Strengths & Weaknesses
Opportunities & Threats
Friends,
I hope that all is well with you and yours.
It was heartwarming to see so many of you reach out after last week’s piece. I try to stay away from matters that are not, shall we say, either directly or indirectly connected to strategy, but lethal violence against children is a topic that cannot be allowed to be ignored.
As also mentioned in the newsletter, we are today going to discuss what is coming up for paying subscribers.
My philosophy, if that is not too ludicrous a word, has always been to treat payments as a show of appreciation more than anything else. But at the same time, I want to ensure that those who are spending their hard-earned money on me get exclusive, premium content.
So, while full details about future changes to the newsletter will be revealed at a later date, I can here and now inform that there will be more content for paying subscribers soon and, unfortunately, less for free subscribers. Accordingly, if you want to upgrade, now is as good a time as any. Just click the button below.
Additionally, once Cannes is behind me, I will start planning the autumn workshops. These will feature top-of-the-industry experts in a number of relevant fields (e.g., marketing effectiveness and measurement, market research and data interpretation, eCommerce and more) and be heavily discounted for paying subscribers in line with their subscription types.
And then there is one more thing which I am not allowed to discuss just yet – but rest assured it is going to be huge. Stay tuned.
Now onto the topic of the day.
SWOT analyses are a staple of many strategic diagnoses, particularly those performed by disciples of the strategic planning school of thought. Yet, as we have seen only too many times before in adjacent contexts, there is little consensus on what constituent parts actually entail. Not only are the terms strengths, weaknesses, opportunities and threats not universally defined, but the methodology is also very much up to personal interpretation.
However, its roots can be found in a deliberate attempt at designing strategy based on both internal and external factors (or at least analysis thereof). Although some, perhaps most notably Henry Mintzberg, have criticized this perceived need of making strategies explicit (garnering a scathing riposte from Igor Ansoff in the process), I am therefore less inclined to dismiss the attempt. Strategies, as I wrote in Strategy in Polemy, are neither fully deliberate nor wholly emergent; always a mix in-between. Prioritizing an understanding of a larger context is thus, it would appear, hardly a negative in itself.
The more pertinent question is whether the SWOT model does it particularly well.
SWOT in Short
The creator of the SWOT model is often said to be Albert Humphrey (no relation to Will that I know of), a management consultant who, in a research project for Stanford University, tried to pinpoint why company planning so often created no value. Together with his team, he concluded that organizations habitually failed to adhere to what he labelled the SOFT aspects of business. As he said at the time, ‘what is good in the present is Satisfactory, good in the future is an Opportunity; bad in the present is a Fault and bad in the future is a Threat’.
Over time, SOFT evolved into SWOT, though the details on how vary. What there is less debate over is how important the work was and is considered. For now many decades, SWOT analysis has been used by an increasing number of businesses as a fundamental part of the strategic formulation process – while also expanding into a widening field of applications.
This is perhaps somewhat unsurprising given its popularity in strategic doctrine; most everyone from Porter to Barney have referenced, explicitly borrowed, or silently stolen from it. One of the reason why, one would suspect, lies in its perceived simplicity and ability to quickly frame situations.
Yet at its core, SWOT is based on the absolute; on strengths and weaknesses as they pertain to the particular organization, and threats and opportunities that are accessible to all. Interestingly, but often overlooked, this means that it inherently cannot lead to differentiation, as it is a relative concept. This is a particularly important point for any marketer reader given that traditional marketing management, as argued for by prominent thinkers such as Kotler, typically promotes SWOT analyses precisely with the end goal of establishing a unique position.
But perhaps that is being overly strict. It is undoubtedly true that smarter and more pragmatic proponents of the model have identified the issue and instead analyze the various factors relative to competition, typically using benchmarking data. This has the potential added benefit of enabling prioritization; outliers may warrant particular attention.
The Strengths and Weaknesses of the Model
Without wanting to go full meta (as in the Greek word, not the Facebook offspring), it is worth recognizing that there can indeed be points to using the SWOT model. Although some well-known professors love to note that SWOT analyses are useless because they never tell the company anything it does not already know, the reality is that far from every employee will possess even rudimentary knowledge. On the contrary, the problem is more commonly the inverse; strategists have proven to be rather poor at defining what their organizational strengths and weaknesses are, not to mention what may or may not happen in the marketplace.
The SWOT model is effectively what you make of it, which is both its biggest strength and its biggest weakness. On one hand, there are plenty of other models and frameworks that can be, and indeed often are, used within it (e.g., value chains and generic strategies as strengths and weaknesses, the Ansoff matrix in opportunities, and PESTEL and five forces in threats). On the other, if it can mean anything, it can mean everything.
More worrying is that markets and firms are complex adaptive systems – impossible to reduce – which means that SWOT analyses (which are reductive by design) will never be able to encapsulate every facet that matters. Any output will thus be, at the very best, general and partial, and consequently ill-suited to be relied upon for strategic decision-making.
Further, the absolute nature of the model is a poor fit for a dynamic, evolving and context-specific reality. Although one might easily conclude that two rivals operating in the same competitive environment would share opportunities and threats, their respective strengths and weaknesses are likely to have a massive impact on the potential impact of them.
Adding relative measures does admittedly mitigate some of these issues, but it also creates new ones. As we all know, most strategists have enough problems trying to understand their own strategy, let alone that of the competition. And focusing too much on the competition has all kinds of potential drawbacks.
So What To Do
Yet be that as it may, SWOT analyses clearly continue to be very popular. In other words, chances are that you will be asked to perform one at any stage in your career (however many significantly better tools for diagnosis and sense-making there may be out there). The question is how to then approach the matter.
My suggestion is to treat SWOT analysis as an outline of sorts, a reminder of the very-most basics of the business for those who may have problems remembering or are as of yet unaware of them. Crucially, however, the task should never be undertaken in isolation – particularly not by a consultant. Many (if not most) of the organizational strengths and weaknesses emerge as a result of connections between people, dark constraints and tacit knowledge. For the vast majority of external aides, these will be invisible.
Also, one should always remember that anything identified, whether the model is used in absolute or relative terms, is subject to change. Just as one cannot create a strategy and, so to speak, be done with it, SWOT analyses are never more than out-of-focus snapshots of a point in time taken through the lens of an observer. That is it. Treat them accordingly.
Next week, I will take a short detour from strategic diagnosis to provide my two cents on Apple’s move into buy-now, pay-later – a sector that, as it happens, I have done a fair bit of work in. As we shall see, I am less inclined to berate them than, apparently, most of marketing Twitter.
Until then, have the loveliest of weekends.
Onwards and upwards,
JP