First and foremost, let’s take a look at SWOT Analysis Definition.
SWOT analysis, meaning Strengths, Weaknesses, Opportunities and Threats analysis, is a widely used technique to perform structured identification and analysis of the factors that will decide the outcome of any proposal, project, product or business case.
Example – Consider yourself in a situation where you need to decide between two career choices.
Now, conducting SWOT analysis will highlight your professional strengths, identify the weakness that decelerates your success, discover career opportunities to use to your advantage and envisage any threats that might impact your career choice. Analysis of these factors will further aid in choosing the most appropriate career choice for You.
Since SWOT analysis is easy to conduct, gives a lot of insights in a relatively small time and can be applied to a whole lot of situations, it has been one of the most widely used analysis and evaluation technique.
In this article, the broad areas we shall be concentrating on are:
- Origin and application of SWOT Analysis
- Business analyst and SWOT analysis
- How to conduct detailed SWOT Analysis
- When to use SWOT analysis
- Tips and best practices
By the time you finish this article, you will confidently be able to facilitate and conduct SWOT analysis for your customer’s (or even your own) advantage.
Origin and application of SWOT Analysis
Arguably, Albert Humphrey from the Stanford University was leading a research project in the 1960s-1970s which concentrated on United States’ Fortune 500 companies. During this research, he developed the ‘Stakeholders Concept’ and ‘SWOT Analysis’. Since then, SWOT Analysis is instrumental in helping organizations, corporations and even individuals take carefully considered decisions.
SWOT analysis is usually performed at the starting stages of any project, activity or task and is a component of the planning and decision-making process. The main aim of conducting SWOT analysis – Meticulously listing down the Strengths (qualities), Weaknesses (negatives), Opportunities (elements in your favor), Threats (risks) around your project/goal/situation and then analyzing each of these factors to see their impact on your project or activity.
Strengths and Weaknesses are largely governed ‘internal factors’ i.e. factors that are under the control of an organization or individual. Examples are – Company policies, staff, efficiency and dedication.
Whereas, Opportunities and Threats are controlled by ‘external factors’ i.e. factors that are outside the control of an organization or individual. Examples include – Competitors, new technologies and political/financial environment.
SWOT analysis, more than anything else, provides a structured approach towards attaining an objective (be it business, professional or personal) and ensures that you have considered as well as evaluated all the aspects that works ‘for’ your objective and ‘against’.
Business analyst and SWOT analysis
BABOK, the business analysis Body of Knowledge recognizes SWOT as one of the primary business analysis technique and every professional analyst should have a working knowledge of SWOT technique and its applications. A business analyst can make use of SWOT analysis in a number of different situations, like:
- Performing warming up or ice breaking discussion amongst various stakeholders of a project
- When analyzing an existing system that is undergoing a change (change analysis)
- When ascertaining the viability of a proposed business solution
- To identify and unearth new opportunities in a domain or sector (opportunity analysis)
- To study and research about the competition to an existing or new business or product (competitive analysis)
- When trying to find alternatives to an existing problem (alternatives analysis)
How to conduct detailed SWOT Analysis
Before preparing for the SWOT analysis, the aim and objective of this exercise should be listed down that should clearly reflect ‘Why’ SWOT analysis is being performed and ‘What’ outcome is expected from this activity.
Doing so will ensure that post completion you can measure the performance of SWOT analysis in achieving the listed objectives.
Once the objective is defined, the following steps can then be carried out.
To get the most benefit and value out of conducting SWOT analysis for a project or business, the first thing that a business analyst/facilitator should do is list down all the relevant stakeholders that can contribute to the discussion and then invite them all.
Having a diverse set of stakeholders (belonging to finance, marketing, sales, and procurement, etc..) will help in getting more perspectives around the discussion, thus, making the details under the SWOT analysis as exhaustive as possible. Also, it’s easier to reach consensus when all impacted stakeholders are present in the same room (real or virtual).
What follows next is drawing a 2 by 2 matrix on a whiteboard/shared screen or making a list with the headings ‘Strengths’, ‘Weaknesses’, ‘Opportunities’ and ‘Threats’. All the points, details and items identified during the course of analysis should be organized under the respective headings in the SWOT matrix.
Also, since Strengths & Weaknesses are governed by Internal factors and Opportunities & Threats are defined by External factors, the SWOT matrix is also called as IE (Internal External) matrix.
Now, we are going to do a brainstorming session with the stakeholders present by asking them questions for each of the SWOT categories and recording the responses.
In case some of the participants are not aware of SWOT and its use, the business analyst/facilitator should spend some time briefing about SWOT and each of its components.
Listed below is an indicative list of questions that will give you an idea around what kind of questions you need to ask.
1. Strengths (governed by internal factors)
Strengths are strong and positive characteristics of any company or business which gives them an edge over their competition and contributes to their success. Strengths could be internal capabilities which are tangible (physical, can be touched) like human resources, assets, logistics, production, trade secrets, etc… Or intangible (non-physical, abstract) like company culture, brand awareness, business processes, market reputation, etc…
All Strengths, since they are under the control of the company, should be constantly enhanced to maintain the competitive advantage over others.
Following questions can be asked to unearth the strengths:
- What are the activities you do better than your competition?
- What are your qualities/characteristics that attract your customers/prospects?
- What are the resources of your company that you cannot do without?
- What factors or elements (tangible as well as intangible) contribute the most to your success?
- What are your advantages over your others?
- What do you see as your strong areas?
- What is the specialized skill or unique experience you possess?
- What is your company’s Unique Selling Proposition (USP)
2. Weaknesses (governed by internal factors)
Any process, areas or resources that hinder the growth or success of a company is categorized under the weakness section. Weakness are always caused by factors internal to the company and thus, if correctly identified, can be worked upon and improved.
Examples – Less skilled workforce, shortage of raw materials, ineffective management style
Key Questions to identify weaknesses:
- What areas, sections or processes of your company are in a need of urgent refinement?
- What are the factors you think are responsible for your failures?
- What are the pain points in your company that you wish to improve?
- What kind of limitations are holding the company back?
- List down the factors that caused the company to lose to your competitors?
- What are the sections that are not making profits and contributing to the losses?
- What are the areas/sections/functions you fear might collapse soon?
3. Opportunities (controlled by external factors)
Growth is the most vital parameter to measure the success of any company and opportunities are external conditions, situations and circumstances that help the company expand its size and revenue.
Opportunities always propel companies in the positive direction and unlike strength, they are dependent upon factors outside the control of the company.
Examples – Upcoming advancements in the communication industry, less stringent trade laws, growth in demand.
Following questions can be asked to find new Opportunities:
- What new areas can you expand the current business in?
- What new products and services can you release in the market?
- Does the current market conditions open up any new opportunities for your business?
- Can you capitalize on our competitor’s weakness and use this as an opportunity?
- How can you best utilize the confidence of your customers?
- What are the existing or new technologies can you use to open up new business possibilities?
- How can you utilize the current trends to our advantage?
- How can you best leverage our existing strengths to grow the company?
4. Threats (controlled by external factors)
Any factors that could pose a risk to the company’s success and might result in lower sales, lower profits or decline in growth is identified as a threat. Threats and weaknesses might look the same but are different as threats are caused by external factors i.e. activities which are not under the direct control of the company.
Examples – Cheaper products by competing organizations, low economic development, changing climatic conditions
Threats are always negative in nature and factors causing treats always happen outside the boundaries of the company.
Following questions can be asked to unearth the threats:
- What are the new advancements by your competitors that can negatively impact your growth?
- What obstacles or issues are faced by the organization today?
- What new technologies/products can impact your existing market capture?
- What factors can threaten your market image and position?
- Are there any social, cultural or environmental factors that might have an impact company’s existing work culture or profits
- What are the latest changes in the political and economic factors that shall negatively influence your business?
- What weaknesses of your company you believe could lead to lower sales, growth or customers
- Which legal changes can put your business at risk?
The last and the final step is the consolidation and analysis of the data that is collected during the SWOT brainstorming session.
To consolidate the data, the business analyst/facilitator should look at all the points that are listed down under each of the headings and ensure there are no duplicate, misplaced, irrelevant or conflicting entries. Once verified, the participants look at the original objective of SWOT analysis (defined before starting the activity), examine each of the points in the light of that objective, discuss, debate and reach a conclusion.
When to use SWOT analysis
Any tool is best used by the person who knows when and in what situations can it be used. One should know that apart from the obvious listing of strengths, weaknesses, opportunities and threats, SWOT analysis can be best used in the following situations:
- When trying to ascertain what new areas and sections can the company foray into?
- When trying to decide the most promising business proposition amongst various options
- Identify areas where there is an urgent need for improvement
- Find out what risks are posed owing to external conditions
- Recognize new areas of growth for a project, division, section or company
- When comparing different approaches towards a solution and deciding which one is achievable and which isn’t
- Determine how a solution will help a company maximize its strength and minimize the weakness
- To devise new strategies, setting goals and policy making
- When the analysis is to be performed quickly
Tips and Best Practices for SWOT analysis
- SWOT isn’t all about listing of various external and internal factors. A detailed and careful analysis is crucial to the success of this technique.
- To obtain a comprehensive listing of all the factors, the business analyst/facilitator should encourage participation from all kinds (departments, domains, divisions, units, etc..) of stakeholders.
- In case of SWOT with many participants, a huge list of factors is obtained. However, the key here is to prioritize and list only the most important/relevant factors.
- For a more thorough analysis, it is advisable to ensure that the factors should be as quantitative as possible. For e.g. the correct way to word weakness should be – ‘consistent reduction (ranging from 8% to 11%) in productivity for the last 3 quarters’
- The 4 quadrants should be used in conjunction rather than isolation. For e.g. factors listed under strengths can be employed to achieve the opportunities.
- It’s a technique and not a process in itself.
SWOT analysis is a simple, extremely versatile technique that can give us multitude of insights in a relatively short span of time. However, the best way to leverage these benefits and get better at it is to regularly use SWOT in your professional (and even personal) vocation.
On should keep in mind that although SWOT shall help you in doing analysis around solving a particular problem, other activities might also be required to fully verify and vet the solution.
Pro Tip: To get the maximum out of the above article, take a basic scenario or problem and create a SWOT matrix, followed by a quick analysis. The complete exercise should just take 15 minutes and will plant the basics of SWOT analysis firmly in your memory.