Getting SWOT

I was saying to someone the other day that the thing I like most about the study of strategy is its simplicity; the way a progression of data will lead you through the steps you need to follow. In writing a business plan, for example, I've always suggested that my clients (or students, when I was a teacher) start with the mission statement, which explains what the company or venture is intending to do. This will, in turn, drive the explanation of why we are going to do it, and what we will need to accomplish these things. These choices will drive who our customers are, which will determine who our competition is, which will in its turn determine how we will have to advertise and what all of this is going to cost. Although if there aren’t enough customers, or if our competition is too tough to beat, then we may need to rethink the whole venture…

Which brings me to one of the basic tools used to assess the current industry situation and determine the strategies needed to direct our company; a technique so simple it can be summed up with a four-letter acronym: the SWOT analysis. The acronym stands for “Strengths, Weaknesses, Opportunities, and Threats,” and in theory all business ventures (and most other organized human endeavors) have to deal with these factors at all stages of their existence. Every group of people has strengths and weaknesses, just as the individual members of the group do; a company or agency will also have tangible assets (equipment, supplies, properties, money and so on) as well as intangible assets (intellectual properties, reputation, goodwill and so on). It may also lack things it needs – the “Weaknesses” of the title.

By the same token, nearly all of us will have to face threats and make the most of our opportunities every day of our lives – and this does not change when we gather in groups to accomplish a mission. Unserved or underserved customers are the most common opportunity businesses look for, but there are many others as well (e.g. the chance to acquire technology, property or information before they become prohibitive; the chance to corner the market on something, or the chance to expand into a new field in time to stake out a dominant position in the market). By the same token, most people believe that threats are primarily comprised of competitors, but changes in technology or the economy, new regulations or trade barriers, or even changes in customer buying habits can offer a much larger threat to your company’s operations.

The key thing to keep in mind about a SWOT analysis is that it truly offers no judgment of the company or the people in it. If we make lawn frogs (like a lawn gnome, only it’s a frog), and the current trend in lawn statuary if for lawn bunnies (like a lawn gnome, only it’s a rabbit), this does not mean that we have failed our families, our customers or our country; it just means that we have to retool our production facilities to make figurines that look more like rabbits and less like frogs. The only possible issues with a SWOT analysis are the people who refuse to do one (because they already have a “perfect” understanding of the market and the industry) and the people who refuse to act on what the SWOT analysis tells them (because they just KNOW that the public will come back to wanting lawn frogs, and it doesn’t matter that the competition can make a better one, or that the government is going to regulate them)…

Done properly, a SWOT analysis can tell you what your company should be concentrating on, what areas it needs to work on, what new products or services you will be able to offer to better serve your customers and to make more money, and what you need to watch out for in the future. Our Strengths drive the activity we should be attempting to focus on, and the Opportunities will tell us where we might be able to use those strengths. The Threats are the hazards we need to look out for, and we need to make sure that our Weaknesses do not make us vulnerable. Trust me on this one, folks: it really is that simple. If you’re willing to do it, of course…