A SWOT analysis is an incredibly simple and powerful tool to help you develop your business strategy, whether you are creating a startup or running an existing business. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats which translates into: Forces, Weaknesses, Opportunities and Threats .
Strengths and weaknesses are internal to your business - things you have some control over and can change. For example, your team, your patents, intellectual property and your location.
Opportunities and threats are external - what's happening outside of your business, in a larger market. You can take advantage of opportunities and protect yourself from threats, but you cannot change them. For example, competitors, raw material prices and customer purchasing trends are external threats.
A SWOT analysis organizes your key strengths, weaknesses, opportunities and threats into an organized list and is usually presented in a simple two-by-two grid.
This is what presenting a SWOT analysis looks like.
When you take the time to do a SWOT analysis, you will be armed with a solid strategy for prioritizing the work you need to do to grow your business.
You may think you already know everything you need to do to succeed, but a SWOT analysis will force you to look at your business from new angles and new directions. You will examine your strengths and weaknesses, and how you can leverage them to take advantage of the opportunities and threats that exist in your market.
So who should do a SWOT analysis?
For a SWOT analysis to be effective, business founders and managers must be deeply involved. This is not a task that can be delegated to others.
But, company management shouldn't do the work on their own either. For best results, you'll want to bring together a group of people who have different perspectives on the business. Select people who can represent different aspects of your business, from sales and customer service to marketing and product development. Everyone should have a seat at the table.
Innovative companies even look outside their own internal ranks when conducting a SWOT analysis and obtaining customer feedback to add their unique voice to the mix.
If you are starting or running a business on your own, you can always perform a SWOT analysis. You can also seek additional perspectives from friends who know a little about your business, your accountant, or even vendors and suppliers. The key is to have different points of view.
Existing businesses can use a SWOT analysis to assess their current situation and determine a strategy moving forward. But remember, things are constantly changing, and you'll want to reevaluate your strategy, starting with a new SWOT analysis every six to 12 months.
For startups, a SWOT analysis is part of the business planning process. This will help you codify a strategy so you can start off on the right foot and know what direction you plan to go.
How to do a SWOT analysis the right way
As we mentioned above, you want to bring together a team of people to work on a SWOT analysis. However, you don't need all day to do it. An hour or two should be more than enough.
Bring together people from different parts of your business and make sure you have representatives from each part. You will find that different groups within your company will have entirely different perspectives which will be essential to the success of your SWOT analysis.
Doing a SWOT analysis is similar to brainstorming meetings, and there are right and wrong ways to organize them. We suggest giving everyone a notepad and having everyone quietly generate ideas to start. This prevents groupthink and ensures all voices are heard.
After five to 10 minutes of private brainstorming, place all the sticky notes on the wall and group similar ideas together. Allow anyone to add additional notes at this point if someone else's idea sparks a new thought.
Once all the ideas are organized, it's time to categorize the ideas. We advocate using a voting system where everyone gets five or ten "votes" which they can distribute as they see fit. Different colored sticky dots are helpful for this part of the exercise.
Based on the voting exercise, you should have a prioritized list of ideas. Of course, the list is now ready to be discussed and debated, and someone in the room should be able to make the final call on priority. This is usually the CEO, but may be delegated to another person in charge of business strategy.
You'll want to follow this idea generation process for each of the four quadrants of your SWOT analysis: strengths, weaknesses, opportunities, and threats.
Here are some questions that can inspire your analysis
You can ask your team questions when you create your SWOT analysis. These questions can help explain each section and spark creative thinking.
Strengths
Strengths are positive internal attributes of your company. These are things that are within your control.
Which business processes are successful?
- What assets do you have in your team, such as knowledge, education, network, skills and reputation?
- What physical assets do you have, such as customers, equipment, technology, cash and patents?
- What competitive advantages do you have over your competitors?
Weaknesses
Weaknesses are negative factors that undermine your strengths. These are things you might need to improve on to be competitive.
- Are there things your business needs to be competitive?
Which business processes need to be improved?
- Are there tangible assets your business needs, like money or equipment?
- Are there any gaps in your team?
- Is your location ideal for your success?
Opportunities
Opportunities are external factors in your business environment that are likely to contribute to your success.
- Is your market growing and are there trends that will encourage people to buy more of what you sell?
- Are there any upcoming events that your company could take advantage of to grow the business?
- Are there any upcoming regulatory changes that could have a positive impact on your business?
- If your business is operational, do customers think highly of you?
Threats
Threats are external factors over which you have no control. You may want to consider having contingency plans in place to deal with them if they occur.
- Do you have potential competitors who could enter your market?
- Will suppliers still be able to provide the raw materials you need at the prices you need?
- Could future technological developments change the way you do business?
- Is consumer behavior changing in a way that could negatively impact your business?
- Are there any market trends that could become a threat?
What to do next Once the SWOT analysis is complete, you are ready to convert it into a real strategy. After all, the exercise is about developing a strategy that you can work on over the next few months.
The first step is to look at your strengths and discover how you can use those strengths to take advantage of your opportunities. Next, look at how your strengths can combat the threats that exist in the market. Use this analysis to produce a list of actions you can take. With your action list in hand, look at your business calendar and start placing goals (or milestones) on it.
What do you want to accomplish in each calendar quarter (or month) going forward?
You'll also want to do this by analyzing how external opportunities might help you combat your own internal weaknesses.
Can you also minimize these weaknesses in order to avoid the threats you have identified?
Again, you will have a list of actions that you will want to prioritize and plan for. With your goals and actions in hand, you will be far from completing a strategic plan for your business. We recommend using the Lean Planning methodology for strategic plans as well as regular activity planning. The actions you generate from your SWOT analysis will fit directly into the milestones part of your Lean planning and will give you a concrete basis on which you can develop your business.
