How a SWOT analysis can help your business grow
One business improvement tool that we highly recommend our clients use is the SWOT Analysis. If you haven’t heard of it before, it is basically a tool that helps you identify what is working well in your company, and what needs improvement.
In today’s article, we’re going to give you an overview of SWOT, and give you some tips for how you can use it to tighten your own business.
Why do a SWOT?
SWOTs are great tools to help you plan for the future. They help identify barriers to growth or success, and how you might overcome them. They can be used to identify possible new products or services you might want to offer, and what might be standing in the way of you introducing those. SWOTs can also be an important part of strategic planning.
In very general terms, they answer the following questions.
What do we want/need to do more of?
What do we want/need to do less of?
What do we want/need to do better?
What new opportunities are out there for us?
What possible problems are there down the road for us?
The information obtained from a SWOT can be crucial in answering these questions. In addition, ideas for addressing any issues is often also part of the SWOT process, giving you not only insight, but possible solutions.
How does a SWOT analysis work?
SWOT stands for:
Strengths
Weaknesses
Opportunities
Threats
These are the four areas that the analysis covers.
A SWOT can be done for an entire organization, or for individual departments. It can even be done for a product line, market segment, or individual project.
It all starts with the SWOT Matrix. This is simply a page split into 4 squares (2 across, 2 down). Each square has as a title one of the 4 words that SWOT stands for.
You then select a team to go through the SWOT process, one that is made up of a variety of people that do work related to the area you are doing the SWOT for. The team begins by filling in items that fit under each title. Here are some examples to give you an idea of how this works.
Sample Strengths
Top notch personnel
State of the art facilities
Better value than competitors offer
Only supplier in nearby area
Sample Weaknesses
High attrition
Out-of-date technology
High workload (leads to employee burnout)
Limited benefits packages
Location
Sample Opportunities
One major competitor has recently closed its doors. Can we woo their former customers?
The lot next door is for sale. Can we buy it and use it to expand?
Covid is keeping more people home. Can we introduce a delivery service?
Sample Threats
Future Covid shut down
Expected recession
New competitor
Changes in supply chain
New trends
Note: strengths and weaknesses are typically internal aspects of your business; opportunities and threats are typically (though not necessarily) external influences.
Once the team has identified the items in each of the squares, you begin to analyze them.
SWOT Step by Step
Now that you have an idea of what SWOT is all about, let’s go over the main steps in completing one.
Step 1. Why are you doing a SWOT?
Be focused about why you are doing a SWOT. Are you going to use it to develop your strategic plan? Are you worried about increased competition? Are you interested in expanding your business? Understanding exactly why you are doing a SWOT will help you focus during the exercise and analysis steps that come later.
Step 2. Assemble your team
Assemble a team to work on your SWOT analysis. Often these people are senior staff, but we have found that having a well-rounded team can help uncover items that senior managers may have overlooked.
Step 3. Explain the SWOT process
Take time to explain to your team exactly what a SWOT is, how it works, why one is being done, and what will happen after the process is complete.
Step 4. Distribute the SWOT matrix
Meet with your team and hand out a copy of the SWOT matrix to each individual. Alternatively, you can break your team into groups and have each group complete one matrix together. When everyone is done, combine all their items into one master matrix. (You could also do this with only one large matrix, at the front of the room, with the entire team contributing ideas to be put on that one sheet.)
Step 5. Fill in the matrix
List relevant items in each of the 4 squares. Don’t analyze them at this point—your goal is to get as many items on the list as people can come up with.
The rest of the steps are part of the analysis phase. Start by thinking back to Step 1: why did you want to do a SWOT in the first place? This will help you focus your analysis.
For example, let’s say you chose to do a SWOT because your customer service reviews weren’t as good as you would like. if you are happy with the size of your company and have no intention of chasing new opportunities, but are very worried about the negative reviews your customers have been leaving, then you probably want to focus your analysis more on the current weaknesses in your organization, and less on new opportunities.
Here are the analysis steps of the SWOT.
Step 6. Strengths
Analyze each strength carefully.
What makes each item a strength?
What are your competitors missing here that you aren’t?
Step 7. Weaknesses
Analyze each weakness carefully.
What characteristic makes it a weakness?
Brainstorm solutions to weaknesses
How serious a problem is each of the weaknesses to the continued success of your company?
Step 8. Opportunities
Analyze each opportunity carefully.
Which opportunities can you realistically take advantage of?
Is this an opportunity that is likely to endure? (not a flash in the pan)
How might you take advantage of these opportunities? What needs to happen?
Analyze each opportunity carefully including timeline, cost, chance of success, effect on current operations, etc.
Step 9. Threats
Analyze each threat carefully.
What can you do to prepare for an individual threat so you can mitigate its effect on your business?
What exactly is causing the threat?
Step 10. Prioritize
You probably can’t implement all the suggested changes or ideas that came out of your SWOT at once, so you need to do some prioritizing. What is the most important thing to address first? Which items can wait? Which have deadlines? Which will have the biggest impact on your business? Here are a few points to keep in mind.
Strengths: the most impactful are those that bring you the largest wins/successes/revenue
Weaknesses: the most impactful are those that cause your company the most difficulty/cost/time
Opportunities: the most impactful are those that will bring the largest gains (image, revenue, market share etc.) to your company.
Threats: the most impactful are those that will cause your company the most harm/time/revenue
Once you have prioritized everything, create a written plan or schedule for implementation of all the doable ideas that came out of the SWOT.
Step 11. Follow up
Build regular reviews into your plan, dates that you will check on the progress being made.
Summary
We hope this article has given you a good idea of how a SWOT works, and why it might be a good tool for your organization to use. While the basic structure and approach of a SWOT Analysis is fairly straightforward, you can make it as simple or extensive as you wish. And remember, it is just one part of a larger process: SWOT analyses are of no value if the information obtained is not put to good use!
Cheers,
Peter
[ This article is intended as general information only and is not meant as professional advice. ]