
IMHO
Insights & Opinions

SWOT (Strength, Weakness, Opportunities, and Threats) analysis is a comprehensive review of an organization as a first step toward building a business strategy. However, because it is a time-intensive process, this important step is often skipped.
Additionally, SWOT analyses can result in conflicting messages across the four elements, leaving people confused and frustrated. In a time-sensitive turnaround situation, conducting SWOT analyses can feel like pausing to do basic training in the middle of a forest fire. So, how can a small/medium size technology firm conduct a useful SWOT process and deploy the results effectively when facing existential threats?
Here is our advice.
How can a small/medium size technology firm conduct a useful SWOT process and deploy the results effectively when facing existential threats?
Do SWOT Analyses at High and Low Altitudes, Not in Between
SWOT analysis is a means to an end, with the end being a potential decision to modify or change the business strategy. As such, two actions are needed to gather accurate SWOT ingredients:
- First, a business should place the top 20-30 factors which dominate the business onto the SWOT checkerboard. Shortly thereafter, the list should be reduced to 10. (High Altitude)
- Second, an exploration team should meet with key customers (large and small) to find a new strategy to pivot to based on these 10 factors. (Low Altitude)
We recommend skipping the “in between” step of conducting an internal audit/validation of the initial 20-30 factors. It is rarely helpful, and it is a time-consuming effort the turnaround team can’t afford. Instead, the time should be allocated to the “Low Altitude” exploration of possible pivots from the existing business strategy.
We recommend skipping the “in between” step of conducting an internal audit/validation of the initial 20-30 factors.
High Altitude for Alignment, not Precision
The purpose of swiftly placing 20-30 factors on a SWOT board is to create alignment on areas of focus. The CEO or general manager must lead this discussion and not delegate it to others. The small participating team should be comprehensive enough to allow for inputs from all aspects of the business. Most importantly, the team must include someone (likely the CFO) who can ask, “So what?” questions and keep the group focused on financial impact. After the initial 20-30 SWOT factors are generated during the first session, it is important to reduce the number of items to less than 10 by the end of the second session. The entire process should take less than 10 hours over a one-week period.
The team must include someone (likely the CFO) who can ask, “So what?” questions and keep the group focused on financial impact.
Low Altitude for Insights on Changes to Strategy
The second leg of the SWOT analysis is much more difficult and where success/failure happens. A business in crisis is often stuck — unable to grow and needing to reinvent itself. It needs a new, more effective strategy.
New strategies cannot be based on generic market research publications because competitors have read the same publications. The team has to conduct a customized, detailed “customer situation” analysis at very “low altitude.” This requires spending a few months asking customers about their most important needs and fears, now and into the future. In these meetings, detailed-oriented members of the management team with an excellent understanding of the company’s value-chain meet with the most insightful customers to review the 10 SWOT items in search of a new strategy.
The goal is to understand where asymmetry of values can be arbitraged to both the company and customer’s benefit. This is an art, not easily distilled into a canned-process. The customer meetings should include skilled experts and executives who can ask questions, listen carefully, and thoroughly understand the customer’s points of view. All precaution should be taken to minimize the risk of politicizing the outcome, and no expense should be spared. This is the most important step, and it should not be taken lightly.
The final SWOT chart should contain less than 10 words (each word represents a factor the business is facing). Next, there should be a paragraph explaining each SWOT word that uses the customers’ language to describe the solution needs and business implications. The entire SWOT analysis should be less than three type-written pages.
The goal is to understand where asymmetry of values can be arbitraged to both the company and customer’s benefit.
SWOT: Focus on Opportunities; Leverage Strength
Once you have an agreed-upon SWOT analysis and have gathered input from customers, the next step is to create a new business strategy based on the Low Altitude findings. In a turnaround business, and perhaps in most businesses, weaknesses will dominate the discussion and everyone’s attention. After almost a century of applying a quality-improvement-process mindset, it’s easy to think of a company’s business as a Pareto list of problems to solve with the most serious first. However, fixing weaknesses may take longer than the runway that’s available. IMHO, a business should always focus on opportunities and leverage its strengths.
I learned this when I was a US General Manager for a company with an overseas parent company from 2003-2005. At the time, the company thought it had the time and resources to address its product and operational weaknesses. However, the lack of buy-in from stakeholders (other than the CEO) coupled with the time it would take to correct the weaknesses ultimately caused the effort to fail, as everyone ran out of patience. Focusing on leveraging the company’s strengths to tackle smaller niche markets would have been a faster, safer growth path that would have generated more excitement.
In contrast, in 2009 when I was a turnaround CEO, our SWOT analysis revealed that the largest semiconductor companies in the world had a stunning level of respect for Kilopass’ patent portfolio. Understanding this strength enabled the management team to engineer the quickest licensing deal with a brand new customer, Samsung. Samsung ended up adopting the technology for its largest and most profitable business, DRAM, and this success saved Kilopass.
Additional anecdotal stories within the technology industry illustrate why it’s more effective to lean on strengths and focus on opportunities. For example, Toshiba decided to invest in battery technology for the upcoming electric vehicle revolution. However, its battery is heavier and less efficient than competitors’. Despite years of effort, the product gap hasn’t shrunk enough to produce any material EV business. In a last-ditch effort, the team decided to lean on the batteries’ durability and fast-charging characteristics and focus on two “smaller” markets: battery for auto-start combustion engines and warehouse robots. Within a short period, Toshiba dominated the warehouse robot market (which relies on fast-charging to reduce the robot size) and gained a virtual monopoly in the auto-start combustion engine battery business because of its durability. This resounding success is a fantastic illustration of how to effectively use SWOT analyses to save a business.
SWOT analysis does not have to be the bulky and torturous process that it’s feared to be. It can quickly align the management team and help it find the strength and opportunities to pivot to, especially when the business is in crisis.
SWOT analysis does not have to be the bulky and torturous process that it’s feared to be.
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