04/01/2012 Leave a comment
No it doesn’t mean burying your head in a textbook cramming for an exam…and nor does it mean a team of battle-hardened commando’s…it is in fact a business planning discipline for identifying the key environmental (EXTERNAL) issues which will impact a business, as well as the strategic capabilities (INTERNAL) of that business …all of which will impact its strategy.
The technique is attributed to Albert Humphrey – an American management consultant based at the Stanford Research Institute who worked with some of the largest global businesses in the 60’s and 70’s.
The beauty of SWOT…is its simplicity and the fact that it works for individuals personally, for small businesses, not-for-profit organisations, government and even the big end of town….it can even be used in decision-making scenarios, like a viability or new product study.
“The Good, the Bad and the Ugly”…
SWOT is pretty comprehensive and it provides an all-round perspective of both the GOOD (favourable factors) and the BAD/UGLY aspects (unfavourable factors) relative to either:
(1) a COMPETITOR business/es …or
(2) the business’s or the project’s specific OBJECTIVES.
How to perform a SWOT analysis…
- Start with what the business or the project looks like today?
Then think and talk about things from an entirely Inward/Introspective viewpoint:
- How does your top management team or Board rate, are there functional gaps, are they cohesive/communicative and focused on achieving pre-defined objectives?
- What are the skills and attitudes of your management and staff like, could they be improved, what do customers say about them and are they stable and productive?
- What products and services are in high-demand? Which are considered the best of their ‘breed’ in the market place?
- What are the marketing and advertising resources and skills like? Are they achieving their desired objectives? Are you driving the ‘right’ #’s and ‘$’s’ of sales and are you growing your sales and sales pipeline continually?
- What is the state of your bank account and do you have adequate finance facilities to grow?
It is likely that when you spend time dissecting these internal ‘STRENGTHS’ and ‘WEAKNESSES’ that you will find that some conflicts or anomalies occur. A strength in one scenario might even be a weakness in another e.g. a broad, highly skilled and experienced Board maybe a great strength in terms of institutional recognition, quality and leadership …but a possible weakness would be the attendant cost and the constraint on internal staff being able to be promoted to those roles in the near-term?
Then move onto the external situation – AND LOOK OUTSIDE yourself or your company:
- Consider the various things that influence your business (think broadly in terms of Political, Economic, Social, Technological, Environmental and Legal issues) and see which of those factors …or the changes that might be occurring in each of those areas will be able to be turned into:
- OPPORTUNITIES for the company
- ALSO think about how each of these factors will impact your most important competitors – how well do they shape up …and where are their GAPS/WEAKNESSES that might be commercially
- What would you need to do to highlight those …and do you have adequate resources to exploit those deficiencies?
Once you have a high-level picture of where things are at please DON’T stop…otherwise all the hard work will never yield anything of real value! At this point you will need to consider and PLAN ACTION STEPS which will exploit the company’s STRENGTHS as well as the OPPORTUNITIES which present themselves in the market…whilst at the same time counteracting or reducing the impacts of the negative or riskier elements of the company and the threat’s posed by competitors….
Spend plenty of time categorizing (an A-B-C prioritisation system works well) the various actions on the basis of their IMPORTANCE and URGENCY …so that they can be allocated to various members of the management/staff for implementation…and try and make sure that no more than 6-8 key areas are to be focused upon at any point in time…
STRATEGIC EXECUTION or “IMPLEMENTATION”, and the success you achieve from taking the various actions is where the REAL VALUE of having taken this important strategic step will be revealed!
SWOT analysis is not an all-encompassing strategy tool – however it has been extremely valuable for more than 40 years and we use it regularly as a business valuation and strategic positioning tool which quickly helps us to benchmark and understand a client …as well as determining how such might grow and improve?
Start using SWOT TODAY…to provide a clear picture of the market and where in it your company sits! Sun Tzu’s ancient quote reminds us of the perils of not doing so…“If ignorant both of your enemy and yourself, you are certain to be in peril!”
For additional information or assistance on strategic planning visit us at www.latticecapital.com.au.
Join us next week when we’ll show you how to use the Boston Matrix within your business.
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