MAKING SWOT ANALYSIS WORK

by Nigel Piercy and William Giles

Cardiff Business School and Strategic Marketing Development Unit, Marlow Introduction Without doubt SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is the commonest practical analytical tool for strategic planning, which is actually used by executives and consultants. As most readers will recognise, SWOT analysis is a simple structured approach to evaluating a company's strategic position w h e n planning, t o identify the company's strengths and weaknesses and to compare these to opportunities and threats in the environment. We have been unable to discover the original source of the technique, but one of the best technical descriptions, w h i c h links SWOT analysis to market segmentation and strategy is given by Abell and Hammond (1979).

The attractions of SWOT analysis are that this technique is familiar and easily understandable by users and it provides a good structuring device for sorting out ideas about the future and a company's ability to exploit that future. In fact, the technique is so well-known that we had some reservations about writing a paper on the topic managers do not take kindly to consultants and writers "rediscovering the wheel"! This said, our experience suggests that there is a market for our ideas about revitalising this tool, for the reasons outlined below. It is our view that the use of this tool has generally become sloppy and unfocused a classic example perhaps of familiarity breeding contempt! It must surely be admitted that SWOT analysis is frequently done badly, but this does not have to be the way the technique is used. On the basis of our experiences in using the technique with companies, we suggest a number of guidelines below for making the technique work dynamically to generate new insights and strategies. First, however, it should not be forgotten that the reason SWOT analysis has come to be so widely known (and we suggest misused!) is because of its inherent attractions. These are: the technique is simple enough in concept to be immediately and readily accessible to managers no computer or management scientist is needed; the model can be used without extensive corporate or market information systems but is flexible enough to incorporate these where appropriate; SWOT analysis provides us with a device to structure the awkward mixture of quantitative and qualitative information, of familiar and unfamiliar facts, of known and half-known understandings, that characterises strategic marketing planning.

Our challenge to the reader is to look at how SWOT analysis is used (or neglected) in his/her company's planning and to see whether our guidelines can be made to work. In short, by changing the ground rules for using this technique, we suggest it can be made exceptionally full and rich in strategic insight. The "rules" we propose for using SWOT to produce dynamic results are: (1) (2) (3) (4) (5) Focused SWOTs. Shared vision. Customer orientation. Environmental analysis. Structured strategy generation.

Focused SWOTS Experience suggests first, that the more carefully we define the area to be evaluated with a SWOT analysis, the more productive the analysis is likely to be. By focusing on a particular issue, and excluding nonrelevant material, we can overcome the bland, meaningless generalisations that executives frequently produce if asked to take a global view of their businesses' strengths and weaknesses. This definition, which should be rigorously enforced, has been made effective in analysing issues as diverse as focusing on: a specific product-market (with parameters defined); a specific customer segment in a market; product policy in a given market or segment; pricing policy in a particular market; distribution systems for particular customer groups; marketing communications for different customers and members of a defined decisionmaking unit; the study of named competitors or groups of similar competitors; relationships between departments in a company; the standing of a marketing department in marketing its strategies within its company.

Our experiences with a wide variety of companies and managers suggest that SWOT analysis can be made to work, these payoffs can be realised, and real strategic insights can be generated and used. We propose a number of very straightforward guidelines to achieve these goals.

MIP 7,5/6 1989

the SWOT analysis provides a concrete mechanism for expressing team consensus about important issues; producing a SWOT analysis has the effect of pushing a team towards agreement and flushes out potentially harmful disagreements indeed, in effect, one can observe managers negotiating the view of the world the company will adopt for its planning.

These potential gains arise primarily from participation of diverse interests in planning but SWOT analysis provides a mechanism for making participation operational and reaching that potential set of benefits. For example, in the financial services business, a company with which we worked was organised into two semi-autonomous divisions one serving the retail market and the other the commercial lending market. Undertaking SWOT analysis in joint planning groups proved to be quite literally the first time that managers of the two divisions actually found out what their counterparts could do and were doing, and uncovered many profitable opportunities for collaboration and cross-selling between the divisions.

Customer Orientation
The way we can use the SWOT technique in a particularly powerful form is summarised in Figure 1. The rule we follow is that attention should first be focused on a critical issue to our planning, rather than being global in perspective we can always build up the global picture by putting together our focused analyses. Apart from anything else, the very act of focusing starts to highlight major gaps in knowledge and the hidden strategic assumptions that managers make. For instance, in a planning session with a major computer firm, we asked the planners to undertake a SWOT for their own position in a particular market segment. The results were relatively negative, so we then asked them to do the same exercise for their major competitors. The planners completed the analysis for their best-known competitor, and the results were encouraging. However, for the third player in the market they came back with blank sheets they had no knowledge or understanding of this company. Their view of the market was swamped by the image of one dominant competitor. Incidentally, the anonymous third company proved to be the fastest-growing player in that market. Focus and concentration can have many pay-offs. The first requirement is that in evaluating our strengths and weaknesses, we can only include those resources or capabilities which would be recognised and valued by the customer with whom we are concerned. This helps us to get past the "motherhood" statements often produced as a list of strengths: service, quality, an established firm, and so on because we have to define what we believe is seen by the customer and is valued by him/her. For example, our "great private medical scheme" for employees is not a strength for these purposes. It is only relevant if we can say that customers would recognise that we treat our employees well, and this in turn has payoffs in how they deal with customers and the establishment of long-term relationships. Applying this rule is often a considerable discipline on executives, and in the event of disputes which cannot be resolved about what is a strength and what is not we may actually test our claims by market research with a larger pool of people, or even with customers! Forcing executives to confront the difference between what they think is important and what customers think is important is a substantial contribution of this technique. At the end of the day however unreasonable, irrational, awkward, intolerant, ignorant or plain foolish the "experts" think customers to be it is the customers who buy products, not the "experts". In fact, we are, in a very practical way, forcing users of the technique to identify the critical success factors in their business, customers' needs, and factors influencing customer satisfaction. In one company, for example, what executives told us was their strength of "technical service excellence", turned out to mean to customers that this was a company that sent out PhD-level engineers to prove that products had been abused in use, and that warranties did not apply!

Shared Visions
Because of its apparent simplicity and ease of communication, we have found SWOT analysis to be an excellent vehicle in working with planning teams or groups of executives. There is little or no barrier created through executives having to learn complex analytical techniques (or succumbing to the temptation to leave it to the "experts"). MIP 7,5/6 1989 6 We have found that the payoffs from making SWOT the central focus for group or team planning to be numerous: the pooling of ideas and information from a number of sources produces richer results;

One problem which regularly emerges is that executives trying to use the model claim that the same thing can be listed as a strength and a weakness. This simply means that we have not gone far enough in our analysis. For example, perhaps the commonest type of "motherhood" statements produced here are: "we are an old-established firm this is a strength and a weakness", or "we are a large supplier this is a strength and a weakness". What we need to do here is to ask the question: which aspects of these characteristics are strengths and which are weaknesses? For instance, the statements above might be expanded as shown in Table I. The remaining issue to be addressed is where managers claim that they have a strength (or weakness) which customers do not know about and would not recognise but which is too important to leave out of consideration. The easiest way of handling this issue is to include these factors in the list, but to have them boxed-off as "hidden". When it comes to the stage of generating strategies, then it is appropriate to consider what would be needed to uncover hidden strengths, if they really are particularly important to the customer and to generating strategies for the future.

"An old established Strength Stable suppliers for after-sales service Trustworthy Experienced

firm" Weakness Inflexible Old-fashioned No innovation

"A large supplier" Strength Weakness Comprehensive product range and Bureaucratic technical expertise Offhand with customers High status/stability reassures No continuity of personal customers contact Table I. (b) Conversion Strategies More difficult is the design of appropriate responses to highly ranked Weaknesses and Threats. Here the goal is ideally to convert these factors into Strengths and Opportunities. In some cases this may be relatively straightforward a Weakness in sales coverage may mean adding to the salesforce, a Threat from a competitor may be bought-off by collaboration or merger, but in other cases we may be unable to think sensibly about conversion or neutralising these factors. In the latter case these factors remain the limiting problems in this business and determine how attractive it is to us. (c) Creative Strategies Finally, we have to recognise that going through this analytical process often simply generates new, creative ideas for how to develop the business. Good ideas should never be discarded simply because they are unusual. Whatever recording we are doing, we should have a box especially for creative ideas that may not fit elsewhere in the model. In this way the model gives us a mechanism for structuring and categorising the strategies generated through the SWOT analysis. The final discipline, however, is one of iteration. As we identify strategies to match Strengths to Opportunities, to uncover hidden Strengths, to convert Weaknesses, and so on, we should always go back and see how the new situation we are building changes the SWOT model and the broad picture we are painting. Our output is then ready to be entered into the planning process for programme-building, evaluation, financial appraisal, and ultimately for implementational or action planning.

Environmental Analysis
Essentially the same discipline is required to view the Opportunities and Threats in the environment relevant to our point of focus the specific market, customer, issue etc. Here the goal is to list those things in the relevant environment which make it attractive or unattractive to us, and our search for ideas should be as thorough and widelyinformed as possible. Indeed, this is another prime chance to identify information needs and market research tasks. Probably the major difficulty here is that executives tend to jump the gun and put their strategies and tactics down as Opportunities a classic example of selffulfilling prophesy! The way out of this trap is the insistence that Opportunities and Threats exist only in the outside world the things we propose to do about them are our strategies. For example, it may be suggested that price-cutting is an Opportunity. This is not an Opportunity in a SWOT analysis it is a price Strategy which we may adopt. However, we would only accept the desirability of a price-cutting strategy if, for example, our size gave us greater costeconomies than our competitors, and there was an identified Opportunity in terms of there being a price-sensitive segment of the market, or the need to meet a competitor's threatened entry to the market with low prices. The rule is that Opportunities exist largely independently of our policies the actions we plan are our Strategies.

The Challenge
The guidelines we have outlined above are incredibly simple to apply, but the disciplines imposed are very severe. We know that this approach is effective, and that it turns the SWOT technique into a dynamic and productive tool for strategic audits and strategy generation. Our challenge to the reader is to use the model and the guidelines on his/her own planning and see what happens!

Structured Strategy Generation

When we are able to complete all four cells of the SWOT matrix, and we have ranked each item in each category in terms of importance, then the matrix acts automatically as a generator of strategies. (a) Matching Strategies Our central focus is on matching our Strengths to Opportunities in the outside world. Our logic here is that Strengths which do not match any known Opportunity are of little immediate value, while highly ranked Opportunities for which we have no Strength are food for further thought.

Reference Abell, D.F. and Hammond, J.S., (1979), Strategic Market Planning, Prentice-Hall, Englewood Cliffs, N.J. MIP 7,5/6 1989 7