A SWOT analysis should be conducted twice a year at a minimum and up to daily for a rapidly growing company. Businesses and business consultants adopted the SWOT analysis process as a diagnostic tool to assess the current status of a business, so before taking on any new actions, a SWOT analysis should be conducted.
In the book, Foundations of Business Consulting, my co-author, Joe Romello, and I discuss a SWOT analysis in Chapter 3, "Leveraging a SWOT Analysis". Albert Humphrey developed the original SWOT analysis in the 1960s with colleagues at Stanford Research Institute. After conducting research as to why corporate planning often failed, Humphrey and his colleagues were able to determine that strengths, opportunities, faults, and threats need to be evaluated. In time, this analysis developed into what we now know as SWOT, which means strengths, weaknesses, opportunities, and threats.
A SWOT analysis is the primary diagnostic tool for consultants. Much like a general practitioner physician uses basic diagnostics like checking weight, blood pressure, temperature, throat, lungs, and reflexes, a business consultant uses a SWOT analysis as their primary diagnostic when determining the basic state of the organization. When conducting a SWOT analysis emotion and perception should get checked at the door because a SWOT analysis should focus on realistic fact-based, data. A SWOT analysis can help an organization with:
Assessing risks and trends
Therefore, if a SWOT analysis can aid an organization with decision-making before taking action, a SWOT analysis should be conducted routinely before important decisions or actions are made by an organization. Strengths and weaknesses are internal to the organization, which means these are the things that organizations have control over and are the things that the organization can change. Normally, strengths and weaknesses change more slowly. However, opportunities and threats are external to the organization, which means that the organization has no control over these things. Normally, opportunities and threats change more rapidly. Thus, things continually change, and so repeated analysis should be conducted before making decisions.
Recently, we conducted a SWOT analysis with a small business owner. The owner has been in business for a few years, and they have been reliant on a handful of clients. The business is stable and revenue has plateaued. Consequently, the owner seeks to grow the business by offering different products and services to a new target market. We challenged the owner to conduct a SWOT analysis on their own, and then present their SWOT analysis to us. Upon review, we found that the common thread among the strengths, weaknesses, opportunities, and threats was the owner.
The strengths were derived from the owner. The owner was the subject matter expert, the salesperson, and the person with the relationship with all of the clients.
The weaknesses were due to the owner, as well. The owner didn't have enough time, resources, plans, or networking ease.
The opportunities were due to the owner, as well. The owner could deliver an affordable solution, develop partnerships, and build awareness of their business.
Finally, the threats were due to the owner. The owner believes that they could be too slow to develop their products and services, and they felt that they didn't have enough time or education.
The issue that emerged was that the SWOT analysis that the owner conducted was a personal SWOT analysis (still very valuable) but not a SWOT analysis of the business. For a SWOT analysis to be effective for an organization, it needs to be focused on the business, as a whole (unless the business will be and forever be a one-person business). The SWOT analysis needs to evaluate internal and external factors. Therefore, we asked a lot of questions to try to get to the root of the SWOT analysis of the business. After a lot of analysis and discussion, we determined that conducting a SWOT analysis weekly would be beneficial for the business since they are planning for significant growth with new products, services, and target markets. If the owner had informed us that they were looking to maintain their business with a handful of clients, we would have most likely recommended conducting a SWOT analysis two times a year.
Here is a sample list (not exhaustive) of when a SWOT analysis could and should be used when making decisions.
Mergers and Acquisitions
New products or services
Hiring and firing of employees
Restructuring an organization
Operations and processes
Keep this in mind when conducting a SWOT analysis. Evaluating opportunities and threats are often easier because they are external factors. Evaluating internal factors, strengths and weaknesses, proves more difficult due to biases. Steve Jobs said, "In most cases, strengths and weaknesses are two sides of the same coin. A strength in one situation is a weakness in another, yet often the person can't switch gears. It's a very subtle thing to talk about strengths and weaknesses because almost always they're the same thing."
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