Do you know what SWOT stands for?
Of course, it means Strengths-Weaknesses-Opportunities-Threats
When was the last time you did a SWOT analysis for your business?
Uhm, I’m not really sure.
So how did you learn what SWOT analysis is about?
Oh that’s easy, we covered it when I was getting my MBA.
I have conducted this informal survey on a regular basis, the results are always the same and yet it still surprises me. If SWOT analysis was important enough to teach in b-school, and important enough for you to remember, why isn’t it important enough for you to implement???
What SWOT Analysis really is…
If you think of the business world as a large jigsaw puzzle, do you know what puzzle-piece you are and where you fit in the picture? SWOT analysis is a way of looking at the larger environment surrounding your business and where you fit within that environment. The external analysis includes evaluating the opportunities and threats that exist in your industry or the world at large that can impact your business.
It is also a way of identifying what you do well, really well, and what you need to work on. The internal analysis focuses on the strengths and weaknesses of your particular operation. Knowing what you are good at and how you fit in the bigger picture is critical to developing a strategy for lasting success.
What SWOT analysis can teach you about your small business…
- Understanding your Strengths serves as the basis for your competitive advantage. Figure out what you do well and do more of it! Make sure you communicate your competitive advantage to the world in all of your marketing materials. Sing your praises to your employees. If your employees really don’t know what you do well, how can they help your business achieve its goals?
Identifying your Weaknesses
- gives you an idea of what you might want to work on. The old adage is true, you are only as strong as your weakest link. In some cases, a weakness may be something that you have purposely chosen not to focus on, say bricks and mortar if you are an online operation. However, if you take an honest look at your operations, from all angles, and within all departments, you may find areas that need to be improved in order for you to be the best business that you can be, for example do you know how long it takes for a customer to get a response to a question via e-mail versus the phone? How does your response time compare to your industry averages?
- Pinpointing Opportunities identifies areas for growth. Often business owners get so focused on their day-to-day operations (and rightfully so) that they may not see future opportunities. Being one of the first to take advantage of a new market trend provides you with the greatest chance for success and profits.
- Considering Threats before they happen will allow you to create a good defense. There is nothing worse for a business than being caught by surprise AND then not knowing what to do. Chaos is definitely not good for business!
Step 1: Assemble a SWOT Team
Include members of your organization from all departments and all levels of the org chart. The greater the variety in the perspectives, the more honest and accurate the picture of your business will be.
Step 2: Pick a Meeting Time and Place
Pick a neutral location where all team members will be comfortable. And pick a time that is convenient to the majority. It’s hard to get people to focus on the task at hand if they are continually feeling the pressure of time and looking at their watch!
Step 3: Set the Ground Rules
Everyone should be empowered to say what they really think without fear of retribution. There is no “wrong” answer. You want honesty and realistic comments at all times. More answers are better. You may get opposite responses from different departments – talk out the discrepancy. Find out why there is a difference of opinion or perspective.
Step 4: Strengths
Set a positive tone by starting with what you do well within your organization. Cover topics such as your product line, marketing, unique selling proposition, resources, reputation, organizational structure, culture, location, operations, knowledge and experience, qualifications and certifications, financial resources, patents and intellectual property, mission and philosophy.
Step 5: Weaknesses
Now it’s time to be honest. Open up the kimono and take a long, hard, honest look at the business and ask yourself, “What can we do better?” Where are there gaps in what you do? Or in some cases, a strength may be a weakness. For example, you may say that being small is a strength because you can respond more quickly to customer demands. But being small may also be a weakness if you cannot support large customer orders. Think about the disadvantages of your value proposition, vulnerabilities, issues, and distractions, and anything that could be improved.
Step 6: Opportunities
Back to the positive side but this time from the perspective of what is going on outside your company in the world at large. What is happening in your industry that you might be able to take advantage of? What are the current trends in the world that might benefit your business? As gas prices continue to climb, how can you capitalize on the market’s desire to drive less? Consider trends in technology, niche markets, possible partnerships or joint ventures, new product development, lifestyle trends, competitor weaknesses, and global influences.
Step 7: Threats
Changes outside of your organization can present a clear and present danger for your business. Identifying a potential problem may give you the time to protect yourself from the impact. Consider where you may be exposed from the regulatory, political, environmental, resource, and financial perspectives.
Step 8: Analysis
The last step is the most fun – what does all this information mean? It’s time to turn the data into workable strategies for your business to pursue! We’ll mix up the acronym S-W-O-T to identify new strategies for your company. After having developed the SWOT answers, give your team a week to ponder what the information means to them and how it can be used to improve your operations. Consider the following 4 approaches to overlap and analyze the data:
Look for opportunities that fit with your organization’s strengths. Do you have a product that could be marketed to a broader audience? Could you establish a partnership with a company with a complementary product line?
Take steps to overcome a weaknesses to take advantage of an opportunity. If you have high turnover, what could you do to increase you employee engagement and loyalty that would in turn provide a more consistent and positive sales team?
Identify ways that your existing strengths could help mitigate external threats. If there is a new competitor entering your market, how can you capitalize on the fact that you were one of the first companies to provide services in this space? How will you use your knowledge and experience to position yourself in a more positive light?
Identify the “perfect storm” issues – what are the external threats that could play on your weaknesses and do serious damage to your business? Develop a prevention and recovery plan so that if the worst happens you have a chance of survival. If your business is online only, you are highly susceptible to technology failure. Do you have a disaster recovery plan? Would you know what to do for you, your employees, and your IT location was destroyed by fire?
So now that you know how easy SWOT analysis is and the benefits to your business, what are you waiting for? Call your team together and get started! And remember to mark your calendar to update your SWOT analysis every year. Think how great your business could be if once a year you and your team focused on developing and implementing strategies to be a better business!