Are SWOT analyses beneficial to business?

Jonathan Faurie
Founder Turnaround Talk

In the past, I have made mention that, before I shifted my focus to the business rescue and business turnaround industry, I was a journalist that covered beats in a wide range of industries. One of these industries was mining. On a mine visit in Barberton, the topic between the CEO if the mining company and the Chief Financial Officer of the company turned to business (never a good idea around journalists who are inevitably never off the record) and the fact that the CFO didn’t believe that a SWOT analysis actually worked.

It was safe to say that I was quite shocked at this as it was a time honoured and well tested process. Sun Tsu makes mention of it in The Art of War and General Norman Schwarzkopf used in extensively in the Gulf War. It must also be mentioned that the CFO’s revelation was also made after a few brandy and cokes, also never a good decision around journalists.

Does SWOT analysis actually work for businesses? Especially those that are in distress? I recently came across a discussion on this topic in some of my recent reading.

The Four Points Of SWOT
The four points of a proper SWOT analysis are Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses focus internally on the business being evaluated, while Opportunities and Threats look at competition and things going on externally. Let’s look at the four points in more detail to determine how you can correctly evaluate each one.

  • Strengths. Your Strengths are internal positives about your company that you can control and that often provide you with a competitive advantage. Some examples might be the quality of your product, the effectiveness of your processes, your access to physical or team assets or other competitive advantages.
  • Weaknesses. A Weakness is an adverse internal attribute about your company that negatively takes away from your Strengths. Some examples might include knowledge gaps on your team, a low-quality product, a lack of money or other tangible assets, bad locations and more.
  • Opportunities. An Opportunity is an external factor that provides promise or is likely to contribute to your potential success. Some examples might include the growth rate in your industry, specific laws or policies that will benefit the need for your product, positive customer feedback or technology advancements.
  • Threats. A Threat is an external factor that you have no control over, which could negatively impact your success. These are typically acknowledged so that you can provide a plan to overcome each one. Some examples include potential future competitors, costs of supply, upcoming market trends, negative technology changes and upcoming regulations or laws.
SWOT analysis is important for any company
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The article points out that the key to a strong SWOT analysis is accuracy in your research across all four points. Once you have the right information, you need to display it in an efficient and appealing way so that the data can easily be shared across your organization, with potential investors or with whoever might benefit the most from receiving it.

How to do an effective SWOT analysis
Every SWOT analysis is somewhat unique to each business but, ultimately, there is a straightforward process that can work for everyone. For example, you’ll have to complete all four points for a proper SWOT analysis but the research and method of getting the information could vary. The depth of each point might also vary depending on the age of your business, and the competition or opportunity in your industry.

The article points out that the three steps to complete a proper SWOT analysis are:

  • Gather the right stakeholders together. You need to involve more than yourself when going through a SWOT analysis. Key leaders and decision makers in your organization should be involved in going through the exercise. If you’re starting a business, you should include all who are involved in the business at this point in time.
  • Brainstorm and capture SWOT data. The second step is to go through the process of identifying the information related to each of the four points. Everyone should do this independently as well as collectively.
  • Analyze the data. Take all of the information collected through the brainstorming and come to an agreement on what factors should be represented in each of the main points. Then you can plug your information into the SWOT analysis template above and use this to strategically plan for future growth.

Use-Case Examples
You can use a SWOT analysis for a number of activities, from deciding whether to invest in a business to helping an individual perform better at a non-profit. The use of SWOT is industry agnostic, as long as there are both internal and external factors that relate to the team, business or person being evaluated.

the SWOT Analysis process involves buy-in from all parties
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Some use-case examples for SWOT analysis include:

  • A new business venture. Whenever a new business is launching it is a good idea to create a SWOT analysis to see where your Strengths and shortcomings lie. If you’re looking to raise money, then it will be expected that you’ve completed this analysis.
  • Launching a new product. Whenever you’re launching a new product, you can treat it like a new business and complete the SWOT analysis to ensure success. Not doing your research beforehand could lead to targeting the wrong customers or not preparing for the competitive landscape.
  • Improving team processes. From time to time, it could be beneficial to evaluate the performance of your team and see where you’re succeeding and what Opportunities exist to improve.
  • Product team adding features. Every time a new feature is added to your product, your team can complete a SWOT analysis to see what impact it could have on the competitive landscape.
  • Marketing team launching a campaign. Whenever a new target audience or method for reaching them is considered, the marketing team can complete a SWOT analysis to determine its potential.
  • As you can see, the sky’s the limit for use cases since you can use a SWOT analysis to determine the potential Strengths or roadblocks for just about anything.

A tool is only as good as the user
I suppose when someone tells you that a SWOT analysis doesn’t work or has no place in the business world, you need to ask that person if it was used effectively. Were all of the parties truly invested in the process and committed to change?

Like the business rescue process, the implementation of a SWOT analysis only works effectively if all parties are committed to turning the company around. This is where the skills of the BRP come to the fore. It is up to them to illustrate the value of the process and to get all stakeholders committed to change.