How to carry out a more meaningful SWOT analysis?

Q: You’ve given us, maybe last year, and the first half of this year, two or three MRx columns on corporate strategy (corstrat) planning. They’ve been very useful to us. But our question now is not about those two or three columns but about what you have missed. You’ve not covered corstrat’s SWOT analysis.

We heard that you have a public seminar on corstrat where the SWOT analysis is very different because they say you “stress test,” for example, each of the identified strengths and weaknesses as well as the identified opportunities and threats. We also heard you only offer this seminar once a year and that we’ve already missed it this year.

We want our SWOT analysis to be more meaningful. So do you mind sharing with us just the highlights of your SWOT analysis plus answering our two questions on your SWOT analysis version? First, what is the stress testing for? And second, how is that stress testing done correctly?

A: As a starter we have to clarify, we don’t have a public seminar on corstrat planning. What we do in corstrat is to serve as facilitator in a corstrat planning engagement.

We facilitate corstrat planning for a company whose key concern is about marketing and/or sales. If the major concern is about money, we hand over the engagement to my finance partner. If it’s about manufacturing or service operations, it’s our operations partner who takes over.

Our corstrat planning engagement can be for a minimum of two days to as much as six. We prefer six days but spread over three weeks of two consecutive days per week. Whichever option the client chooses, any two-day session is an off office base corstrat retreat. We’ve tried the client office as the planning venue and it usually does not work. The one-week break between the first and the second, and between the second and the third is for workshop assignment and quality workshop output delivery. You can’t expect quality work when you cram everything in two days.

We now tackle your two questions about stress testing the results of corstrat’s SWOT analysis. What’s that stress testing for?

SWOT stands for “Strengths, Weaknesses, Opportunities, and Threats.” In the workshop, corstrat participants working in small groups go about brainstorming to identify the company’s SWOTs and each group writes them down in a list. There are four lists. The first is for strengths, the second, for weaknesses, the third for opportunities, and the fourth for threats. Then each group presents its SWOT list in 5 to 10 minutes.

The shorter the corstrat planning duration is (as in the two-day option), the more impromptu and unsubstantiated most of the ideas in each group’s SWOT list becomes. In fact, in the two-day duration, the listing of strengths becomes almost an embarrassment when read the day after because the guilty group often realized that it just converted the occasion as an exercise of its bragging rights.

Try to recall, for example, those many identified areas of strength that your last SWOT analysis generated. Here’s a sample list:

1. The CEO’s and Chair’s reputation and individual plus combined experiences.

2. The company’s known and solid brand equity.

3. Experienced sales force trained in the latest technological changes in the industry.

4. A marketing team attuned to the needs of sales and in the service of sales.

5. Highly competent product development and R&D team.

6. Well trained in-house market research group focused on marketing’s need for quick but valid research.

7. Top management’s ability in decision making to balance short-term and long-term considerations.

The company in this example is a medium-size consumer company that’s a No. 7 in one product category and for the rest of the five product categories it’s participating in, its brands are outside the top 10 in market shares. While the company has gained in sales values across the categories it has entered, it has not gained much in market shares. This was why everyone gave a hearty laugh when we said: “Looks like this is one happy mutual admiration club.”

Then it was time for stress testing. We introduce the need for this by saying: “If you have this many admirable areas of strength, why is it that not even one of your brands is a market leader? There’s also not one that made it to a serious challenger position?”  The need to substantiate one’s strength candidate or at least clearly argue how a candidate strength is a competitive advantage gets readily recognized.

The idea of stress testing comes from McKinsey. The idea of stress testing against competition is a Michael Porter framework. We’ve chosen this basis for stress testing because Porter’s 1980 model of strategy as competitive advantage has stood the test of time notwithstanding Kim Chan’s 2005 Blue Ocean Strategy and most recently, Mark Johnson’s 2010 Business Model Innovating.

Here’s my version of the stress testing question to ask for an identified strength: “What are the: (1) resources and (2) capabilities that your company now has but which competition does not have or does not yet have and so makes for your company’s competitive advantages?” For example, consider strength No. 1 in the list above. The challenge of this stress test question to corstrat planning participants is to prove “beyond reasonable doubt” that competition does not have a CEO and Chair with the reputation and combined experiences of their company CEO and Chair. When this stress question is asked of each of the rest of the seven identified strengths, and then the participants given some time to discuss and deliberate, the usual predictable outcome is either zero strength (which was true of the medium size mere contender company example above) or a shortlisting into one or two strengths.

Stress testing the W, O and T of SWOT makes use of an adaptively similar stress test questions. The end result is therefore equally similar, i.e., a shortlisting into the truer and more meaningful SWOT list. The list becomes more meaningful because:

(1) it gives the company’s few strengths needing reinforcement since they explain the driver/s of the company’s success;

(2) it identifies the company’s real weaknesses or competitive disadvantages calling for correcting;

(3) it isolates the unserved and underserved market opportunities for business growing; and

(4) it pinpoints the true sources of competitive imitations and entries that can upset the company’s revenue and profit attainment.

Keep your questions coming. Send them to us at [email protected] or [email protected]. God bless!