Improving the SWOT Process Can Boost Business Planning

SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a common methodology used by many businesses for strategic and annual planning, product introductions, and competitive analysis.

As a business counselor and former Missouri Quality Award examiner I've seen many businesses use the SWOT process. Unfortunately most have not used it well. The approach I often see is a group of individuals tossing out ideas, comments, suggestions that usually address their own interests or preconceived notions. The results of such an approach are neither comprehensive nor balanced.

A more systematic approach is critical to the quality of a SWOT analysis. A common means to conduct a more balanced and comprehensive SWOT is to categorize the strengths and weaknesses as anything internal to the business while opportunities and threats represent anything beyond the control of the business. This methodology has its applications, but if the SWOT process is not guided beyond this initial stage the results can still be disappointing. Refocusing the SWOT categories and using additional criteria to analyze each category will produce a better result.

While a traditional SWOT compares internal factors to external factors, the revised SWOT focuses on comparing the current situation to a potential future situation. The first step is to adjust the definitions of each category. In this case the strength and weakness categories should focus solely on the current business situation. The opportunities and threats should focus solely on the future. By analyzing the current situation versus the future, a business manager is able to make better informed decisions.

The second step in the revised SWOT process is gathering as much information about the market as possible. This is sometimes called environmental scan and it becomes the foundation of the SWOT analysis. The scan's purpose is to identify all the conditions, both current and future in which the business must operate. The results will be used during each category's analysis. Conditions are anything that can impact the business. While the environmental scan includes conditions the business can control, much of the effort should be devoted to those conditions beyond the business's control. Social, political, legal, environmental, technological, demographic, and industry conditions are some of the factors that should be considered.

For example, if a business depends on a delivery company to get its product to its customers, knowing that the delivery company will start negotiating a new contract with its drivers' union must be one of the conditions included in the SWOT analysis of future events. If this is judged to be a threat, contingency plans can then be developed.

With a thorough understanding of the current and future conditions in which the business must operate, the next step is to select a set of criteria to ensure a balanced assessment of the business's strengths and weaknesses as well as its opportunities and threats. Two of the best sets of criteria are the perspectives of the balanced scorecard and the Baldrige Criteria for Performance Excellence categories.

Regardless of the criteria selected, the same criteria should be applied to each of the SWOT categories. The balanced scorecard has four basic perspectives: financial performance, customer performance, internal process performance, and organizational performance are identified. Analysis of strengths, weaknesses, opportunities and threats are based on these four perspectives, as illustrated in the following diagram.

	Current Focus		Future Focus
S t r e n t h s	Organizational Performance (e.g. Growth & Learning) List the identified items in each square in each category	Internal Process Performance (e.g. How Business is Conducted)	Organizational Performance	Internal Process Performance	O p p o r t u n i t i e s
	Customers	Financials	Customers	Financials
W e a k n e s s e s	Organizational Performance	Internal Process Performance	Organizational Performance	Internal Process Performance	T h r e a t s
	Customers	Financials	Customers	Financials
	Economic, Political, Legal, Social, Technological, Industry, Demographic, Environmental		Economic, Political, Legal, Social, Technological, Industry, Demographic, Environmental

 

If Baldrige criteria are used as the basis of the SWOT, each of the four SWOT categories would be evaluated by assessing leadership, strategic planning, customer and market focus, knowledge management, the work force, and process management. Baldrige's seventh category, results, is embedded in the other categories during the SWOT assessment.

Try using this approach in your next strategic planning cycle. Your local MO SBTDC can provide assistance with environmental scan research, assisting with or facilitating a SWOT, annual planning, developing a balanced scorecard or using the Baldrige criteria through a process called SMART.

- Chris Thompson, business specialist, Cole County SBTDC 6/9/09