Rethinking SWOT Analysis.....

“Traditional SWOT analysis” …

SWOT analysis is a powerful tool that is used by companies to build business strategies. It stands for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis is usually done in an organized way using a 2*2 grid like pattern. By observing where they are, companies can develop strategies that help them to stand out from the rest.

Strengths

Strengths are positive attributes of a company. These are internal factors and can be controlled.

The following questions help to identify strengths:

What do you do better than others?

What do customers/competitors see in you as your strengths?

What physical assets or human capital do you see as strengths?

What is the advantage that you have that competitors don’t? etc

Weaknesses

Weaknesses are negative attributes and can weaken strengths of the company. These are internal factors and can be modified for betterment.

The following questions help to identify weakness:

What issues create loss in sales?

What can you improve?

Is the company location ideal? etc

Opportunities

Opportunities are external factors and by identifying them, companies can discover new prospects that might contribute to success.


The following questions help to identify opportunities:

What are current or future change in regulations that can favor your business?

Change in customer lifestyles or change in technology that can create opportunities etc

Threats

Threats are external factors that companies have no control over. By identifying them, companies can prevent them or prepare themselves an action plan on how to deal with them.

The following questions help to identify threats:

Diminishing capital or debt.

Any potential new entrants?

New technology or change in regulations that company cannot afford.

Changing consumer behavior etc                   

  Source: Harvard Business Review

Once SWOT is complete, companies define strategies and action plans based on their priorities. They might use their strengths to take advantage of opportunities or use them to combat threats and minimize weakness etc

“New SWOT analysis” …

The need for novel SWOT analysis tool (see image below) arose from the need to understand competitors’ strengths and weakness. Let’s explore the new face of SWOT tool.

Your strengths & Weakness

The idea that your strengths can turn into risks was stated by Harvard Business School professor Dorothy Leonard, who argued that an organization’s strengths can turn into “core rigidities” or obstacles with new projects. Sometimes strengths can turn into threats. A powerful position in market can sometimes lead to low innovation.

Sometimes, weakness can be turned into an advantage. The example is SpaceX. SpaceX is relatively new in space technology business and lacks the funds of the incumbents such as Boeing, Lockheed Martin etc. But its weaknesses have led it to develop new innovations such as the use of cheaper electronics in its rocket components thereby reducing their production costs.

Competitor Strengths & Weaknesses

Understanding competitor’s strengths might provide opportunity for a company. It is also important to understand competitor’s weakness because sometimes their weakness may pose threat to your market as well. Consider another scenario for example, a competitor may invest in new technology that is weaker in numerous dimensions but is stronger on few that attracted a particular segment of customers only. Before the company realizes, it might lose its mainstream customers to the new ideas of competitor. This is called disruptive innovation theory. The initially weak competitors may give them false impression.

                                                                       Source: Harvard Business Review

Conclusion

Looking at business from a different perspective challenges your assumptions about the company. Sometimes the mighty companies are brought down by weak peers. Small companies find ways to change their weaknesses into advantages. In traditional SWOT, strengths remain strengths and weaknesses remain weaknesses. That is not true in real world. Sometimes organization’s strengths need to be protected. So, depending on the situation it is critical to develop strategy in a novel way.