Since it was brought to the forefront of business planning by Albert Humphrey in the late 1960s, the SWOT analysis has been relied upon by corporations, small businesses, nonprofits, and even schools to make key decisions and form strategies. This planning tool in which you measure your strengths, weaknesses, opportunities, and threats can be beneficial, but often, organizations rely too heavily on this method while not performing it correctly or without recognizing its weaknesses. Our strategic planning firm in Minneapolis is providing a closer look at whether you should perform a SWOT analysis on your organization and, if so, how to avoid common pitfalls.
What Is a SWOT Analysis?
A SWOT analysis, or SWOT matrix, is a strategic planning framework that allows you to take an objective look at the internal and external factors that can affect your organization’s ability to meet your goals and succeed.
Strengths are the internal factors where your organization excels and allows you to stand out from the competition, such as brand recognition, experienced leadership, or innovative technology. How can you use these strengths to meet your goals?
Weaknesses are internal factors that prevent the organization from performing at an optimum level. This could include high turnover, low cash flow, or outdated equipment that slows operations.
Opportunities are the external factors that give your organization an advantage over the competition. This could include lower taxes in your state that increase your profits, or, for a smaller business, neighborhood improvements that increase the profile of your area and attract more people.
Threats are the external factors that are out of your control that can harm your organization, such as a material shortage, increasing competition, or supply chain issues.
Advantages of a SWOT Analysis
First, let’s consider the advantages of performing a SWOT analysis and how it can help you develop goals and set the framework for building a strategy to achieve your goals
The leading benefit a SWOT analysis offers is its simplicity in that there are no technical skills necessary to complete it, just knowledge of the organization and the industry. Because it is presented with each quadrant representing a factor, it provides an easy and brief overview of your organization’s position that can be shared and discussed.
SWOT analysis is generally performed during a brainstorming session among leadership or department heads. While discussing the internal and external factors affecting the organization, this opens communication and allows everyone involved to get on the same page in determining what the strengths, weaknesses, opportunities, and threats are. This also fosters collaboration and encourages free information sharing which is important, particularly among departments that may not have opportunities to communicate or collaborate regularly.
Recognizing External Factors
Most organizations focus on internal factors, such as how to leverage strengths and combat weaknesses. However, it’s important to recognize external factors such as trends, advancing innovations, and supply chain issues that will affect your organization. While you don’t have control over external factors, your organization can control how much of an impact they have and how you can embrace opportunities and mitigate threats.
Any organization can use this tool, including nonprofits, schools, and small businesses. Going deeper, a SWOT analysis can be used to aid in individual decision making or can act as a guide for sweeping reforms and updates within the organization.
Challenges of a SWOT Analysis
The SWOT analysis is very useful, but there are limitations and drawbacks that need to be recognized.
Lack of Hierarchy
While you can draft lists of your strengths, weaknesses, opportunities, and threats, the SWOT analysis does not provide any method to prioritize the items or create a hierarchy in which to address weaknesses and threats or leverage strengths and opportunities. Because of this, the SWOT by itself does not offer a clear path to taking action (Minsky and Aron, 2021).
Lack of Insight
While all four areas are given the same weight, this can make it a challenge to interpret and gain insight into where your organization is. For individuals and organizations who do not have in-depth knowledge of analysis or strategic planning, the SWOT acts more of a snapshot of where your organization is, but not how to move forward.
Recognizing Strengths vs. Weaknesses
Often, organizations don’t see that current strengths could, over time, become weaknesses as “core competencies harden into core rigidities” (Brandenburger, 2019). This means that features that were once aiding in an organization’s success, like an experienced, seasoned leadership team, could become an obstacle over time. For example, the strength of having experience could become a weakness if the leadership team fails to innovate or adapt to modern practices.
The simplicity of a SWOT analysis makes it attractive to organizations who can complete it during an afternoon meeting. However, it’s simplicity is also a limitation to those with minimal experience in the analysis. Factors are only separated into four distinct categories without recognizing that there may be overlap within categories and there are no weighing factors to determine significance. Also, it ignores the strengths and weaknesses your competitors experience which can also affect your organization.
Often, SWOT analyses are performed during a meeting or brainstorming session of leadership with little, if any reliable data being used. The strengths, weaknesses, opportunities, and threats are determined based on the perception and opinion of those participating in the meeting. What leadership perceives to be a strength may be perceived by a weakness by someone else.
Schedule a Consultation for Strategic Planning in Minneapolis
While a SWOT analysis can assist your decision making and strategic planning process, there are drawbacks when not performed correctly. At Woodland Strategies, we can assist with your SWOT analysis and provide the tools and insight you need to determine the right steps for your organization and put a plan in place to achieve your goals. Fill out our contact form to schedule a consultation with our team today to get started.