SWOT analyses have been around a long time, and continue to be popular in the business development community. Unfortunately, the vast majority of SWOT analyses are essentially useless—not because the tool is broken, but because it’s not being used properly. The ultimate goal of a SWOT analysis is to produce actionable intelligence—and yet that is precisely the step that is most often neglected.
For the uninitiated, a SWOT analysis is a simple four-quadrant assessment of a competitor’s Strengths, Weaknesses, Opportunities, and Threats (SWOT) in the context of a specific opportunity. It is a simple, easy-to-understand tool that helps identify the internal and external factors that either help or hinder a company’s probability of winning.
Despite popular belief and practice, a SWOT analysis is not complete when the quadrants are filled. When the strengths, weaknesses, opportunities, and threats have been identified, and documented in the four quadrants, this is merely the first step. The final step requires moving from observation to analysis. Observation provides the “what,” while analysis provides the “so what.” This requires developing key strategic implications from the SWOT factors. To put it another way, the “next step” is to use the completed SWOT chart to predict likely actions the competitor will take.
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 ways of deriving implications from a traditional SWOT chart—one of the more effective methods 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.
This may seem daunting, but the payoff is great! The result of this step is a list of likely competitor actions that are both rational and defensible. Can you see the value of providing such a list to decision-makers? It enables informed decision-making in a way that a SWOT chart simply cannot do. Yes, it’s more time-consuming, and prediction is inherently risky, but taking this step is the only way to get true value out of a SWOT analysis.