So-What (SWOT) Analysis

One thing that makes my palms sweat when reviewing a business plan or strategy document is a SWOT analysis.  Reading one of those two-by-two tables makes me think that my generally very smart, commercial, rational clients, have decided to illustrate what they learned at primary school, or have accidentally inserted a no-idea-is-stupid whiteboard printout from the start of a brainstorming session.

I'm not saying that SWOT doesn't have its place at the beginning of the strategy development process; it does, especially if you start with the "O".

O, for opportunity, forces you to take a moment to look around and speculate where the future pools of profit might be, which is especially useful for bringing out those areas that you're currently not doing anything about.

S(trengths) helps you realise where your sources of competitive advantage might lie.

W(eaknesses) forces you to be realistic about what may need improving, and traits that might put you at a disadvantage.

T(hreats) forces you to look at those things coming over the horizon that might sink you below the water line.

This forced lookaround for factors that may be important is, in my experience, the entire benefit of SWOT.  But it's only of value if you go on to test properly which ones are true and material.  Unfortunately, most plans that I see stop with the SWOT output, and bung the list unqualified into the document.  This is worse than useless; it's foolhardy, because it can set in train a series of actions that are based on barely-substantiated speculation.

From the long list of strengths, weaknesses, opportunities and threats that emerge in the SWOT analysis, how do you know which are actually true as opposed to speculation? Which are material and will affect the entire future of your business, and which are pretty much irrelevant?  Which ones should you deliberately not do something about, for example the weakness in high-end products that would kill your cost advantage if you addressed it?  How do you know which opportunities are the ones to put time and money into, and which are the ones to deprioritise?

If you recognise SWOT's limitations, and treat it as a start point, from which you do some testing with facts, then you can create something valuable from this motley list of brainstormed hypotheses.

Start with the opportunities and ask some standard commercial questions.  How big are they? How well positioned are we to exploit them versus everyone else?  How much does it cost to start exploiting each of them?  How sustainable is the profit stream that comes from each?  Which of them is the most valuable use of a dollar of investment or an hour of management time?  If the business case of any one of them stacks up, what do we do next to get there?

Do the same kind of reality check and so-what test with the strengths, weaknesses and threats.  And you will end up with a short list of credible opportunities and actions, which I promise will pay back the additional time a hundred-fold.

You'll also have fewer business plan readers with sweaty palms asking "so what?".


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