We've all participated in, and most likely, initiated countless analyses of Strengths, Weaknesses, Opportunities and Threats (SWOTs). For basic strategies and tasks, it's a useful and familiar tool. Used in the right way and in the right hands, it can be a valuable way of narrowing down a range of options and coming up with a plan.
It's easy to get started with a SWOT analysis because everyone knows what it means and what the rules are. ..... Or do they? For example, what "Strengths" are we talking about? The company? Its products? Suppliers? Competitors? Potential competitors? Current capability? Future capability? Markets? Customers? Partners? All of the above?
Likewise, there are always lots of "Opportunities" but which ones are actually available? Or possible? Affordable? Achievable with current resources? If not, then what resources are required? What can be done within a realistic timescale? Will this work with current channel partners or customers? Some combination of the above?
To get the most from a SWOT analysis, it's imperative to agree the ground rules in advance: what is our goal? What is the company hoping to achieve? What are the parameters? What outcomes are realistic? Who does what with the results? When will they do it? Who will monitor progress?
There are many alternative methodologies for evaluating strategy including Porter's Five Forces and PEST (Political, Economic, Social and Technological) and which have greater structure and rigour than SWOT analyses.
A popular derivative of PEST is PESTLE which also includes Legal and Environmental analyses. This is a useful methodology well-suited to assessing the impact of external macroeconomic forces on a company and enabling a focus on strategies to address and mitigate their impacts.
Porter's Five Forces analysis focuses on five key competitive pressures being exerted on a company and its offerings. It is more commercial than PEST/PESTLE and includes assessment both of the threat level and the anticipated change in that level. It also provides a more structured and rigorous approach for systematical analysis. Combined with enhancements to identify differentiation and mitigation for the threats identified, Porter's Five Forces is a powerful tool to develop and agree strategy.
How do the methods compare?
Startups and smaller companies may be interested (and concerned) by the macroeconomic landscape but there may be little they can do to plan for or mitigate the effects on their business. A PEST(LE) analysis might therefore be informative but ultimately irrelevant when it comes to formulating strategy.
All companies should be interested in Porter's Five Forces analysis and the identification of mitigations and differentiations to address the threats identified. It provides more structure and focus than either SWOT or PEST analyses but can be restrictive; for example, regarding opportunities.
So where does that leave SWOT analyses? Well, how about a SWOT analysis of SWOT....
There is a place for SWOT in your toolset alongside other more specific tools and methods. The key is knowing which tool to use when and how to use it.
Ash Madden is Founder and Director of Madden Associates Limited, the Specialist Channel Sales & Partnering Consultancy