The right way to SWOT
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The SWOT analysis is a 2x2 matrix superstar, it’s in every strategy textbook and probably taught to millions of students every year. However, as I’ve encountered it in the world of business, it’s often used WRONGLY. In this post, I’ll share with you the right way to use the famous 2x2 matrix, helping you to develop real strategies as an outcome of this analysis.
BASICS
Strengths and weaknesses are analyzed from an internal perspective while opportunities and threats are analyzed from an external perspective. The interplay of internal vs. external is where the magic happens, it’s where strategies are created. Most people stop after they fill in these boxes, they fail to SWOT the right way and it becomes a page in a strategy powerpoint that garners little discussion or worse, NO REAL STRATEGIC DECISIONS. But before this interplay, we need these four boxes to capture critical insights. Notice the word CRITICAL. If we use this 2x2 matrix to capture the “kitchen sink” it’s going to be of no value to anyone. How do we do that? Read on my friends…
GARBAGE IN, GARBAGE OUT
You need to be very critical of what goes into the matrix, and you might discover after going through this exercise that you don’t have enough research or data to fill it out. Then you have to decide how to get the data, which is probably another blog post. The key attributes to filter what’s in and what’s out are:
RELEVANCE
DIFFERENTIATION
SUSTAINABILITY
For each box, i’ll go through what this means.
Strengths
Relevance: a relevant strength delivers real value to the customer. Is this something that the customer wants and/or needs? If it doesn’t bring any value, it cannot be considered a strength.
Differentiation: Is this strength unique? Meaning, does the competition also have this strength? If it’s something that is commonly held across the industry, it is not a strength.
Sustainability: Can competitors easily deliver what you might consider a strength? Is this strength something the company is aligned to for the long term?
Weaknesses
Relevance: genuine weaknesses are those that decrease the value of the brand in the eyes of the customer. If the customer doesn’t really care about it, it is not a weakness.
Differentiation: Is this weakness unique? Again, if it’s something the entire market suffers from, like the need for high cost raw materials, this is not a weakness.
Sustainability: Can this weakness be easily corrected? Can it be counteracted by the organizations strengths or strategy etc.? If so, it’s not a true weakness.
Opportunities
Relevance: Opportunities listed in this box needs to be large and accessible by the brand. If it’s something that has unsurmountable constraints, it should not be listed as an opportunity. And if it doesn’t bring a relatively large value to the brand, it should also not be listed.
Differentiation: Is this opportunity very different from other opportunities? When an opportunity start to conflict with other opportunities, it should not be included. For example if an opportunity is going after the low cost segment when the brand has been positioned as a premium brand, it’s in conflict.
Sustainability: Will this opportunity last? Is it a fleeting trend, or is it something that is durable enough to justify the effort of pursuit?
Threats
Relevance: Are these threats gnarly and unmitigated by other factors? For example, a big decline in one market can seem to be really threatening because of the large impact it can have, but if it is compensated by the growth of another accessible market, it’s no longer considered a threat.
Differentiation: Is the threat truly new and undefended? Is it not met by current strategies? If it is being addressed in some way today, it’s not a unique and new threat.
Sustainability: Will this threat be around for the long term? Or is it going to diminish on its own over time? For example a short-term pricing or blunting campaign is just that, short-term and not considered a real threat.
When you have all three attributes (relevance, differentiation and sustainability) met for each box, WE ARE NOT DONE, but you have a solid 2x2 matrix, ready to work for you.
MATCHMAKING
The next step is to align the internal with the external
Align a strength or strengths that can be used to capture the market opportunity. For example, a strength of having significant awareness and mindshare in a disease area is coupled with the opportunity of a competitor recall in that market.
Align a threat or threats that causes a particular weakness to worsen. For example, the threat of new regulations on cybersecurity and patient data compliance is coupled with our weakness in the current business model where digital services is free and not resourced appropriately.
This iterative process may mean new SWOT items be uncovered if there are some unaligned SWOT factors. The process is complete when every factor is matched up.
KEY SUCCESS FACTORS (KSF)
After they are matched and lined up, you will then develop KSFs that addresses each match up.
WHAT do you need to do to capture those opportunities? Continuing with the previous example, a KSF would be to leverage KOL-relationship to influence the neglected providers in a share gain campaign.
WHAT do you need to do to avoid weaknesses being made worse? Looking at the previous example here, a KSF would be to shift digital to a paid service and resource accordingly.
CONCLUSION
Once you have a list of KSFs, you can then proceed to the next step of HOW. This is putting together the plan for how the organization can address each KSF. The additional rigor and steps to your SWOT process means you no longer dread the previous useless exercise of putting together this 2x2. Now you can SWOT right, SWOT happy.
Ways I can help you
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