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21st century competitive forces
One of the failures of strategic planning is the overabundance of matrices of information. These matrices of information have historically been used as planning tools to collate necessary information in order to make business decisions. However, one of the most common yet poorly utilized business planning tools is the SWOT Analysis. SWOT stands for strength, weaknesses, opportunities and threats.
This document is a static representation of information – that for all intent and purposes is often mainly well known. If you’ve ever reviewed or built a SWOT, then you know that the strengths and weaknesses are often populated with information that is widely known. Things like “we are market leaders in xx technology”. These platitudes are hollow and provide no decision making support when choosing whether or not to proceed with a strategic plan. On the other side of the strengths column is inevitably something that identifies a weakness that is in fact, not a weakness. This collection of strengths and weaknesses suffer from attachment or lack of perspective. They simply reiterate what everyone already knows to be true and does not provide sufficient “meat” to be useful.
On the other side of the chart is OT (opportunities and threats). This section of the SWOT often restates the opportunity in front of the organization and identifies what will happen if the organization doesn’t pursue that opportunity. When this matrix is often used, you can see groups of people in a room nodding in agreement because they know what is already going to be said. These meetings are best utilized to share new information and engage in provocative discussions to ensure that the strategic plan is well thought-out and considers the options ahead. Instead, these discussions of SWOT often tend to be rubber stamping exercises.
For these reasons, a SWOT analysis is completely useless in forward-thinking strategic planning exercises. It is a reflection of the current state and/or the past. A preferential analysis should be done that looks at the following:
- What weaknesses does the organization / product need to address?
- Once identified, what are the ways in which these weaknesses can be addressed?
- Does it require investment in facilities, people or technology?
- Identify the risk of each weakness to the firm’s success in achieving business objectives (high to low)
- What are the opportunities for the business in each of the following categories?
- Technology / Innovation
- Markets / New Segments
- Regions / New Geographies
- Expansion / Operational
Once the weaknesses and opportunities have been identified, a discussion should take place on how to align the organization to best capitalize on the opportunities ahead while addressing the inherent weaknesses. This should take into consideration the level of risk associated with not addressing the weakness as well as the level of risk associated with not pursuing an opportunity.
The next set of discussion/analysis should take place on the strengths of the business – what can the business utilize to allow it to pursue any one of the opportunities or address weaknesses. In most cases, these tend to be well known.
Perhaps the most important but oft overlooked section of this analysis is the threat assessment. This is an invaluable part of the SWOT analysis but it does not get the coverage that it deserves.
A threat assessment should identify the potential risks to the business in not changing, while also identifying the challenges that lie ahead in the opportunities. A proper analysis should identify the risk, mitigation and threat level that particular risk poses to the organization.
Our recommendation – throw out the SWOT matrix and have a discussion instead.
FEATURED INSIGHTS
Competitive vs. comparative advantage
