In the 1960s, Albert Humphrey of the Stanford Research Institute set out to find out why corporate planning consistently failed. Thus, a SWOT analysis was created. Today, SWOT analysis is one of the most important concepts in the business world and is widely used by all kinds of organizations to help create a strategic plan.
So what is a SWOT analysis and what does one do with it? in this article, we’ll explain it all (and share some SWOT analysis examples) from start to finish.
What is a SWOT analysis?
A SWOT analysis could be a high-level strategic planning model that helps organizations identify where they are doing well and where they can improve, both from an internal and external perspective. SWOT stands for “Strengths, Weaknesses, Opportunities and Threats”.
SWOT works because it helps you evaluate your business by considering several factors:
- Strengths and weaknesses are internal factors (things you will be able to control), such as team members, software, and geographic location.
- Opportunities and threats are external factors (things beyond your control) such as competitors, regulations, and economic trends.
Organizations use SWOT to chart a future course that plays to their strengths and minimizes risks. Taking the time to look at your organization from different perspectives and honestly assess your future prospects can be a worthwhile activity; the insights you gain must be used constructively as part of your strategic planning process.
How is a SWOT analysis performed?
To help you get started, we’ve created this step-by-step SWOT value benefit analysis template. The examples below are specific to the airline industry (as that is the example we use in our network), but performing a SWOT analysis is applicable to any or all businesses.
Note that we have divided our hypothetical examples into Strengths, Weaknesses, Opportunities, and Threats, which support the four perspectives of the Balanced Scorecard. You don’t need to use the Balanced Scorecard to be successful with a SWOT analysis, but this method provides a strong framework for your discussion.
Not using the Balanced Scorecard? See the main principles of whatever strategic management framework you use for methods that consider your business. for example, the VRIO framework emphasizes value, rarity, replicability, and organization; instead, you will be able to conduct a SWOT analysis through these criteria.
1. Create a SWOT matrix.
This is a grid-like matrix that will store the data you collect. As you’ll see in the SWOT analysis template below, each quadrant contains one of each of the four elements you’ll focus on—Strengths, Weaknesses, Opportunities, and Threats. Using a matrix helps present your findings in a clear and easy-to-understand manner.
2. Gather the right participants.
Get people from all departments involved in the analysis. Your entire leadership team should be involved, as they will provide a broad view of the organization and offer insight into the competitive landscape. But having lots of different perspectives is helpful, and that means including leaders from each department—and anyone else you think might need valuable input. The more diverse the group, the better stats you’ll get. Not all ideas will make the final list, but it’s important to think of them all
3. Identify your opportunities.
Ask the group: Where do we see big (and small) opportunities for our organization? What can we see in the future?
The Upward Airlines group could discuss the following:
- Financial opportunities: what is our biggest opportunity to strengthen our finances? This may mean using federal loans in an extraordinary time of crisis (such as COVID-19) or adopting a particular technology to reduce costs. Maybe there is a chance to get a weaker competitor.
- Customer Opportunities: Where could we dramatically improve with our customers? Could we improve our online interface? How about finding new ways to interact with customers when travel options are few and far between?
- Internal opportunities: What processes move us forward in the long term if we can improve them? Perhaps now might be the time to upgrade your reservation or system.
- Learning & growth opportunities: What opportunities do we have to leverage staff? For example, do we have cross-training opportunities? Could we make a few tweaks to improve our culture and thus our retention?