Remember the line from the ending of “Back to the Future,” when Doc Brown hops out of the DeLorean (with its surprising 2015 updates), and begins digging through Marty’s trash can? “I NEED FUEL!” he exclaims as he prepares to drop a banana peel and a half-used can of soda into Mr. Fusion. This obscure line from a familiar classic from the ‘80’s perfectly highlights an important principle – no matter how fancy your car is, no matter how many bells and whistles it has, or how much time and energy you’ve spent tuning it, it still needs fuel to operate effectively. “What’s your point, Brandon?” Glad you asked. In the business world, it’s all too common to find companies who spend tremendous resources designing and building their own solution – and maybe even developing a Price to Win assessment – without investing any resources in understanding what their competitors will offer, or even what their customer really wants. Neglecting competitive intelligence in this way is a lot like failing to put fuel in the car. And as a result, they lose – or worse, they win and get stuck down the road when their solution stalls. Effective competitive analysis based on sound information and consistent processes ensures that your car is fueled up and ready to drive when you turn the key. It also gives you a cushion when the inevitable roadblocks occur. It helps you arrive on time, and on budget, relaxed and ready. Of course, not all fuel is equal. You may be able to use the unknown liquid in the rusty can that someone dropped in your back yard – but wouldn’t you rather use dependable, reliable gas you trust? Isn’t your car – your job – worth it?
As I said before, the other most common mistake that deprives SWOT analyses of their value is the failure to take the essential next step, after it has been completed. “What is that next step?” you may ask. The answer lies in the fundamental intent behind the SWOT analysis. The purpose of a SWOT is to help analyze and assess the competition. And what is analysis, other than simply deriving meaning from data? There is a big difference between observation and analysis. Simply put, observation provides the “what,” while analysis provides the “so what.” Herein lies the reason why many deride and dismiss the SWOT chart as useless. In its standard form, it is data with no analysis. It includes nothing more than four lists of characteristics or factors about the company, none of which articulate any kind of strategy or action on the part of the company. Therefore in the eyes of the savvy decision-maker, it fails to answer the critical “so what?” question. You can imagine your executives saying “So… the company is strong in these areas, and weak in these areas … so what? And… the company is affected by these external opportunities and threats… so what??” It is my assertion, therefore, that the true value of any SWOT analysis appears only after completely (and correctly) populating all four quadrants, and THEN developing key strategic implications based on those factors. Competitive analysis of any company must include a predictive element, which attempts to answer the question “What is the company most likely to do next?” The four elements of a SWOT chart, if accurate, can be extremely useful in developing these predictions – but they do not explicitly provide the answers in and of themselves. So how does one take this next step? There are several different ways of deriving implications from a traditional SWOT chart – one of the more effective (albeit labor intensive) methodologies I have come across involves examining the intersections of the various factors two by two, in an attempt to discern the most likely action on the part of the company. For example: if the company has [Strength #1] and [Opportunity #1], therefore they would most likely do [Implication #1]; if the company has [Weakness #1] and [Opportunity #1], therefore they would most likely do [Implication #2], etc. There are two downsides to adopting this “extra step.” First, it adds a layer of complexity to a process that is otherwise very simple and user-friendly (which I would argue is one of the reasons SWOT is so popular). Second, prediction is a dangerous game. Those who attempt to predict the future invariably expose themselves to personal risk – risk to their reputations. Success will earn them great respect and even reverence – but failure may cost them the trust of their customers. But analysis is not for the faint of heart! In my judgment, the benefits far outweigh the costs. So be bold. Be fearless. Be ruthless in your zeal to add real value in the form of that elusive treasure – the life-blood of our profession: actionable intelligence.
Whether you love them or hate them, SWOT Analyses have been around for many decades, and they continue to pervade the realm of business development and strategic decision-making, most commonly in competitive assessment. I could talk at length about why these simple quad charts have garnered so much attention (both positive and negative) over the years, but I won’t. I continue to see value in SWOT analyses, but only if they are done properly and completely. What I want to talk about is what almost everyone does WRONG with SWOT analyses. In my experience, the two most common mistakes that rob a SWOT analysis of real value are: (1) failure to understand what an “opportunity” is, and (2) failure to take the essential next step after a SWOT analysis has been completed.
- Opportunities misunderstood.