How to Make a SWOT Analysis
By Hauke Borow
The SWOT-Analysis is a very well-known strategic management technique.
Nearly all executives I know could tell you something about this ultimate method which seemed to be the decisive tool to deduce profitable strategies in their own area.
But I noticed quickly that the SWOT-Analysis has been applied incorrectly in many cases.
Probably most decision-makers believe that the acronym SWOT already tells them enough about the contents of this method so that a deeper understanding seems to be no longer necessary.
But what does SWOT mean?
SWOT stands for strengths, weaknesses, opportunities and threats.
As a crucial part of the SWOT-Analysis, these are the key characteristics that should be used in order to describe a certain situation.
After having completed the analysis of the actual state the next step will be the deduction of a strategy that contains all the actions that are necessary to reach a defined goal.
The SWOT-Analysis is used in many different areas, eg. choice of industrial location, product policy and even in the strategic project management.
The applications are very diverse and you will be surprised how often this method can help you with your current strategic discussions.
Strengths and Weaknesses
As we could see it is essential to define your goals at first.
Building strategies does not make any sense without having a goal.
Secondly, you should start with the characterization of the observed object from the internal business perspective (it doesn’t matter whether you deal with a scenario, a product, …)
The “strengths and weaknesses” are the appropriate characteristics. They are relevant to present the internal, organization-specific variables.
Write down the internal strengths and weaknesses concerning the examined object in a corresponding list.
Opportunities And Risks
Opportunities and risks represent the external, environmental influences.
These are forward-looking events and circumstances that deteriorate or improve your present situation.
Try to anticipate or to derive them and record them in a provided list.
Now let me explain all these ideas with the help of a small example:
Case study – Project Management Department
You are department manager in a company and you have received the task to lead a newly formed department that will be responsible for the project management at your plant in the future.
You get a young, dynamic team and initially no specific further orders.
- Building up a department that leads the decisive strategic projects of the company and finishes them successfully.
- Getting a key position in the company
- Finishing at least 2 big projects which have a minimum outcome of 100.000$
Research object of the SWOT analysis
- The new project management department
- Young, motivated employees
- Methodological expertise
- Executive has good network within the company
- A wide range of tasks
- Lack of experience
- No working processes
- Lack of acceptance within the company
- No established team
Opportunities (Always ask: What improves the situation?)
- Strategic management of major projects
- Expansion of the department
- Raising the status within the company
- Measurable and sustainable improvements in results
Threats/Risks (Always ask: What deteriorates the situation?)
- Fluctuation in the department
- No further project contracts
- Blockades within the company
- Employee dissatisfaction
Let’s say that you have described the strategic situation of this very simple example sufficiently.
Now you create a so-called SWOT-Matrix in order to visualize the deduced strategy blocks in a very clear and concise form.
The matrix could look like this:
The combination of letters in the different matrix fields represent the corresponding combination of variables.
The combinations will help to find the following questions:
- SO – Strenghts/Opportunities combination: What strengths match your opportunities? How can your strengths be used to increase the chance of realizing your chances?
- ST – Strengths/Threats combination: Which threats can be attacked by which strengths? How can your existing strengths be used to prevent the occurrence of certain risks?
- WO – Weaknesses/Opportunities combination: Which opportunities can arise from which risks? How can weaknesses be developed into strengths?
- WT – Weaknesses/Threats combination: Where are your weaknesses and how can you protect yourself from harm?
The answers to these questions will lead you to the strategic building blocks that form the result of the whole analysis and are put in the matrix fields afterwards.
Deduction of a Strategy Block – Case Study
WO – Weaknesses/Opportunities combination: Which opportunities can arise from which risks? How can weaknesses be developed into strengths?
The mentioned “lack of experience” can be interpreted as a lower operational blindness. The young, motivated people of your department can analyze the company’s problems from a very new perspective. Very often this leads to completely new solution spaces.
In terms of your goals (see above) you should share these insights with your boss in order to fight for the big strategic projects.
Result: You have turned a weakness into an opportunity! You can note this strategy block in your matrix:
That’s the way how you can find many different strategy blocks which build your personal department strategy.
I hope this article helps this well-known method to become even a little more well-known. But it certainly has got a new user from now on who knows how to use it effectively and most of all… correctly!
Hauke Borow is an industrial engineer who supports the management of a German industrial company. Throughout his management career, he has been the leader of several business projects that improved the performance of the company dramatically by increasing earnings and winnings. Hauke currently manages a strategic department that is responsible for the process management, project management, controlling and facility management of a medium-sized enterprise in the machine building sector.