Be Careful with SWOT Analysis. Issues and Risks of SWOT

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SWOT Analysis > Best Practices > Be Careful with SWOT Analysis. Issues and Risks of SWOT

Be Careful with SWOT Analysis. Issues and Risks of SWOT
Bernhard Keim, Business Consultant, Germany, Premium Member
I am not that happy with SWOT Analysis. My issue does not concern the tool itself, but the way it is often used. People like to make some statements with it, but the list in each of its quadrants can be endless. Everything is true, but what does really matter from all the points listed? So be careful with cherry picking (giving selective attention to particular things) to draw conclusions from a SWOT-Analysis.
Here's an example of what I mean. Let's think about the situation of a horse shoe manufacturer 110 years ago:

  • Strengths: how did it help you to be the best horse shoe manufacturer?
  • Weaknesses: did it make a difference for your future, that your marketing was weak?
  • Opportunities: there were a lot of competitors you could buy for little money.
  • Threats: there are automobiles coming up, but how can these loud and unreliable vehicles affect the business?
If you had been the boss of such a company: what might your reaction have been?
Now think of today: are you sure that your company is not acting like the horse shoe manufacturer? Too often SWOT makes people think more sophisticated, but inside the box.

Risks of SWOT Analysis: Biases
Jaap de Jonge, Editor, Netherlands
I agree Bernard. Giving selective attention to particular findings and then drawing conclusions based on that is indeed a dangerous tendency of human beings. One should keep this in mind when performing a SWOT analysis and/or PEST analysis…
By the way, 2 terms for the underlying human tendencies for this phenomenon are:
- Conformation Bias, and
- Anchoring Bias.

How to Avoid Biases in SWOT Analysis
James Antwi, HR Consultant, Swaziland, Member
Quite often SWOT is used for generating a ''shop list'' of strengths, weaknesses, opportunities and threats. But indeed what to do with this shop list becomes a problem, because of the subjective tendencies associated with its analysis.
I believe we can subject SWOT to a more objective analytical framework by allowing independent experts to rate the shop list quantitatively. By doing this we can mitigate the biases that are associated with SWOT analysis.

Be Careful of SWOT Analysis
Dr. Alan Williams, Professor, Thailand, Member
I insist that all my department managers attend every senior management meeting and also I insist that they all contribute to all discussions whether the subject relates to their department or not.
Amidst other discussions I often ask one of the senior managers to lead a SWOT analysis of the subject at hand and I mention I want to hear/see comments and factors which are not the obvious points.
Also I often mention the old 'think outside of the box' phrase and also explain that to 'think outside of the box' we all need to identify the unconscious barriers that are unconsciously stopping us from thinking outside of the box.
This approach often produces better results in the discussion and it also gives me an opportunity to assess the capabilities of my senior managers.

History Exonerates the Horseshoe Company
DSTEHL, Strategy Consultant, United States, Member
Bernhard makes a great point. His concern can be covered by an approach encouraging strategic foresight activity.
The analogy to the disruption of transportation is a bit unfair, however, since part of the SWOT work itself should point out - rather than assume - the commoditization or preparedness of the industry for disruption. And, given the increased rate of change across PESTLE domains, most today's business assumptions aren't fair critics of assumptions from a century ago. Some of those assumptions were legitimate.
As for a company that did EXACTLY what you ask about within the horseshoe industry, look up DIAMOND CALK HORSESHOE COMPANY. "Founded in 1908… Initially manufacturing horseshoes with a special type of calk to improve the animals' foothold on slippery surfaces, the company successfully adapted to the development of motorized transport for the masses and produced a range of adjustable wrenches and pliers from the 1920s." (Wikipedia).

Tendency in SWOT to Overly Focus on the Negative
Paul Bailey, Consultant, Canada, Member
Great comments from everyone.
I have found that for most groups, when conducting SWOT analysis, there is a tendency to spend the bulk of the time addressing the negatives (Weaknesses and Threats). The reason for this is that our brains register negative events, experiences etc much more strongly than positive and as a result we spend more time discussing how to minimize the negatives rather than maximize the strengths in order to take advantage of opportunities.
That's why over the last few years I have shifted away from SWOT (although I still use it in some settings) and first use SOAR, Strengths, Opportunities, Aspirations and Results. This comes out of Appreciative Inquiry. I don't want to ignore the negatives but the fact is we too naturally address the negatives and deal with them.
So for strategic planning purposes SOAR shifts to a focus on the positive before addressing the concerns raised by weaknesses and threats.
Thoughts welcome.

Use Trends for External Analysis!
Johannes Crol, Consultant, Switzerland, Member
I don't like opportunities and threats as implicitly they contain the strengths and weaknesses.
Instead, I use external TRENDS and confront these with strategic strengths and weaknesses. They come from competitors analysis.
Weaknesses can also be things you just have to do better, but are not strategic, like better managing capital or improving internal communication.
Confronting S and W with the trends, leads to 2-4 strategic issues which you can formulate as questions which directly lead to actions.
I successfully used this numerous times. It works in case you want to do your present business better. If you want to expand in other areas, I suggest to use core competences and research market attractiveness.

Use SWOT as a Starting Point
Charles Alter, Consultant, United States, Member
I have successfully used SWOT analysis as a starting point for big picture strategic planning and small picture continuous improvement projects.
To me the key is to START ON THE POSITIVE SIDE with Strengths and Opportunities and then proceed to the negative side of the equation with Weaknesses and Threats.
This is a much more balanced approach and provides good data to begin a project.
Furthermore, the best advice is to keep the exercise short and sweet! SWOT is just another arrow in the quiver.

SWOT Analysis Using Collective Intelligence
Murali Sundararaju, Coach, India, Member
Great comments by everyone and great learning.
I see many other versions being mentioned such as SOAR, SWOCC, etc.. While they are great and provide a different perspective, I believe it's still good to KEEP SWOT for it's ability to BALANCE BOTH POSITIVES AND NEGATIVES. If done the right way, it gives the best recipe for success.
Each point in each quadrant needs to be objectivized, prioritized and associated with time bound action with desired results. This can only be done by experts and that expertise can only be gained by incessant practicing.
I involve my team in creating a SWOT analysis for day to day simple situations such as 'best time to leave home to office' and each one then comes with a plethora of points, based on their own experience. Each of those is valid, but when combined and consolidated, I get a comprehensive analysis using collective intelligence.
I then graduate them to create similar analysis on more complex business problems which has worked very well.

Avoid Strategies in SWOTs
Connie James, Professor, Member
I agree if you anchor opportunities in industry trends and data (not firm-specific strategies), it will minimize the confirmation bias. Similarly by considering threats that are truly external, without the opinions about whether they are good or bad, will remove persons' opinions from the analysis.
Next, do a Five Forces analysis on the industry. It should include if industry revenues are increasing or declining. This will give external validity to the SWOT.
Next, use a TOWS matrix with both analyses in mind. Usually, the strategies that evolve are more grounded in fact than opinion.

SWOT Analysis is not Complete on Itself
Musagwiza, Manager, Zimbabwe, Member
I agree this tool should be used in combination with other tools like Porter’s 5 Forces, Scenario Planning, Delphi Method just to name a few, which can be combined in order to find a strategic initiative and direction.
To me a SWOT is just one guide and is not the final result. The results of SWOT need to be input for other instruments.

Reduce Bias in SWOT
Connie James, Professor, Member
The 1-2 page SWOTs we do, have ±50 citations that show the variety and quality of sources, forcing out individual opinions.
We then rate each bullet point by High, Medium or Low and then toss the low ones.

Use SWOT in Combination with Other Tools
Trevor Hudson, Consultant, United Kingdom, Member
In my view, for all the reasons outlined above, SWOT should absolutely not be used as a decision making tool. Instead it should be used in combination with other approaches to give you a snap shot of now and the near future.
If the external is a focus for you then combine with PESTLE or similar.
If you are trying to consolidate a lot of complex info then use the Delphi method internally or externally.
Finally, if you really want something quick and dirty use SWOT but don't share the outputs without the heavy caveats - particularly the unconscious biases used to create it.

SWOT is a Summary Tool
Gregory McGuire, Business Consultant, Member
I use SWOT Analysis as a summary tool. Merely using the tool to fill out the quadrants is a recipe for failure. It is a quick and dirty way to complete an analysis but that approach is weak.
Instead, I recommend a thorough external and internal analysis - utilizing several other tools - PESTLE, Porters Five Forces, Financial and Operating Ratios, Porters Value Chain.
On completion, I would use the SWOT tool to summarize.

A SWOT Needs to Be Informed by Other Analysis
Huw Morris, Management Consultant, United Kingdom, Member
I have seen very few insightful SWOT analyses. Those that were helpful were informed by other analysis - for example a Porter 5 Force analysis reinforced with consideration of the significance of regulation and complementary products.

Very Often, SWOT Analysis Becomes a Formality
Jeny, Partner, China, Member
I have seen many SWOT analyses become a routine and formality in companies that does no good while really a waster of time.
As senior leaders & managers, how do we really dig-deep through SWOT combined with thinking-out-of-box, and map the actions in details and follow through with clear responsibilities & timeline assigned. That is key to contribute to the success of our business.

SWOT Analysis Provides Little Gain for Strategy
Bernhard Keim, Business Consultant, Germany, Premium Member
SWOT Analysis just tells you what you should know anyhow. It is not strategic, but might deliver some insights. It does not tell you, what to do, but it might help to improve operational efficiency.
It does not help to overcome your own bias. Because we don't know what we can't see. And we have trouble imagining other ways of framing out problems or working toward a solution.
SWOT helps sorting the obvious, but not to understand the underlying systemic structures of problems. And when you have caught a kind of understanding of the underlying structures then start to think systematically through your possible futures on a more sound basis.
Please don't run into the strategy tool trap. I think the embedded links might help you.

SWOT Step 2 Threat Assesment
Johan Bergstroem, HR Consultant, Sweden, Member
I agree with @Bernhard Keim, SWOT is basically but a list of threats, etc.
This is where the work starts. Next step is to analyze these threats etc.. Place the threats in 3 columns, the 2nd one has a heading: "Likelihood" and the 3rd one: "Consequence".
  • In the safe corner, not much has to be done about the threats, they have low consequence and low likelihood, very small threats.
  • On the other hand there's also the high likelihood / high consequence corner. These threats need a lot of attention and assessment and action plans.
  • There is one "joker" threat left and that is the low likelihood / high consequence threat - these are events that might change things very drastically if they occur, however the likelihood is low, for example fire, floods, earthquakes, nuclear power plant fallout, acute fatal diseases, loss of key personnel etc.
    Editor: Indeed, see also Black Swans.

How many hours, on average, such SWOT report takes to compile?
DSTEHL, Strategy Consultant, United States, Member
@Connie James: Thanks. That's a great distinction. I have a follow-up inquiry.
High, medium, and low are great when anchored to statistical thresholds, but not so much when functions of unspecified assumptions. By that, I mean they are informative, but not for the sake of "outcomes" correlations. Given your point, I assume the 50+ citation reports are representative of at least qualitative reviews and some quantitative data. If so, that is a strong standard.
Would you be willing to share, based on an estimate at your own 90% confidence level, how many hours, on average, such a SWOT report takes to compile? I think that's a great indicator of the level of work some of us are discussing and some of us are not (not to disparage anyone, but there should be a quality difference between an MBA SWOT project and a professional firm's paid reporting). Having that difference in mind, we might gain a better foothold on the question at hand.

SWOT a Primitive Tool, but…
Chris Hoe, Director, Australia, Member
@Bernhard Keim: Analysis is done to tell you what you don't know. That is what research is all about - not just collecting data but to analyse the findings and come up with new insights.
SWOT is a primitive tool. For every action, there is an opposite and equal reaction. Strength-weakness, opportunities-threats, advantages-disadvantages, push-pull, pro-con. There is nothing sophisticated or complicated about it.
Any bias is overcome when different people analyze independently. It is a way of using this primordial tool or box.
The important thing is how you use the tool. The more effort you use even a simple tool the more you get out of it. A brush is a tool but used by a master produces a masterpiece. Even a high school student knows what a 'SWOT analysis' is. When he uses it and when I use it on the same subject, each of us will come out with a different result. The student may come up with some insights that I am blind to see. His/her fresh approach using this old primitive SWOT tool may extract more than any new complicated algorithm or multidimensional matrix.

Frankly, it Entertains a Lot!
Augusto Carreira, Partner, Portugal, Member
I once worked as a Business Unit Director for a large multinational whose top management decided it would be a good thing to perform a SWOT analysis of each BU once in a year. Which I did, although I knew this wouldn't add anything to the management of my business, because all I was doing was a reframing what I and my team had already had come up with earlier on about the business and the quantitative targets to achieve!
It was a waste of time, but quite fashionable at that time!

SWOT Follow-up: Intersecting SW with OT
Pedro Ferrao, Teacher, Portugal, Member
In order to find strategies and actions, you must intersect the internal components (SW) with the external analysis (OT).
For instance, if you are Weak in a subject that is a Threat to your company. More on Confrontation Matrix.

Liked This SOAR
Sridhar Gopal, Management Consultant, India, Member
@Paul Bailey: I concur with the idea that the application of SWOT has been considerably diluted over a period of time and more effective tools are emerging that can be applied in specific contexts. Your SOAR approach - not often heard here - provokes my thinking and I am considering applying it in specific contexts of my practice. Thanks for sharing this here, Paul!

Determining SWOT Priorities
Charles Alter, Consultant, United States, Member
@Connie James: Excellent approach and a way of forcing prioritization for SWOT topics. This would help reducing the most important items to actionable tactics and sorting out the wheat from the proverbial chaff in the SWOT exercise.

Uncertainty and SWOT
Eyad, Manager, Jordan, Member
I have a similar point of view. I see that round table discussions including variety of industry relevant people, and having as much market intelligence, primary and secondary information as you can will be more effective and efficient than SWOT alone since the core of the analysis is to make the right decision and a simple SWOT is having a degree of uncertainty that will distort decision making process.

SWOT is Just a First Step, Not the Final One
najib mohammed Saif, Turnaround Manager, Yemen, Member
Thank you Mr Bernhard for your SWOT advice.
@All: Remember a SWOT analysis is not the final step, but it does give us some information about our actual position. Before you can proceed to create a strategic plan you need other tools to analyze the results you got from your SWOT analysis.
After that you can create your strategic plan. Thanks.

Combining SWOT with PESTLE
Pradeep Sinha, Management Consultant, India, Member
I have found that SWOT combined with PESTLE gives a better perspective and is more comprehensive. Organization will be able to focus on company's context as well as cover all aspects of SWOT for each element of PESTLE.
I also found this combination is fitting well with the intent of clause 4 of ISO 9001: 2015 requirements.
Editor: Indeed, see also the Best Practice: "Combining SWOT with other Strategy Tools" (P).

GIGO & SWOT Analysis
Maurice Hogarth, Consultant, United Kingdom, Premium Member
Processes are designed for rational use. As long as those who use them have an emotional stake in the outcomes (as is often the case) then thinking habits and experience habits will produce a tunnel vision type mind-set and blind-spot ‘thinking’.
A colleague no longer wanted a family car so he put the data into a decision making process that provided the answer wanted, a sports car! GIGO (Garbage in / Garbage out). To bemoan the way SWOT is used for 'cherry-picking' is to bemoan human nature.
The main weakness is that people produce their SWOT lists (good or bad) but do little if any ANALYSIS. From their lists they jump to conclusions rather than correlate or seek patterns in their Strengths/Opportunities or their Weaknesses/Threats data.
I use SWOT against the Internal / External aspects of Political (includes Legal); Economic; Social (includes Environmental); Technological to obtain the data for decision taking, planning and plan-protection.
Ed: On this, see also PEST Analysis is Complementary to SWOT Analysis and Combining SWOT with other Strategy Tools.

Hours Needed for a Well-researched SWOT
Connie James, Professor, Member
@DSTEHL: In reply to your question, ±10 hours for an expert who knows the organization and 20 or more for a novice. An outside consultant would need some time and processes to get to know the organization. Still, some tools and methodologies are standard, shortening learning curves.

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