Let’s make SWOT Analysis simple?

Let’s make SWOT Analysis simple?

Every business should make SWOT analysis part of their weekly Power Huddle routine. Why? If a business owner does not monitor its strengths, weaknesses, opportunities, and threats regularly they will not be prepared for the unexpected. Do you want to be a reactive business owner or proactive? I also like to look at SWOT in another way that also includes Internal: strengths/Successes-Weaknesses/Issues. External: Opportunities/Performance-Threats/Profit. Would you agree with this extended breakdown that these are all areas a business owner would want to monitor weekly?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is a framework to help assess and understand the internal and external forces that may create opportunities or risks for an organization.

Strengths and weaknesses are internal factors. They are characteristics of a business that give it a relative advantage (or disadvantage, respectively) over its competition.

Opportunities and threats, on the other hand, are external factors. Opportunities are elements of the external environment that management can seize upon to improve business performance (like revenue growth or improved margins). Threats are elements of the external environment that may endanger a firm’s competitive advantage(s), or even its ability to operate as a going concern (think regulatory issues or technological disruption).

Examples

Strengths

Strengths may be any number of areas or characteristics where a company excels and has a competitive advantage over its peers. Advantages may be more qualitative in nature and therefore difficult to measure (like a great corporate culture, strong brand recognition, proprietary technology, etc.), or they may be more quantitative (like best-in-class margins, above-average inventory turnover, category-leading return on equity, etc.).

Successes

Internally what were your successes for the week, converting a new client etc…

Weaknesses

Weaknesses are areas or characteristics where a business is at a competitive disadvantage relative to its peers. Like strengths, these can also be more qualitative or quantitative. Examples include inexperienced management, high employee turnover, low (or declining) margins, and high (or excessive) use of debt as a funding source.

Issues

What issues might you see in your business, such as your sales funnel is not working properly.

Opportunities

The “Opportunities” section should highlight external factors that represent potential growth or improvement areas for a business. Consider opportunities like a growing market share), technological advancements that might help improve efficiency or changes in social norms that are creating new markets or new sub-segments of existing markets.

Performance

In what areas could you improve performance or efficiency? Is your pricing on point?

Threats

Threats are external forces that represent risks to a business and its ability to operate. The categories tend to be similar to the “Opportunities” section, but directionally opposite. Consider examples like an industry in decline (which is the same as a decreasing TAM), a technological innovation that could disrupt the existing business and its operations, or evolving social norms that make existing product offerings less attractive to a growing number of consumers.

Profit

Have you reviewed your financial statements for the week? Are you on track to meet your budgeted income? Have you exceeded your budgeted expenses, if so why? Could you still be on track to meet your monthly budget, even though you might have had some hiccups within the week? If not, time to put some strategies in place to right the ship.

How to Conduct a SWOT Analysis

A SWOT analysis is rarely completed in isolation; it generally makes up one part of a broader business analysis. And while it is itself an assessment framework, a SWOT analysis is also an effective tool to help summarize other findings.

For example, an analyst can’t really assess a company’s strengths and weaknesses without first understanding the business and its industry. They may wish to leverage other tools and frameworks in order to accomplish this, including:

What is a SWOT Analysis Used For?

A SWOT analysis is used differently by different stakeholders.

For smaller companies, I recommend the SWOT is used as part of the weekly review of the business. The SWOT becomes a part of the health check of the biz at the weekly power huddle 30 min meeting (one of your sprints in your 4.5 hour workday™ schedule. You will notice as you implement this strategy, fewer situations will catch you and your business off guard. You will catch bottlenecks (things that stop productivity) earlier and have less impact on your business success.

Larger organizations For example, a management team will use the framework to support strategic planning and risk management. SWOT helps them visualize the firm’s relative advantages and disadvantages in order to better understand where and how the organization should allocate resources, either towards growth or risk reduction initiatives.

The analyst community, on the other hand, may seek to understand (and quantify) strengths, weaknesses, opportunities, and threats in order to assess the business more completely.

Consider that findings from a SWOT analysis may help inform model assumptions among analysts.

It could be an equity researcher trying to estimate the fair market value of a company’s shares, or a credit analyst looking to better understand a borrower’s creditworthiness.

In general, the SWOT framework is considered by many to be one of the most useful tools available for strategic planning and business analysis.

It is vital for the success of your business or organization to utilize the SWOT strategy as an intricate part of your business operations. It is important that your team members know you have a pulse on the health of the business every day.

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