SWOT or TOSW?

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WRONG ORDER

Nearly everyone seems to use the SWOT analysis today, probably because it is easy to understand, comprehend and remember!

Unfortunately, very few seems to understand that the SWOT has relations inside itself as well as relations to outside models, some of which I will write about here. This is purely a personal opinion, of course, but I have found it useful and a number of customers have indicated that they now better can utilize the SWOT analysis!

First, we must understand the thinking behind the model. Strength and Weaknesses are purely Inside-Out thinking, and as such, are focused on ourself too much, so we need to take these parts last, so that we may understand that we act within a narrowly defined environment, but that this environment is larger than the immediate organization!

Opportunities and Threats are based upon what is happening in the environment and how this may affect us (Outside-In thinking) and are the basis on which we should begin thinking, as these are the parts upon which we have the least possibility to affect directly. Also, by starting with the outside perspective, we avoid just congratulating ourselves too much.

THREATS

Start with doing a Strategic Space analysis, to define where you currently fit in and where your competition is in relation to yourself.

Complement this with a 5 Forces analysis to see how competitive the industry is.

Combined, this will very easily diagnose where your threats are coming from, in the short-to-medium term.

Add to this an analysis of the 7 Strategic Risks from the SRM framework, and you will have a very good picture that is very comprehensive and (hopefully) easy to address.

OPPORTUNITIES

As you now know where you are in relation to your competition and where the competitive pressure is coming from, you may do a PEST (or STEP, depending on which business school you went to) analysis to understand what is happening in the macro environment.

This analysis, combined with the SS and 5F should easily guide you to identify opportunities that you potentially could exploit (and of course, identify additional threats).

STRENGTHS

Identify your Distinctive Capabilities and Core Competencies to easily see where your strengths are coming from. To help you with this, it would be advantageous to identify the current Generic Strategy (ala Porter) that you are currently pursuing. This would be advantageous also when you continue with the next step.

In order to qualify your strengths, use the VRIO test:

  • VALUE - Does it generate efficiency or more effectiveness?

  • RARE - Is it also possessed by competitors?

  • IMITABILITY – Is it hard to copy / imitate?

  • ORGANIZATIONAL - Can it be exploited by your organization?

WEAKNESSES

To identify the weaknesses, first do a 7S analysis and then, based on the DC, CC and the 7S, see where you can't support (or have bad support) for the GS that you have previously identified.

AND THEN...

Define the Profit Zone for your organization, both today and after any proposed changes (due to the SWOT-analysis). See if what you are doing and proposed to be doing is giving you the optimum Value for Money. You can then always make a EVA (Economic Value Added) analysis, to ascertain that this is what you really should be doing. You may even entertain, at this stage, an idea of making Scenario Analysis a part of your analytical arsenal.

To complement these findings (and help you at evaluation and action planning stages, you may need to define the Unique Selling Propositions (USPs) and segment your markets, to see if the the 80/20 rule is fulfilled and execute appropriate Risk Management analysis on proposals.

POSTSCRIPTUM

What this also describes, is a way to take a number of MBA models and create a working model that incorporates them inside the framework of the SWOT. This is not the only way to do this, nor do I make any claims that this is the best way, but it works for me and my customers.

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