A Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis is a strategic planning technique designed to help you get a sense of how well-positioned a company is and where opportunities exist for it to create a competitive advantage. Conducting a SWOT analysis not only enables you to get a better sense of where your business stands when compared to its rivals, but also the position that it occupies in your chosen industry. As a strategic consultant for over 1,000 leading brands, I often recommend using a SWOT analysis as a tool to determine which business strategies are currently working for you and which could use a tune-up. It's a simple but powerful way to make the most of your resources, reduce chances of failure and plan for potential hazards, and you can use it to reduce risk and craft more successful business plans and solutions. Here’s how to make a SWOT analysis work for you.
How to Perform a SWOT Analysis
The main reason for employing a SWOT analysis is to get a better sense of factors that might impact business decisions. To be most effective, you’ll want to employ it before committing to a course of action, such as considering new market opportunities, exploring new projects or rolling out fresh products, services and solutions. In effect, a SWOT analysis challenges you to consider where your resources and capabilities are strong or lacking, and how you can leverage your strengths or external market dynamics to maximize your odds of business success. At its base level, such an analysis will reveal core areas where your business is performing well and where it needs to acquire new capabilities or adjust its tactics. I recommend performing one every 6 to 12 months to ensure that you’re evolving with changes in the working world.
One of the most basic and powerful methods of strategy planning, a SWOT analysis provides a helpful tool for mapping out your future.
To perform a SWOT Analysis, start by taking a sheet of paper and dividing it into four equally-spaced squares, one devoted to each of the following headings: Strengths, Weaknesses, Opportunities and Threats.
These are things that your business does well and advantages that distinguish you from your rivals. To fill out this box, ask yourself questions along the following lines and list out the answers:
- How would you describe your unique sales proposition?
- What do you as a small business do especially well?
- Which unique resources and capabilities can you draw on?
- What singular tools, technologies or techniques are yours to command?
In similar fashion, you’ll also want to consider your weaknesses and areas where your small business may be underperforming. Be honest and realistic with yourself and make a point to evaluate your weaknesses from a variety of angles (resources, processes, systems, capabilities, people). To help with brainstorming answers, you’ll want to ask yourself questions such as:
- Which business strategies and solutions need revisiting or improvement?
- What processes and procedures could use an overhaul?
- Where are you lacking in resources and insights?
- How are competitors finding ways to get ahead of you?
Next, think about new chances and opportunities that are beginning to open up in the marketplace as the result of economic, social or technological changes. To help you spot new opportunities and get a sense of their prospective impact, ask yourself:
- What market trends do you see emerging, and how might they impact your business in coming months?
- In which ways are client behaviors beginning to change and shift?
- How might changes in geopolitical leanings or regulatory policies impact your industry going forward?
- What other potential audiences might be interested in the products, services or solutions that you offer?
Finally, you’ll want to consider business threats: Anything that might negatively impact your organization, such as supply chain complications due to a global pandemic or a shortage of available labor. Like I explain in my recent book, Think Like a Futurist, making a point to consider future events that might impact your company and ideating ways to deal with them in advance can improve your odds of successfully adapting. This not only means contemplating what your competitors are doing, but also how markets and industries are changing. You can do so by asking yourself:
- Which new trends present a clear and present danger to your business?
- What are your competitors currently up to, and which business strategies might they employ going forward?
- How are audience expectations and demands changing?
- How well do your business solutions stack up against those offered by current and emerging competitors?
Understanding Your SWOT Analysis
After you've conducted your SWOT analysis, you’ll find yourself with several telling statements. For example, you may find that your company’s core strengths lie in its agility, technical expertise and superior customer service. At the same time, you may also have discovered that because you’re a small business, your weaknesses may lie in having less staff and resources at your command. Having identified prospective opportunities in the market (such as potentially offering quick-turn response, high-touch and low-cost services to customers) and potential threats (perhaps a growing range of direct competitors and the relative ease of copying your business model), you can then respond in turn. This might mean investing in hiring the best possible talent and providing your staff with highly specialized training in new and emerging technologies (thereby improving productivity and making their services harder to substitute). Alternately, it could mean expanding your business model to reduce risk, routinely engaging in targeted advertising efforts to attract new customers or diversifying your client base by finding new markets to service.
Put simply, a SWOT analysis provides you with deeper insight into what’s working well and not so well with your current operating strategy. Conducting a SWOT analysis not only forces you to think more critically about how well you stack up against rivals and where you can improve, it also forces you to consider which internal and external forces have the potential to disrupt this status quo and where these forces are already working to create new opportunities. Once you've performed a SWOT analysis, you’ll have a far better sense of next steps and potential business actions to take—as well as how to better plan around any emerging threats.
In the end, using a SWOT analysis can help you avoid failure, maximize odds of success and obtain a far better understanding of your operating reality so that you can craft or retool business strategies to be more successful.
Photo: Getty Images