How not to do a SWOT analysis – and what to do instead

In this lesson, which is part 3 of the series on the SWOT analysis, I want to share with you 4 big SWOT analysis mistakes many business owners make.  And, I’ll show you what to do instead.

Mistake #1. Following a random SWOT process instead of a proper, visually-driven system

In the first SWOT lesson I shared with you this worksheet, which many business owners use when doing their SWOT.

how-not-to-do-a-swot

In my view this process is too random and accordingly, you run the risk of the whole process going off on too many tangents.

The Solution? Instead, you should use tools like those below, which provide a more structured process, while also allowing your creative juices to flow.  The Summary Analysis is helpful in that it provides a concise visual overview of where you are at in your business.

strategic-analysis-overview-1016

Mistake #2. Strengths and weaknesses are internal. Opportunities and threats are external

Analyze internal strengths and weaknesses.  And analyze external opportunities and threats. This is a biggie, is taught in business schools, and the subject of most books on strategic management.  Problem is, it’s wrong.

Don’t pigeon-hole strengths and weaknesses as only being internal to your business, and opportunities and threats as only being external.  Why? You run the risk of failing to address the strengths and weaknesses of your competitors and the marketplace in general.  Plus, you run the risk of failing to address internal opportunities and threats that pertain specifically to your business.

As Sun Tzu explained:

“Therefore, determine the enemy’s plans and you will know which strategy will be successful and which will not….Probe him and learn where his strength is abundant and where deficient.” (From The Art of War)

Bottom line?  Not knowing your competitors’ strengths and weaknesses is silly.

What to do?  Use a tool like my Strengths matrix to map not only your strengths, but also the strengths of your competitors.

strengths-analysis-matrix

Now with regards to threats, some of the biggest threats to your business can be internal, as shown in the threats matrix below.  For instance, how much impact would a key staff member leaving have on your business?  Or a significant relationship or cultural issue?  These are internal threats that need to be accounted for.

Threats-Analysis-Matrix-960

Solution.  Use tools like the Threats matrix to address all external and internal threats.

Mistake #3. Not accounting for probability and impacts

Many business owners don’t do enough probability analysis.  Put simply, they don’t take into account the likelihood of something happening or not happening in, or to, the business.  They may be aware of an issue or threat, but don’t deal with it effectively.  Big mistake.

Furthermore, they don’t effectively address the impact that a threat or weakness could have on their business.

Solution.  Using a tool like the threats matrix forces you to address the issue of probability.  In other words, the matrix makes you assess the likelihood of a threat occurring.  Just as importantly, it brings to the forefront the impact that threat would have on your business.

The threats you need to be most worried about?  Those that have a high probability of occurring, and which would have a significantly negative effect on your business.  Come across any of those in your business and you are potentially in deep s#%t.

Mistake #4. Not planning counter-measures or actions

What is worse than not using probability and impact analysis?  Using probability and impact analysis – and then not bothering to put in place any counter measures or actions?

When the threats are high and the weaknesses significant, and you fail to plan accordingly – you will pay the price when the S#%t eventually hits the fan.

Long story short?  You’ve got to plan the counter-measures.  Or have a plan B.  Using a tool like a Threats matrix helps you to better prepare for any threats that may occur.

Summary

The SWOT analysis is a key step in the strategic planning process.  But conducting a SWOT is not an activity that should be performed just in your strategic review.  You should SWOT regularly and intensely.  And when you do, make sure that you:

  1. Follow a proper process, using visual thinking tools
  2. Assess external strengths and weaknesses, as well as internal opportunities and threats
  3. Use probability and impact analysis
  4. Plan counter-measures and actions based on your analysis