Myths have a way of infiltrating belief systems. As with most myths, they’re grounded in history, are easy to understand and have some face validity. But despite the ubiquitous use of SWOT (analyzing Strengths, Weaknesses, Opportunities and Threats), it’s absolutely crucial to get past the myth of its application as a valid business strategy. Holding onto this myth inhibits your ability to develop real strategy and, more importantly, will virtually prevent you from convincing your employees to take a more profound path.
SWOT, as applied to the business world, is generally viewed as a creation of the 1970s when business strategy was really business policy. When I took Business Policy — now called Strategy — in business school, we read cases to “learn” what to do in business. (Even today, some schools think this is all there is to strategy.) Once in business, we were expected to use corporate history or examples in the press as a foundation for what passed as strategy.
SWOT was an attempt to bring some structure to the topic, and as a conceptual approach is still fairly robust. Unfortunately, many authors, academics, and practitioners decided that SWOT was an analysis tool and a means for an organization to pull all of its people together to develop its strategy.
Why SWOT Is Not Strategy and Is Not an Analysis Tool
Taking five minutes to do a SWOT exercise is a five-minute waste of time at any organization. More money has been wasted on SWOT than virtually any other aspect of thought in business. Anyone can generate a SWOT using his or her own biases and view of the world. In the end, a SWOT is simply the opinion of the person or group filling it out. Companies over the years have dedicated untold dollars to meetings where groups throughout the organization craft the SWOT for their company, their division, their product, and so on. Then, of course, they emphasize their Strengths, minimize their Weaknesses, look for Opportunities and prepare for Threats. It all sounds good. However, who decides which is what?
Just because someone believes X is a strength doesn’t make it so. SWOT is an inherently static look at the business based upon a gut opinion. Furthermore, everything that’s a strength is also a weakness. By the same token, everything that’s an opportunity is also potentially a threat.
Over the years I have asked each of my then 8-year-old sons to do a SWOT of his third grade class. I taught him the technique in 3 minutes (anything that an 8 year old can learn effectively in 3 minutes should tell you everything you need to know about SWOT as an analysis tool). I then asked his teacher and his principal (separately) to do one. Amazingly, they didn’t align. My sons thought recess and lunch were the strengths of third grade. Each boy listed his teacher as a strength (albeit below the other two items), as well as a weakness, an opportunity and a threat (at the top of each list). I know it comes as a shock, but neither the teacher nor the principal listed recess or lunch as strengths.
A vast amount of material exists out in the internet world to caution you about the drawbacks of SWOT as an analysis tool. The approach was abandoned by most serious strategy practitioners more than 25 years ago, and yet I see it being attempted every year as I work with organizations in all types of industries. Its staying power is mostly attributable to its ease of understanding and the many, many non-strategy professors at universities who “teach” (a loose term at best) it as a technique.
Serious practitioners of SWOT craft elaborate charts that have a vast list of elements in each of the four boxes. More importantly, people preparing a SWOT tend to live in the past rather than the present or future because the approach doesn’t provide for any dynamic view of the market. Your view of the company will distort what you believe belongs in each category.
However, as I pointed out earlier, it’s a fairly robust conceptual approach. If you look at each element, the fact is that you do want to know what would populate each of the four blocks.
Do you want to know the strengths of your company? Of course you do. There’s a very well-honed technique that was crafted in the 1980s and has been one of the most researched approaches in the history of strategy. Application of this process allows organizations to get at the true strengths (differentiators) of the company. Called by many names — VRIN, VRIST, VRIO — they’re all versions of Resource-Based Analysis.
Do you want to know the weaknesses of your company? Of course you do. These are the standard (table stakes) elements of the business that are being operated below the industry’s median expectations. It’s crucial to identify these and put together an aggressive action plan to get them at or near the median. Table stakes elements of the business done badly will negate all the great things you do to separate your organization from the competitors.
Do you want to know the opportunities of your company? Of course. However, it’s only an opportunity if you have a competitive advantage that can be applied. There are a number of techniques for finding these true opportunities.
Do you want to know the threats to your company? Again, of course. However, threats will also impact most of the companies in your industry. Therefore, there are a number of approaches to discern what these might be and how your organization can navigate those ahead of your competitors.
What does this mean? It means that it’s time to put SWOT to bed as a strategy approach. It’s time for every business person to learn how to really develop strategy and how it can be implemented.