SWOT Analysis Done Well: From Four Lists to Real Choices

SWOT analysis is probably the most familiar strategy tool there is. You draw a two-by-two grid, list strengths, weaknesses, opportunities and threats, and then, too often, you file it away and change nothing.

Used well, though, SWOT is a fast way to get a small team looking at the same facts and talking about real choices. The difference between a useless SWOT and a useful one is mostly in the preparation, the discipline of the session and what you do with the grid afterward.

This guide walks through all three, with a simple method for turning the four lists into strategies.

What a SWOT covers

The University of Kansas Community Tool Box, a free planning resource, describes SWOT as a tool "to explore both internal and external factors that may influence your work." The four boxes split along two lines:

• Internal factors you largely control: strengths and weaknesses. For a small business, these include your people, finances, processes, location, equipment, reputation and past results.
• External factors you don't control: opportunities and threats. The Community Tool Box lists examples such as future trends in your field, the economy, demographic changes, the physical environment, legislation and local or national events.

Keeping that split clean is the first discipline. "A new competitor opening nearby" is a threat, not a weakness. "Our website is slow" is a weakness, not a threat. Mixing the two makes the grid much harder to act on.

Where SWOT usually goes wrong

The method has had critics for a long time. A 1997 article in the journal Long Range Planning by Terry Hill and Roy Westbrook was titled "SWOT analysis: It's time for a product recall." You don't have to abandon the tool, but it helps to know its common failure modes:

• Lists that are too long. Fifty items is a brainstorm, not an analysis. The Community Tool Box suggests refining each list to "the best 10 or fewer points."
• Vague items. "Great customer service" is a claim. "Repeat customers made up most of last year's sales" is evidence, if your records show it.
• Only the owner's view. The Community Tool Box recommends identifying strengths and weaknesses from both your own point of view and that of the people you serve. Customers often see assets and problems you don't.
• Justifying a decision already made. The Community Tool Box notes, citing two Iowa State University authors, that SWOT usually reflects your current position, so it may not encourage openness to new possibilities, and it can be used to justify a course that has already been decided.
• Stopping at the grid. A SWOT is an input to choices, not a result.

Prepare evidence before the session

Spend an hour or two gathering facts before anyone fills in a box. Useful inputs for a small business include:

• Sales by product, service and customer type over the past year or two.
• Customer feedback, reviews and reasons for lost sales.
• A short competitor review. The U.S. Small Business Administration suggests assessing competitors' market share, strengths and weaknesses, the importance of your target market to them, barriers to entry, and indirect competitors who may affect your success.
• Changes in your area or industry: new regulations, local development, supplier changes or shifts in customer habits.

Running a SWOT session step by step

The Community Tool Box lays out a practical process that scales down well to a small team:

1. Pick a facilitator who listens well and keeps things moving, plus someone to record.
2. Explain the purpose in a sentence. The Tool Box suggests something as simple as "Where are we, where can we go?"
3. If you have enough people, split into small groups. The Tool Box suggests breakout groups of three to ten.
4. Give groups 20 to 30 minutes to brainstorm all four categories without ruling ideas out.
5. Reconvene and record results category by category, or start with the top item in each: the strongest strength, the most dangerous weakness, the biggest opportunity and the worst threat.
6. Discuss, agree on the most important items in each box, and write a short summary for everyone to keep.

If you are a solo owner, you can still do this. Draft the grid yourself, then ask two or three people who know your business, such as a key employee, a long-time customer or your accountant, to challenge it.

Turning the grid into strategy with a TOWS matrix

The step most SWOTs skip is pairing items across the boxes. A version of this approach is often called a TOWS matrix; Heinz Weihrich described it in a 1982 Long Range Planning article, "The TOWS matrix—A tool for situational analysis." The Community Tool Box presents a version adapted from Fred David's strategic management textbook, with four kinds of strategies:

• Strength and opportunity: use strengths to take advantage of opportunities.
• Weakness and opportunity: overcome weaknesses by taking advantage of opportunities.
• Strength and threat: use strengths to avoid threats.
• Weakness and threat: minimize weaknesses and avoid threats.

For example, imagine a hypothetical family-owned hardware store. A strength is staff who can answer detailed repair questions. An opportunity is a wave of older homes in town being bought by first-time owners. A threat is a big-box store opening on the highway. A weakness is limited online visibility. Pairing them suggests concrete options: free weekend repair clinics for new homeowners (strength and opportunity), a simple online "ask our staff" service to fix the visibility gap (weakness and opportunity), and emphasizing expert advice instead of matching big-box prices (strength and threat).

Each pairing produces a candidate strategy, not a decision. Pick the few that fit your overall direction and that you can actually resource. Our guide Competitive Advantage: Porter's Generic Strategies for Small Firms can help you judge which options build a lasting advantage.

After the session

The Community Tool Box suggests using a SWOT to identify the issues you intend to change, set or reaffirm goals, and create an action plan. In practice:

• Choose two or three actions, with an owner and a date for each.
• Note which items need more evidence before you act.
• Revisit the grid when something big changes, or at least once a year. The Tool Box points out that an opportunity can turn into a threat if everyone else sees it too.

Key takeaways

• Keep internal factors (strengths, weaknesses) separate from external ones (opportunities, threats).
• Gather evidence first, including customers' views and a short competitor review.
• Trim each box to the most important points; the Community Tool Box suggests 10 or fewer.
• Pair items across the boxes to generate strategies, then choose only the few you can carry out.
• Watch for the tool's blind spot: it describes where you are now and can be used to justify a decision already made.

Sources

• University of Kansas Community Tool Box, SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats
• U.S. Small Business Administration, Plan your business: Market research and competitive analysis
• Crossref record, Heinz Weihrich, The TOWS matrix, a tool for situational analysis, Long Range Planning 15(2) (April 1982)
• Crossref record, Terry Hill and Roy Westbrook, SWOT analysis: It's time for a product recall, Long Range Planning 30(1) (February 1997)