SWOT analysis.
Where can you use SWOT analysis?
What is SWOT?
How to get started with your SWOT analysis?
We will work through an easy to understand SWOT example, and most importantly: learn
how not to be lame!
SWOT analysis is a tried-and-tested technique to build awareness of where you currently
are, and then take action to move ahead.
You can make SWOT analysis part of your plans to start a new business venture.
You can apply it to an existing business.
Go a level below the total company and perform a SWOT analysis for a business unit, product,
functional department, or project.
You could also apply SWOT analysis to a competitor, use it for a not-for-profit organization like
a charity, or get personal and apply SWOT analysis to yourself!
What is SWOT?
SWOT is an acronym for the four parameters in the tool: a SWOT analysis identifies strengths,
weaknesses, opportunities, and threats.
In the SWOT matrix, S and W are internal, they relate to you and your abilities (strengths)
or lack thereof (weaknesses).
O and T are external, they come from the outside, in the form of opportunities you can use to
achieve better results, or threats that could cause trouble.
Strengths and Opportunities are positive and joyful, you want more of these, you want to
maximize them, make them stronger.
Weaknesses and Threats are negative or painful, you want to minimize them, mitigate their impact.
To get started with a SWOT analysis, you need good questions that spark an intense conversation.
For strengths: what are we great at, how are we unique and special, what advantages do
we have that others don’t?
For weaknesses: where do we do poorly, where are we behind, where do we need to improve?
For opportunities: where is the potential, where can we grow and expand, which trends
could benefit us?
For threats: what could hurt us, what could put us out of business?
Let’s perform a SWOT analysis for the local Muscle Power Gym.
Meet the friendly gym owner, Diego!
We are going to help him work through the strengths, weaknesses, opportunities, and
threats for his business.
Diego intuitively gets the idea of what a SWOT analysis is: as a bodybuilder, he is
well aware of his stronger and weaker muscle groups.
Let’s do a SWOT for the Muscle Power Gym.
Diego, what are you great at, where do you do poorly, where is the potential for your
business, and what could hurt you?
Like many business people, the process of coming up with a list of strengths is fairly smooth.
Muscle Power Gym has an owner who looks the part, it is an established local brand, customers
love the personal approach, and the gym has a group of loyal “core” members.
Identifying weaknesses comes a lot harder for most people.
That’s because weaknesses, sometimes euphemistically called “development needs”,
can feel like a criticism.
After a lot of reflection, we list the following weaknesses: Muscle Power Gym has dated equipment,
a small floor surface inside and little parking space outside, a weak social media presence,
and offers a very limited number of group lessons.
Where’s the potential, what are the opportunities?
Offering personal coaching programs to transform people’s physique and life, maybe move to
a new building for more space, and offer merchandising (like clothing and supplements).
What are the threats, what could hurt the business?
Well, there are two types of very aggressive competition moving in, and they have deep
pockets: “budget” gym chains that thrive on volume, with new equipment and low membership
fees, and multi-sport facilities where besides a gym members can use the pool and a tennis court.
That’s a solid draft version of the SWOT analysis.
What do we do now?
Well, for some organizations, this is all they do: make a bare-bones list of strengths,
weaknesses, opportunities, and threats, open the grey filing cabinet, find the letter S
to file the report under SWOT analysis, and go back to whatever you were doing.
They misunderstand SWOT analysis: it is not an end goal, it is a tool.
Not so for Diego!
He is a man of action, and wants to use his SWOT analysis to start making improvements.
Diego wants to take action to take advantage of the opportunities he listed, and turn a
current weakness into an opportunity by becoming the King of Social Media!
Wait a minute, Diego!
Before you go into action mode, are you sure your SWOT analysis is complete?
You identified strengths, weaknesses, opportunities, and threats, but didn’t take the voice of
the customer into account yet.
For example, are the strengths you came up with really strengths, or merely opinions?
Let’s go talk to some of your customers, or even better: talk to former customers,
or people interested in sports who aren’t your customer!
They could provide a fresh perspective on your business and your offerings, and help
you improve your SWOT analysis.
Which of the items you identified do they actually care about?
Which items would they add?
And as actions speak louder than words, let’s observe the actions of customers.
Let’s visit some gyms in other cities, and see with your own eyes what customers actually do.
Besides getting the customer perspective, every business in the world needs to intensely
reflect on the disruptive impact of technology.
Can it help you or hurt you?
We take the draft version of the Muscle Power Gym SWOT analysis, and add phones, apps, and
earbuds as a threat.
The world is getting more and more individualized, and the gym is certainly no exception.
Maybe the “personal approach” you listed as a strength is not so strong anymore, if
everybody believes they are experts themselves.
Customer interviews reveal that what Diego thought was a strength (loyal “core” members,
basically Diego and his bros making a lot of noise, grunting like a caveman when powerlifting,
shouting “Light weight, baby!” before every set, dropping plates on the floor) is
so annoying to some of the other customers that it is actually a weakness, and customers
cancelled their membership as a result!
Now that we have an updated SWOT matrix, let’s prioritize the items from high impact to low impact.
For example, in the Opportunities section, the move to a new building might be the top one.
What else can we do to add some perspective to the SWOT analysis?
So far, it’s just a narrative.
We could count the number of items in each of the four sections.
What is the frequency?
3 Strengths, 5 Weaknesses, 3 Opportunities, and 3 Threats.
Slightly skewed to the negative side, but not a big deal, right?
Frequency of occurrence is not necessarily the right approach to weighing risks and opportunities.
Not all risks and opportunities are created equally.
On the strengths and opportunities side, we need to distinguish between items that could
lead to linear improvements in results versus those with exponential (convex) impact that
could skyrocket results.
On the weaknesses and threats side, we need to distinguish between items that could lead
to linear worsening in results versus those with exponential (concave) impact that could
put you out of business.
What is the potential payoff in each of the four sections of the SWOT matrix for Muscle
Power Gym?
The strengths look fairly linear.
The weaknesses? Linear.
The opportunities? Linear.
The threats? Yep, that’s where the problem is.
The threats have a concave payoff, making the SWOT matrix very unbalanced.
Muscle Power Gym is at risk of getting hurt big time, even so badly that it could end
up going out of business!
Getting the voice of the customer, understanding the customers’ actions, prioritizing the
SWOT items, and analyzing their impact in terms of payoff, enrich the SWOT analysis.
It gives Diego a much better starting point to take decisive action to save his business.
Even though things look grim, all is not lost!
For example, taking a really good look at price versus value could help finetune the
membership offerings.
Bye for now, Diego!
We wish you all the best.