SWOT analysis came from research conducted at Stanford Research Institute between 1960 and 1970 and stemmed from the need to find out why corporate planning failed. Fortune 500 companies funded the initial research to find a way to overcome poor planning. SWOT analysis was designed to provide a subjective assessment of data that is organized by the SWOT format into a logical order that helps understanding, presentation, discussion, and decision-making. The four dimensions are a useful extension of the basic list of pros and cons that many of us use to guide decisions.
According to the creators of the method, SWOT essentially tells you what is good and bad about a business or a particular proposition or category. A SWOT analysis always focuses on four categories:
Strengths – What are we good at; where do we excel; where do we have a unique advantage or a significant head start over the competition?
Weaknesses – What are we not good at; where are our vulnerabilities; where are we less than adequate; where have we been ineffective in comparison to the competition?
Opportunities – Where can we take advantage of current market trends; where can we exploit our strengths and the competition’s weaknesses; what are the possibilities for a big win; what excites us the most?
Threats – Which of the competitors are coming on strong; where are the market trends working against us; what are the gaps that can be exploited by our competitors; what scares us the most?
At the first stage of the process, you are only asking questions, you are not attempting to create action items or set strategic direction. Do not draw conclusions at this point and do not make any business decisions based on your answers. The point is to get all of the relevant input out on the table before you attempt to organize the data and use it for planning purposes.
It’s important to note that every SWOT analysis I have participated in has generated far more data than it is possible to work with. After the initial brainstorm and data collection phase, you will need to synthesize the data into the most important and relevant points.
Additional SWOT Resources
If you would like an organized way to create your SWOT analysis, Center for Business Modeling has a great new SWOT & Business Health Analysis Tool. Click here to download or learn more.