SWOT analysis can be incredibly useful in visualizing conflict. It can provide an overview of your internal capacity for action (strengths and weaknesses) and external circumstances (opportunities and threats). Used effectively, SWOT analysis can inform and enable good decision-making. However, I think SWOT analysis is often a tool that is easily misused, like something people only use in their yearly strategic planning rather in daily decision-making.
So, how do I use SWOT analysis? First, I add a “G” into SWOT (don’t worry, I won’t go making up a new name for it):
- Goal: what you want to achieve, and the value that is at stake
- Strengths: your abilities that help you achieve your goal
- Weaknesses: your abilities that put your goal at risk
- Opportunities: circumstances that can create value
- Threats: circumstances that can lose/destroy value
Everything starts with your goal, and whether something is a strength, weakness, opportunity, or threat depends upon that goal. A strength for one goal might be a weakness in another, and the same applies for threats and opportunities. Furthermore, you should only include strengths, weaknesses, opportunities, and threats that are important to your goal.
For example, if you are awesome at solving Rubik’s Cubes and put that down as a strength, then you better be in a competition to solve Rubik’s Cubes. However, if your skills at solving Rubik’s Cubes are an example of an excellent memory and an ability to keep multiple data sets in mind then that just might be very relevant (just don’t put it down as “great at Rubik’s Cubes”). Or, if another state passes regulations that have no impact on your business, then you shouldn’t list that as an opportunity or threat.
Ultimately, SWOT analysis is only as useful as you make it. If all you do is create a list, then you are losing out on a lot of information your SWOT analysis could tell you. Everything has a context, and it is important that your SWOT analysis be a compelling story, not just a compelling list. How I do that is up next.
A Compelling Story: Lists, Charts, Scenarios, and Deeper Thinking
To create a compelling story, I like to do the following:
- Create the SWOT list: first, I start by creating a list of each of my strengths, weaknesses, opportunities, and threats; I then assign each a value based on how much it might contribute to achieving my goal
- Plot the SWOT chart: next, I plot the strengths/weaknesses (SW) average value and opportunities/threats (OT) average value on a SWOT chart; the higher to the northeast I am, the more attractive my goal looks
- Create SWOT scenarios: then, I use my SWOT list and chart to come up with various scenarios to determine ways in which I can improve my position and improve my goal’s relative level of attractiveness
- Engage in Deeper Thinking: finally, I then take the information the SWOT analysis reveals and complement it with other types of analyses, such as Porters five forces, the growth-share matrix, decision trees, conflict decision-making, etc.; the goal here is to explore each of the above details in greater depth
For example, imagine we are the executives of a company that recently started making a new product that will revolutionize (or at least so we think) the future of some industry. Our goal is to make a lot of money. So, how attractive does our goal look? Well, let’s take a look at the four parts of creating a compelling story to answer that question.
1. Creating the SWOT List
First, we need to make a SWOT list, and include how much each factor might contribute to achieving our goal. Let’s imagine that these are the important factors that we came up with:
2. Plotting on the SWOT Chart
Next we compare it to our SWOT chart. By taking our SW average of 1.75 and OT average of 0.5 and putting those in our SWOT chart, we see that our goal appears to be “neither attractive nor unattractive.”
3. Creating SWOT Scenarios
Next, we can now create SWOT scenarios to possibly move northeasterly in the SWOT chart to a “somewhat attractive” position, or hopefully even higher. When you create SWOT scenarios you are adding life to the depiction of your situation. This is what makes the story “compelling.”
For example, if we cannot improve our product or customer service, perhaps we can improve our distribution or marketing. Or, if we change our strategy to differentiate our product, perhaps we can lower the impact of substitution and buyer power. Furthermore, there might be a combination of these options that have an even greater impact when combined than when used individually. Perhaps, if we combine improved marketing with a shift in strategy, we can better differentiate our product line and turn substitution and buyer power into opportunities, instead of just weakened threats.
4. Engaging in Deeper Thinking
Next comes deeper thinking, and here is where I note a few cautions about using SWOT analysis and why deeper thinking is required. Deeper thinking shouldn’t just be something you do at the end of your SWOT analysis, but be integrated throughout. SWOT analysis can do a great job, but it can also obscure very important details.
Firstly, the value of the goal you set is not the same as the probabilities of being successful at achieving it. The SWOT chart, above, provides a broad overview of your goal’s attractiveness. It combines, to an extent, both value and probability, but that does not mean that it predicts what will actually happen.
In our example company, our goal is extremely valuable. Just because our position is “neither attractive nor unattractive” does not mean our goal isn’t worth pursuing. It does mean, however, that we have some impediments to our success, and our goal might not be as valuable as we hope.
Furthermore, this approach to SWOT – averaging strengths and weaknesses, opportunities and threats – best works with a limited number of independent, and important, factors. The more factors you list, the more each factor’s importance becomes muted. The goal of the SWOT chart is to be useful, but it isn’t exact, and too many factors can water down the usefulness of the SWOT chart.
Additionally, strengths and weaknesses can be related to one another, rather than independent. The same applies to opportunities and threats. Because the SWOT chart uses averages, this can make a big difference in your position on the chart itself. Thus, it is important to consider which factors are truly independent and which are actually related.
For example, imagine you are playing soccer and are about to take a penalty kick at the end of a long game. You might list your soccer skills as a strength and your fatigue as a weakness. Are these two factors related, or independent? Should you reduce the strength of your skills due to fatigue, or list fatigue as a separate weakness?
In the soccer example, if you put your skills at +9 and fatigue at -2, your SW average value would be +3.5. But if you considered them directly related, you might lower your skills to +7 (if that’s what you truly thought it might be now), and your SW average would be +7 (only one strength listed, no weaknesses). Although you are considering the same factors, how you decide they are related makes a big difference.
When you use a SWOT analysis, I recommend combining it with other tools that can complement its weaknesses. In our above example company, we already incorporated Porter’s five forces into our opportunities and threats. But we could also apply the growth-share matrix, decision trees, conflict decision-making, etc. If something can improve our ability to predict and explain our decisions, then that is a useful tool.
A Compelling Story Should Also Have a Compelling Explanation
“A good story is often less probable than a less satisfactory… [explanation].”
I will end by quoting Mlodinow (2008), who in turn quoted Kahneman and Tversky: “A good story is often less probable than a less satisfactory… [explanation]” (p. 25). So, keep in mind that the compelling story your SWOT analysis reveals had better also have a satisfactory explanation to back it up. I think this is the real value of the SWOT analysis: it should not only reveal overtones of your situation, but challenge you to explore the details in greater depth.
Mlodinow, L. (2008). The drunkard’s walk: How randomness rules our lives. Knopf Doubleday Publishing Group.
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