By: Bob Dearing, CFE
We live in an ever-changing world of acronyms. Business has had its own for many years and when you add social media, we now have a plethora of meaningless words. Anyone who has grown up over the past 20 years or has teenaged children know exactly what I am talking about. Reality is, speaking the social media lingo is quickly becoming a resume worthy expertise.
One well-known business acronym that has been around for many years is widely used and considered a staple in business planning. Strengths, Weakness, Opportunities and Threats or SWOT, is used around the world in every business type from Starbucks to General Motors to develop strategic plans. SWOT is a powerful tool when used correctly and can be a time-draining, snooze-fest when used incorrectly.
Let’s take a look at how a basic SWOT process might work. Take a few minutes and watch this short video presentation by Jennifer Bridges from Project Manager.
Bridges does a good job of defining and explaining the what and why of what a SWOT analysis is and how it is created. What she does not explain is the next step into how the information is used to develop a strategic plan. We will talk about that at another time.
So, what is it for?
A ship without a rudder is doomed to wander aimlessly or simply go around in circles. John Maxwell describes a company without direction as being like “An octopus on roller skates – a lot of movement but no real direction.” SWOT is a tool to help you focus and channel your thoughts to provide you with a strategic direction.
How does it work?
The premise is really quite simple. Every company, whether they realize it or not, has Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are identified as internal since they are under your control while Threats and Opportunities are external and controlled by outside events. As you begin the SWOT process it is important that you put aside your corporate façade and take a hard look at your company from the outside in as well as the inside out. Let’s take a look at some of the things you will want to consider in your exercise:
Strengths – What the Company does well. Can what we do well be improved and made stronger. Are your strengths people, process, product, reputation, technology? List the important ones, we will prioritize later. (Internal)
Weaknesses – What the company does poorly. Be honest with your team, we all have them. The point is, how can we improve. Is your weakness a lack of expertise in an important area, your process does not work well for the customer, inept customer service… be honest, now is the time. (Internal)
Opportunities – What outside opportunities could you take advantage of. Is there some new technology innovation available that you should be using, has the market “shifted” and you are positioned to react, is there a competitive situation that could be to your advantage? Here is where you discover a “break out” moment. (External)
Threats – What outside threats could hurt your company? This is a forward-looking area to identify events that are a threat to your success. Is the economy beginning to slow, is there a plan for road construction that will change traffic flow to your location, a new competitor planning to enter your market? The goal here is to develop strategies to fight off these threats. (External)
What does it do?
SWOT will help you better understand your company. It is a powerful analytical tool that will provide a roadmap to building your plan for the future. It identifies things that are helpful to your company (strengths and opportunities) as well as those that could potentially be harmful (weaknesses and threats). It allows you to explore solutions to problems and identify obstacles that get in the way of attaining your goals and objectives.
It will help you decide on what direction you want to take and identify any limitations you may have for making change. Most importantly it is a brainstorming session that allows all voices to be heard. Be sure you involve all departments in your company so that all areas are represented. Pay attention to people closest to the customer when identifying needs. Once you have completed everything on your SWOT list then prioritize them by the most important in each category. You may not use all of them but that is ok, just the most important. Don’t overdo it, the top three to five will do.
Create a grid like the one described in the video. This will identify your priority items in each category for the next period in its’ simplest form. At this point, you have two questions to answer…
1. What are you trying to achieve?
2. How will you achieve it?
Once you have answered these two questions you can take that information and develop it into a strategic plan.