Many business owners and boards suck when it comes to performing a SWOT analysis. At least that would be the impression you get from reviewing the “Why Companies Fail” survey, conducted by the US Turnaround Society.
I wrote about this survey several months ago, and highlighted its key findings as follows:
What you see here are failures of strategy. And failures of strategy are most often an outcome of a failure to properly analyze. In other words, a failure to conduct a proper SWOT or strategic analysis. For the sake of simplicity I’m going to use the term SWOT analysis which, as per the SWOT acronym, is an analysis of the Strengths, Weaknesses, Opportunities and Threats that relate to your business.
The SWOT analysis is a crucial part of the strategic planning process because this is where your strategies evolve from. So if your analysis is a cock-up, then your subsequent strategies are likely to be as well.
The SWOT analysis can be used in these two ways.
Firstly, a SWOT analysis can be part of all-encompassing strategic review of your entire business. This is when you set aside time to conduct a quarterly, six-monthly or annual review.
Secondly, it can be used as part of a situational review when you have an urgent that needs to be resolved. For instance, the sudden decline in your market or a collapse in profits.
Either way, the SWOT analysis is designed to give the insight required to help you figure out your current situation with a view to developing the right strategies for the future.
For your SWOT analysis to be effective you must have and use a proper and robust process. This process may include the use of tools such as Porters Five Forces, GAP, sensitivity analysis etc. The key point to understand is that these are tools, which may or may not be part of a much bigger and robust process.
How not to do a SWOT analysis
Lots of business owners and boards do their SWOT analysis by listing them on a whiteboard like this:
A good start, but way too simplistic. This blank page approach to analysis can often get you sidetracked into analyzing stuff that has little strategic relevance and is therefore not important in the wider scheme of things.
Instead you need to focus your analysis on the things that truly matter, and conduct your analysis in a structured and organized manner. In order to do this you should use a tool like this one here, which provides a visual summary analysis of your business:
As shown the summary analysis allows you firstly to give your business a rating on the 12 strategic planning factors. So what you do here is review each of the 12 factors and mark each factor on the corresponding continuum.
For example, strategic factor #2 is a rating of your strategy team. This where you rank the expertise, skills mix and team dynamic of your strategy team.
One of the biggest mistakes business owners and boards make is having the wrong skill set on the planning team. Strategic planning teams and boards are often composed of those with high-levels of functional expertise…for instance law, accounting and finance, or marketing. The reality is though, functional expertise and strategic expertise comprise two vastly different skill sets.
In the second part of the analysis you are asked to give a score in key areas of execution such as brand awareness, together with a summary score of your business concept, strategy, vision and goals.
In this part of the analysis we focus on strategic KPIs such as sales conversion rate, transaction frequency, as well as the clarity and practicality of your vision.
Once you’ve completed both parts you’ll have an excellent snapshot of where your business is currently at. You next step then is delving into some of these areas in greater detail, particularly the ones which have scored low.