SWOT analysis

What it means

A SWOT sets out a company’s strengths and weaknesses and the opportunities and threats around it. The first two are internal and can be changed; the last two are external and must be responded to.

The value is not the grid but what follows from it. Without a decision and a date it is a list of sentences everyone reads differently.

SWOT is often confused with PEST analysis. PEST maps the external environment in detail, meaning politics, economics, society and technology, and says nothing about the company itself. In a SWOT it feeds the opportunities and threats, but you will not read strengths and weaknesses from it; those have to be found inside the company.

How it works in practice

It is done before a larger decision: entering a market, an investment, a price change. Strengths are checked against figures from the books and a benchmark, not against instinct.

The useful next step is pairing: how a strength serves an opportunity and how a weakness is defended against a threat. Concrete tasks come out of that.

When clients prepare a business plan for a bank or an investor, we help them above all with the weaknesses. The bank will find them in the statements anyway, such as dependence on one customer or a thin margin, and a company that names them itself and adds a plan looks more credible than one that stays silent about them.

What to watch out for

Strengths get written as "quality service" and threats as "competition". Such an analysis helps nobody: it fits any company and therefore says nothing about yours.

A SWOT written by the owner alone shows the company as the owner sees it. Blind spots stay blind: the salesperson knows about customer complaints, the accountant about late payers, the storekeeper about stock gathering dust. Without involving at least a few people from different parts of the business, the real stakeholders, you get an analysis that merely confirms what you already thought.