis (http://www.usfca.edu/fac_staff/weihrichh/docs/tows.pdf), but a general web search turns up lots of material on this.

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