What is SWOT Analysis and How Can it Benefit My Business?
A SWOT analysis can provide you with a clear indication of how your business is doing, and identify areas for improvement. Here’s how to carry one out
SWOT (strengths, weaknesses, opportunities, threats) analysis is a way of looking at your business that can provide you with a clear picture of exactly where you are in the market. The methodical and critical approach found in SWOT allows you to use the lessons learned to grow and drive your business forward.
It is an extraordinarily flexible method widely used by organisations ranging from the smallest start-up to blue-chip multinationals in order to critically analyse their current situation and identify how to improve their prospects or position. Done right, you can go from a position of stagnation and confusion to one of surety, progress and innovation.
This article will provide you with a run-down of how to identify strengths, weaknesses, opportunities and threats in your own business, and how to put this invaluable analysis into practice to maximise the benefit to your business.
How should I use SWOT analysis in my business?
SWOT analysis should normally be a regular process; if you integrate it into your annual performance review, it will give you a clear picture of how your business has changed at regular intervals and whether you are heading in the right direction more generally.
The snapshot of a business provided by a SWOT analysis can also be a good tool when looking to raise finance for external investors, or for maximising the benefits before you hire a consultant to look over your business.
- Include others. It’s a good idea to get as many views as possible for a SWOT analysis. By doing it yourself or with a small group of like-minded senior employees, you run the risk of simply confirming pre-existing views and achieving precisely nothing.
- Choose the right people. Senior people within your company are obviously essential for an inside view, such as managing directors and heads of divisions. Customers and suppliers can provide analysis from outside; you can use surveys or questionnaires for an overview or decide to include them in the process itself. If it’s your first time running a SWOT analysis, it is likely you will benefit from the expertise of a dedicated consultant.
- Identify the issues. Once you have identified who will be involved, conduct a brainstorm of where they think the strengths, weaknesses, opportunities and threats are in your business; focusing especially on weaknesses and threats. Use the below checklists to guide areas for discussion.
- Work out the importance of the issues. Use information from your own or similar businesses to help you in this regard. For example, if you conducted a SWOT analysis last year that identified a particularly lucrative customer account as a strength, your business is obviously weakened in this regard if you have lost that customer. Focus especially onto what extent the strengths and weaknesses you have identified give your business a competitive advantage (or disadvantage).
- Test your analysis. Canvass an objective viewpoint from a friend, family member (or non-executive director if you have access to one) to see whether they agree with your analysis and weighting of the issues.
- Draw up an action plan. Put what you have learned into practice by drawing up a clear, simple roadmap for how you plan to improve your business’ position. Encourage input from key people in your company for ideas and make sure the action plan contains concrete steps and timeframes for completing your objectives.
- Use your SWOT analysis `to help you in key business decisions. An example would be using the SWOT analysis to identify whether a new product launch is in line with your strengths. Don’t use it as a substitute for the decision-making process itself – use it as a valuable tool to help you.
How do I identify my strengths in a SWOT analysis?
Most business owners will already have an idea of their strengths, both from their own knowledge and from customer and supplier feedback, so this should be the easy part. The key to understanding this stage is not to be modest about your strengths, but equally try to avoid hubris. Be realistic about what you do well.
There is no prescribed method for identifying strengths in a SWOT analysis, and the relative weighting of your strengths will depend on the size of your undertaking, the sector you are in, and so on.
One approach you could try which works particularly well in a group session would be to begin by brainstorming adjectives that describe your company (“innovative”, “friendly”, “unusual”, and so on) and match them up to concrete strengths your company has. For example, ask – what makes you so innovative? Is it the product or service you offer, or how this product or service is delivered? Is it higher-than-average investment in R&D? Be creative and take an open-minded approach.
You could also start by asking yourself these general questions:
- Why should I succeed?
- What do I do well?
- Why do customers say they enjoy working with me?
- What advantages does my company offer over the competition?
- What makes my brand particularly unique or strong?
- Do I market my business well?
- What is good about the people within my company? Is there anyone that particularly stands out?
- How do I keep costs low or turnover high?
It’s easy to get bogged down in stale thinking about your company during this stage, as your marketing documents and own vision for the company will be full of claims about your strengths as you perceive them. Try for a third-party viewpoint; if someone was looking in from the outside, what would impress them about your company?