Life is full of decisions: Should I take this job or that one? Dump my boyfriend or try to work things out? Use this type of diagram or another? As we approach these decisions, especially the weighty, life-altering ones, there’s an almost universal response: List the pros and cons.
Whether it’s writing a physical list, or simply a mental exercise, we’ve all made a list of pros and cons. And, at some point, we’ll all do it again. Why? Because it’s simple and effective.
When it comes to business decisions, a simple pros and cons list might not cut it. You’ll want to introduce a few more dimensions to your background research and analysis before settling on any conclusions. Enter: the SWOT analysis.
SWOT analysis has been a staple among business professionals for decades—and with good reason! As you evaluate your business strategy, company goals, or specific initiatives, performing a SWOT analysis can help your team make informed, goal-oriented decisions. And the best part? SWOT analysis is (nearly) as simple as making a pros-cons list.
What is a SWOT analysis?
Basically, SWOT analysis is a way of thinking about your business and then organizing those thoughts.
So how does SWOT analysis have you approach your business? At this point, you’ve probably guessed that SWOT is an acronym—each letter corresponds to one aspect of your business that is analyzed in the SWOT method.
The four parts of a SWOT analysis are:
As you perform a SWOT analysis, you consider your business in each of these four categories. What are your strengths? Weaknesses? The lists you come up with for each category are placed in a two by two grid.
Each category gets its own quadrant in the chart: Strengths in the upper left, weaknesses in the upper right, opportunities and threats along the bottom. The four aspects of SWOT analysis fall into two categories: Internal factors (strengths and weaknesses) and external factors (opportunities and threats).
If you’re thinking that SWOT analysis seems simple (maybe even too simple), you’re right! But that’s the beauty of SWOT—nearly anyone can perform a SWOT analysis and the payoffs are huge. Because there aren’t any bells and whistles, you’re able to cut straight to the crucial insights that will help you make informed strategic decisions.
How to do a SWOT analysis
Like most business analysis practices, you don’t want to perform a SWOT analysis by yourself. (And not just because it’s lonely.) Your perspective as an individual within a company is limited, as are your priorities. So before you start, gather a team of individuals from various teams, positions, etc. As you put your heads together, you’ll find that each person brings a different perspective, creating a fully fleshed out and comprehensive view of your company.
Now that you’ve gathered a group to work with, what’s next? Use a SWOT analysis generator to create a SWOT chart. Remember the four parts of SWOT? As a group, you’ll address each one in turn. Here’s what that will look like in practice:
While there’s no particular order to the parts of SWOT, why not start things off on a positive note? (Note: you might—and probably should—revisit each section over the course of your analysis.) Kick your meeting off by asking the group to list company strengths.
These might include, but are not limited to:
- A viral marketing campaign
- Lots of money coming in from investors
- A smart, creative team
- A killer product
You get the idea. Don’t be afraid to think outside of tangible, quantifiable strengths (though you should still include those!). You and your coworkers know your company’s strengths better than anyone—if you think something is worth noting, go ahead and jot it down.
Now for the less fun part: What are your company’s weaknesses? These could be financial, organizational, and much more. Some things to consider are:
- Less funding than you’d like
- High customer churn
- Lack of communication between teams
- An out-of-date product
It can be tough, but try to be honest with yourselves. Objectivity here will go a long way in helping you turn some of these weaknesses into strengths. After all, you have to acknowledge a problem before you can fix it.
Whereas strengths and weaknesses are both internal factors, it’s time to turn the group’s attention to things outside of your company. Start with the exciting ones: Opportunities. These will likely play off of your company’s strengths. Your list might include:
- A new group of investors to schmooze
- Market trends
- Technological developments
- Economic trends
If you’re unsure how to find opportunities in your strengths, here’s an example. Perhaps your team just hired a new engineer who specializes in cloud-based solutions. And perhaps none of your competitors offer cloud-based software, or their cloud-based solutions are, well, lacking. Boom! There’s an opportunity. You can expand your customer base by offering the best cloud-based solution.
Just like the opportunities you listed, threats are factors outside of your company. Threats to your company might include:
- Upcoming legislation
- Political and economic regulations
- Negative market trends
- A competitor making big strides forward
Now that you’ve made it through all four categories, briefly revisit each one. Your group’s conversation about opportunities may have brought new strengths or weaknesses to light.
How to analyze your SWOT chart
While filling out a SWOT chart can be a useful exercise on its own, the real value is in analysis: What can that chart tell you? A lot—you just need to know how to look for it.
SWOT analysis is all about making connections. You’ve listed strengths and weaknesses alongside threats and opportunities: Are there any correlations you see between the two sides? You might notice, for instance, that certain threats loom larger in light of certain weaknesses. By addressing those particular weaknesses in your company, you can alleviate threats. (And possibly convert them into opportunities!)
Remember: You have the most control over internal factors—your strengths and weaknesses. As you discuss changes you should make as a company, start by addressing the weaknesses. Do you have a communication problem? Maybe you need to purchase a new software solution to help facilitate collaboration between teams.
As you analyze the finished SWOT chart, be sure to involve the whole group. Ask each individual to identify a strength that could translate into an opportunity. (They should take both of these from the lists you created as a group.) The insights you gain during this step could lead to new campaigns, strategy shifts, and new hires within your company.
How to use SWOT for strategic planning
There’s not much value in performing a SWOT analysis if it’s all talk. Done right, SWOT analysis can play a big part in your strategic planning. Think about the insights you and your team gained during the last step: Can any of those be turned into actionable steps to improve your business strategy?
Hopefully, you answered yes. Write those actionable steps down—it will be helpful to sort them into two groups, high- and low-priority. Now pull up the company calendar: When do you want to accomplish each item? Maybe you want to hire a new software team lead by the end of the month. Or maybe roll out a marketing campaign by the end of the quarter. You might even have long-term goals, such as developing and releasing a new product. Whatever your goals are, be sure to set realistic milestones and communicate with key stakeholders.
The best part about SWOT analysis is that it’s not exactly heavy lifting. As you adjust your strategy, you might need to perform another SWOT analysis a few weeks down the road. And that’s no problem—just gather a team and get to it!
Now it’s time to bring your team together and actually do a SWOT analysis in Lucidspark.Get started