How can our SWOT analysis be more realistic and actionable?

Question:   My team is in charge of our housing construction company’s corporate strategy (Corstrat) planning and analysis.

Every October or November for the past 12 years, we hold a three-day offsite Corstrat planning with our CEO in attendance.

The specific programs and activities to execute the following year come out of the Strength-Weakness-Opportunity-Threat (SWOT) Analysis that we work out in the second half of the Corstrat’s first day.

Some two or three years ago, we read a Marketing Rx column where you took up SWOT analysis, but for marketing planning.

You mentioned though that what we’re doing in our Corstrat SWOT analysis can be rendered just as realistic and actionable by adapting your “stress testing” for the identified areas of strength and weakness.

Our CEO did not agree to the stress testing and so we just continued our Corstrat planning as before.  However, I instructed my team to analyze how our corporate performance, overall and in each functional areas, compare with what our SWOT analysis predicted each year.  In all of the 12 years, most of our identified strengths were not those that mattered, and most of our cited weaknesses were not what should have been corrected.

We showed our analysis to our CEO but he said the company is still doing well.  “While revenues have mostly been below quota, they continue to increase even though not as much as expected.”  Also, “we remain profitable although not as much as forecasted.”  He ended by telling us: “Look, guys.  In my 30 years, I have yet to see a plan that faced reality as it has predicted.”  How can we persuade our CEO to do a stress-tested SWOT analysis?

Answer: Your major challenge is a difficult one because it’s an issue of changing an executive mindset.

In your case, it’s doubly difficult because it’s your top executive, your CEO, whose mindset you wish to change.

Warren Bennis, the famous management of change guru, says changing a mindset won’t happen overnight.  According to another guru, John Maxwell, there are eight stages to the change finally happening.  Both are saying the same thing.  Changing a mindset takes a long time.

How can you hasten the change process?  Shorten the time it takes to go through the stages. Consider, for example, the stage that typically takes up the most time.  That’s the first stage, namely, the “denial stage.”

Your CEO believes that the time for change has not yet arrived because “while revenues have mostly been below quota, they continue to increase, even though not as much as expected, and we remain profitable although not as much as forecasted.”  Those are the words of a CEO who’s clearly in denial.  It’s been there for some 12 long years.  How can you put an end to this denial period and stop it from extending?

Consider the strengths and weaknesses of the departments of your company and which are behind in the 12 years of corporate performance.  There are strengths and weaknesses in the functional areas of marketing and sales, operations, supply chain, finance, and human resource, and in corporate governance and top management.  Realistically, you can’t expect change in all these departments.  But always, there are one or two organizational units where change can happen more easily.

Suppose these are the departments of Marketing and Sales.  Consider their identified areas of strength and weakness.  For attaining corporate objectives, there will be differences of opinion about what strengths of Marketing and Sales should be reinforced and/or improved, and what weaknesses to correct.  To resolve differences, one can hold a workshop to establish common ground.

When skillfully facilitated, the “common ground” workshop can identify truly realistic and actionable strengths and weaknesses.

One of the tried and tested ways for conducting this workshop is to stress test strengths and weaknesses.  It is in the common ground workshop where stress testing is more readily accepted or least resisted.  So how is stress testing carried out?  Ask the stress testing questions.

Here’s the stress test question for a claimed strength.  “Is this strength unique to your company and not found in your closest competitor so that you can consider it your key competitive advantage?”  When answered with facts and evidence, the number of initially claimed areas of strength suddenly dwindles in proportion to how far from the market leader your company is.  If you’re a No. 4 in the industry, your true stress-tested strengths number less than those of the No. 3 and No. 2.

Here’s a curious example.  One client cited that its key marketing strength is in how dedicated and hardworking its marketing and sales managers are.  I then asked: “Considering that you’re No. 4 in the industry, are you saying that the No. 3 or the No. 2 or the No. 1 does not have just as dedicated and hardworking marketing and sales managers?”  The facts and figures for the three competitors were shown.  After a brief discussion, the claimed strength fell out of the list.

The stress test for weaknesses asks: “What strengths do your major competitors have that you don’t have?  What are these competitive disadvantages of your company?”  Again, when considered with facts and figures, the list expands in proportion to how far your company is from the market leaders.

So if you’re No. 4, your weaknesses should be more than those of the 3, the 2 and the 1.

The foregoing is your critical starting point toward a more realistic and actionable SWOT analysis of strengths and weaknesses.  It entails the following.

For your kind of situation, start by accepting that it’s most of all about changing your CEO’s mindset about the need for change in your Corstrat planning model.

Then, direct the change toward your SWOT analysis portion.  Choose a department in your company where it’s least difficult to effect change.  Avoid being comprehensive at once.

Then focus on the chosen department’s identified strengths and weaknesses where differences of opinion about what strengths to reinforce and what weaknesses to correct will emerge.  Resolve the differences via a common ground workshop.  It is in this common ground workshop where the stress testing will be least resisted.  Apply the stress testing questions to identify your company’s truly realistic and actionable SWOTs that are facts and evidenced based.

Keep your questions coming. Send them to me at [email protected].