SWOT Analysis should be consigned to the ashbin of strategy history.
SWOT Analysis should be consigned to the ashbin of strategy history.
I'm fed up with reading SWOT analysis. My irritation stems from the amount of time I waste reading them, which is considerable. It's about the amount of time some unfortunate folks squandered putting them together. That is why my 28th Playing to Win Practitioner Insights post, It's Time to Toss SWOT Analysis into the Ashbin of Strategy History, is titled It's Time to Toss SWOT Analysis into the Ashbin of Strategy History. (You can find links to the rest of the PTW/PI series here.)
A Little Backstory
The Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis, which was created at the same time as the concept of business strategy, is arguably the most venerable and widely used analytical tool in all of strategy. Surprisingly, considering its popularity, there is debate about how it came to be. According to one school of thinking, SWOT was developed in the mid-1950s by a group of Harvard Business School (HBS) professors, including C. Roland Christensen, Kenneth Andrews, and George Smith Jr., who all taught the long-running capstone Business Policy course. The other school of thought claims that SWOT was invented in the early 1960s by a Stanford Research International (SRI) consultant called Albert Humphrey, and that this is the one that is most often taken up and repeated online.
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It amazes me that no article on the contested origins of SWOT mentions Humphrey's coincidence (or not) that he was an MBA student at HBS in the mid-1950s and would have taken the necessary Business Policy course, most likely from one of Christensen, Andrews, or Smith. My guess is that he learnt it at HBS and then commercialised it at SRI, or that he learned the basics of the tool at HBS and then improved it in his consulting firm.
In any case, SWOT was developed during the critical era of 1955 to 1965, when researchers and practitioners were striving to define the novel concept of business strategy and engage in the untested practise of strategic planning. Unsurprisingly, strategy swiftly devolved into a planning exercise, as formal business planning had been taught and practised since the dawn of business education at the turn of the twentieth century, and managers were comfortable with it. Now, planning had to become more "strategic," but what did that entail? SWOT turned out to be the initial response. To be strategic, one had to take a step back and consider the following general questions: What are our strengths, weaknesses, opportunities, and threats?
SWOT, like any other practise that establishes an early mindshare lead, maintained and expanded that lead to the point that, half a century later, a strategic planning process is more than likely to begin with a SWOT analysis.
The Issue with SWOT Analysis
When I deliver a strategy presentation, I frequently question the audience, "Who here has done or received a SWOT analysis?" Everyone in the audience raised their hands since SWOT is such a widely used tool that everyone has conducted and evaluated several SWOT studies. Then I ask, "Who can tell me a single blinding insight that came out of a SWOT analysis?" On the second question, I'm still waiting for my first hand. No one in the audience has raised their hand to inform me about a pivotal finding from a SWOT analysis. Given the millions of person-hours spent completing and analysing SWOT analyses each year, this is quite devastating. A SWOT analysis produced no non-intuitive strengths. There was not a single intriguing flaw discovered. There was not a single fantastic possibility brought to light. There was no way to know if there would be any serious threats.
It isn't due to a lack of detailed SWOT analyses. They're usually massive, with hundreds of pages of graphs, charts, and tables. The issue is that the task is designed in such a way that it is intrinsically impossible to complete.
Consider the analysis of strengths. To examine one's strengths, one must first define what is included in the category of'strengths,' as well as a method of quantifying what is included. A strength, on the other hand, is only a strength in the context of a certain Where-to-Play/How-to-Win (WTP/HTW) decision. If your HTW states that you would win based on having the largest product line, then having a large product line should be listed as a strength in your SWOT. If, on the other hand, having the most reliable and consistent delivery is your HTW, then having a broad product selection may be a weakness rather than a strength. You just don't know what WTP/HTW option you'll make at the outset of a process to select strategy, thus you can't determine anything particularly insightful about your abilities. That is why the SWOT analysis' strengths section is so bland, generic, and undifferentiating.
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The same can be said of flaws. A flaw is just a flaw in the context of a specific WTP/HTW option. The same may be said for opportunities and threats. It's a danger if a new player joins a WTP, but only if you want to play there. As a result, there is a uniformity to SWOT evaluations. You can't be particular about strengths and weaknesses before deciding on a WTP/HTW. At the start of a strategy process, it's difficult to tell what is and isn't an opportunity or a threat. As a result, SWOT studies are a mile broad and an inch deep by design, resulting in a lot of work and a lot of pages but little insight.
A Better Approach
The better way is to do an analysis only once you have a firm understanding of the specific aim, allowing you to dig a mile deep and an inch wide. That is, you don't do it right away, as with the SWOT, and you don't try to make it too broad, as with the four-pronged SWOT. Wait for the results of the analysis. Patience is required. Don't do anything unless you've given it some thought.
Begin by outlining the strategy issue you're attempting to resolve. That is, what is the gap between your goals and the results you desire? Then, using a 'how might we' query, specify the solution's shape. That is, how may we close the current gap that has been identified? Then consider what WTP/HTW options might be available to address the how might we query and close the gap between ambitions and outcomes. Then, for each possibility, consider what would have to be true for it to create the desired result (WWHTBT). Then determine which WWHTBT aspects you believe are the least likely to be true and, as a result, are the impediments to you pursuing that possibility.
Then, and only then, after you have a firm grasp on both the question you're trying to answer and the level of proof you need, create particular tests for the parts that are crucial to your decision. Your patience will be rewarded with significantly more detailed studies that yield far more compelling results.
Data mining vs. science
The SWOT problem is just one example of a larger problem of science being misused in data analytics. Analysts can crunch large datasets, spreadsheets with limitless rows and columns, to hunt for patterns and correlations, thanks to ever-increasing computational capacity. It has a scientific vibe to it because it incorporates numbers and analysis. But it isn't the case. It's simply data mining, and if you abuse data long enough, you'll get something! It will provide you with correlations that have no underlying explanation, trends that have no relevance, and so on.
Only a scientific analysis begins with a specific hypothesis. This excludes implicit ones, such as "I believe x, but I'll keep my thoughts to myself until I see what the data says." The hypothesis will direct the analysis with scientific precision: what data should be crunched, how should it be crunched, and what standard of proof should be used.
Unfortunately, SWOT is just another form of data mining. It gathers large amounts of data with no theory (other than these four ambiguously titled categories) in the hopes that something valuable emerges, which my audience inquiry demonstrates does not. Worse yet, the SWOT participants may have theories, but they are kept hidden. As a result, they impose their views on data gathering and analysis while claiming to be conducting an objective analysis while guiding it to the desired conclusion.
SWOT was developed in the early days of strategy when early practitioners needed tools desperately. But it's turned into a massive time-sink with little or no payoff. It's time to consign it to the ashbin of strategy history.
Perspectives from a Practitioner
This is a no-brainer: never conduct a SWOT analysis. Also, never listen to a SWOT analysis that you happen to get. It is, at the very least, a waste of time. In the worst-case scenario, it will divert your attention away from developing and rigorously validating your strategic thinking.
In general, never do research without first formulating a hypothesis. Otherwise, you'll be wasting your time with pointless data mining. Some people worry that having a hypothesis before testing it would lead to bias, such as anchoring on the hypothesis's suggested solution. It's a difficult task. Anchoring is a real thing. However, having no hypothesis is worse because you can't rigorously improve your thinking without forming and testing hypotheses. On this front, my advise is a modest variation of the instruction to have a strong but shaky opinion. I believe that having a strong opinion can offend people. I feel that you should constantly have a strong yet loosely held opinion. It implies that you take the time to formulate a clear hypothesis that will guide your actions. That will allow you to continually increase your grasp of the world around you, making you a better strategist!
