The SWOT Exercise & Strategic Planning
There are many ways to go about the strategic planning process. The larger the organization, the more complex the process. I have found, for small companies and divisions of large companies, a well-conducted SWOT exercise fits in well with the strategic planning process.Most people do not really understand the link between the SWOT and strategic planning, so the process often conducted badly. This is sad because the SWOT tool, if used well, can be a vital part of the strategic planning exercise.
Why are SWOT exercises conducted badly? This is a question that is worth pondering and possibly answering.
1. Mostly, when managers do a SWOT exercise, it is because they think they should or that they feel compelled to do. What follows is that they fill words into the four quadrants and then sit back with a look of grim satisfaction on their faces. The result is an exercise that brings no strategic insight.
2. Second, most managers do not have a good understanding of what the words actually imply for the business, and so don’t analyze them well.
3. The exercise normally starts from stating strengths, moving on to weaknesses and finally to opportunities and threats. This is an inside-out approach. There are two articles in the Harvard Business Review (click these links: article 1, article 2) that suggest we should follow an outside-in approach. We should start with opportunities and threats and then move onto strengths and weaknesses. In short, we should follow an outside-in approach.
SWOT Exercise: A Case Study
We’d like to illustrate the problem with a case we were involved in, and this may serve as an instructive example. The team was doing conducting the SWOT as a routine exercise, and not as part of the strategic planning exercise.
The local division of the company conducted the exercise and concluded that strict regulations were a threat.
When we probed them, we discovered they had stated this because of an inbuilt bias, or fear, against the regulatory environment.
We then suggested that they change their paradigm. In short:
1. A strict regulatory environment could help to keep weak players out, and we are referring to companies who like to skirt the law.
2. The company’s customers were aware of their adherence to regulatory guidelines, and they could position themselves better.
3. They did not have a regulatory person, and this was a weakness.
Because of this exercise, they hired a regulatory manager who helped strengthen their position.
1. They could give regulatory support to customers, further strengthening the strong relationship they already had.
2. They could take part with industry wide regulatory and scientific communities, and this helped to position themselves as a responsible partner.
If the division had left the exercise at the first draft, they would have lost significant market opportunities, and may have become a relatively minor competitor. After they went deep, they gained significant strategic insights, which helped them strengthen their market position.
A Few Short Recommendations for Conducting A SWOT Exercise
It’s not possible to write exhaustive posts on the subject, but we’d like to give a few recommendations:
1. The outside-in approach that the HBR articles recommend is excellent. However, don’t stop there. Once you conclude the outside-in exercise, conduct an inside-in exercise, and see if this gives you some additional insight.
2. Ask yourself: do your strengths allow you to capitalize on the market opportunities, and to ride out the threats? Are your strengths sufficient to capitalize on the opportunities and outrun the competition? If not, what action will you take?
3. Do you need to take corrective action to convert weaknesses into strengths?
4. The information filled in the four quadrants should only be a summary of a detailed exercise. If the information in the quadrants is the exercise, then you may be doomed to failure