The SWOT matrix is a very common tool in the world of business schools, in fact it's one of the very first topics you're likely to come across in any Strategy and Business Development class. The concept, per se, is so widely popular that doesn't even spark any intellectual thinking anymore, but over the years the SWOT analysis has reinforced its position as a first in line tool when it comes to setting direction for a team or an entire organisation.
Before diving into why the SWOT analysis is still standing firmly on the podium of strategic tools, let's get a closer look at what it is and how it seems to cast its spell over managers of all times.
The SWOT analysis matrix
The acronym stands for:
Strengths, Weaknesses, Opportunities and Threats
And the way the matrix works is as simple as it sounds: to complete the analysis, one must study the business and find a fitting content for each category.
What are the strong points of the business?
A strong point is something that adds value to the company and contributes to sustain a short, mid or long term competitive advantage. The more the strength can position the company ahead of the competition, the more pivotal it is as a foundation for the company success.
Here are some examples:
time to market 20% shorter than the avarage of the competition;
stronger quality systems and values;
leaner organisation, less bureaucracy and more agile responses to the market;
more competent and prepared customer service;
Without strong points, it would be very hard to leverage opportunities. In fact, the most positive chances in business are taken by making good use of the company strong assets.
What are the weak points of the business?
Complete opposite of strong points, weak points can be found by answering the question: in which area the competitors are more efficient or result driven than us?
It's essential for any entrepreneur and any manager to keep an eye on weaknesses, because they can sometimes evolve in threats, especially when they're left completely unattended and negletted.
incomplete or scattered market offer;
In respect of the corporate vision, what are we willing to take on?
Any decision, any event, any move that can properl the company forward and bring it closer to reaching its vision is considered an opportunity. As said before, opportunities and strong points are correlated: the firmer the strength, the greater the opportunity. However, it's also possible to generate an opportunity by amending a weak point and therefore balancing out its effects until it gets overcome completely. When a weak point gets turned into a neutral point * or, even better, into a strength point, opportunities arise.
What situations could cause harm to the company or generate obstacles on the path to achieving the business vision?
Anything that is considered eligible of causing troubles is a threat and as such, it needs to be prevented by either eliminating it before it comes into play or developping what's needed to overcome it easily as it presents itself. Ignoring a weak point instead of fixing it isn't a smart choice, because any weak point * when not properly faced * has the potential of becoming a threat in the long run. Of course, it's not the weakness in itself that causes the threat, but it's the effects of it: being weak in something basically means being unprepared for a number of situations that can arise around that weakness.
On the other hand, it's fair to say that strong doesn't always equal being threatless: even the strongest companies in the world do face threats all the time, but since they're very solid in most areas they are likely to respond better and “bite back_.
Now that the SWOT analysis overlook took shape, it's time to address the timeless value of this strategy tool.
The everlasting strength of the SWOT
The main reason why the SWOT analysis is one the most popular business tool lays in the fact that no matter how complex the business is, it is always possible to find the answers the SWOT requires. In fact, these answers are often within easy reach and there's no need to employ a complete team of analysts to find them out:
Everyone who's in charge of the future of the business is instinctively aware of them and only needs to refine and organise them.
The SWOT is a great tool for business development, because it highlights the low points and the high points of the company whilst allowing complete freedom of choice when it comes to dealing with them and deciding what will be the next step.
At the heart of every business development rule there is one indeniable truth:
Before setting up the future, one must be fully aware of what the present looks like.
And the SWOT analysis offers just that: the possibility of a quick and inexpensive reality check for the whole business, in order to gain perspective and perform a more effective decision making.