In colloquial language, we usually say that before facing a new project we should analyze its "pros and cons". It seems that this attitude was implanted in our genes many thousands of years ago and is one of the characteristics that distinguishes us from the rest of the species on the planet.
It is the ability to forecast the future with your feet on the present. And we do it both personally and business, although in this case we need to be more laborious.
Since its invention in the early 1960s, the analysis of the strengths, weaknesses, opportunities and threats of a business (description that generated acronyms such as SWOT, SWOT, DOFA and probably some other that escapes me) has been the most Popular to start planning an organizational strategy.
The tool is usually promoted as simple and easy to use, but it is far from being so, even though the basic matrix proposed in most cases is very simple. It consists of a double-entry table whose columns show the external factors of the organization - the opportunities and threats -, while the rows consider the internal factors of the organization - its strengths and weaknesses.
According to it, the circumstances that can fit in each of the categories are listed and then, at the intersection of rows and columns, define strategies to address each of their combinations. It's something like this:
The main technique used to develop the analysis is brainstorming or brainstorming, but in general there is no systematic guide to do it. It relies primarily on the momentary inspiration of the participants and the result ends up being more a consequence of the skill with which the moderator of the discussion acts than with its content in itself.
It does not seem an appropriate way to tackle such a delicate issue as strategic planning is undoubtedly. I once read a metaphor that seemed highly illustrative to understand the challenge that it implies.
If you pick up a rifle and aim at a nearby, motionless target, minimal pulse instability is likely to have little or no impact on the end result. But if that target is far away and on the move, as is often the case with the strategic planning horizon in any company, that little jitter at the start of the journey will mean missing the target completely, because in the distance the deviation becomes huge.
And if that planning did not foresee the possible alternatives that could force us to implement contingency plans to correct the course or design actions in this regard, things get even more complicated. In this matter, improvisation is a very bad counselor.
That's why you should be alerted to some issues to consider before embarking on a planning job that, far from helping you succeed, could hasten a catastrophe. And excuse me if I sound dramatic; You will thank me when you finish reading this article.
What information should be used?
A SWOT worth its salt should start with the best possible information, fully updated, specific and from the organization's experts in each of the areas. That includes consultants and subcontractors, if any, and information from specialized publications, official sources, and first-hand data.
In other words, don't trust rumors and gossip; they are quicksand.
Let's look at the different areas in which we move. Marketing, sales, operations, administration, logistics… what external events surround each of them and to what extent could they affect the progress of our business? Let's stick to practical reality, considering the old Pareto rule: less than 20% of what happens around us is capable of significantly affecting 80% of the results. Let's be cheap.
Only when we have established external situations are we in a position to examine what weapons we can face, that is, what factors in the internal context are relevant to address the challenges of that external context. Know-how, material resources, professional skills, availability of information, equipment, infrastructure. How could we characterize each of these variables in the case of our company?
And one last caveat at this point: let's leave the value judgments for the end of the year. In many cases, situations are described in a way that condemns them from the outset to be the bad guy in the film (or the opposite), which skews the result of the analysis and prevents us from reasoning in the right way. Situations should be described in a specific and neutral way (as neutral as possible). The precision of language is radically critical.
For example, instead of ruling "Our investment capacity is low" it would be better to consider "Our capital (or our line of credit) is $….", because that amount may be too low to implement some strategies but more than enough for others. The same could apply to the size of the organization, functional competencies, and other such matters.
Strengths or weaknesses? Opportunities or threats?
Another thing that surprises me in the usual presentations of this tool is that it is assumed that the SWOT categories are absolute. In other words, it is suggested that each of the situations contemplated should be a weakness or a strength, an opportunity or a threat. Black or white. And this is what, in my experience, tremendously complicates its use.
Because in reality there are only grays of infinite shades.
And even more: the same internal situation can exhibit different shades of gray depending on which external situation it must face. It can be a strength or a weakness and even both at the same time and in different proportions, depending on the context to which it is exposed. And the same goes for opportunities and threats.
For example, the organization's current functional competencies could be considered a strength in certain scenarios, but at the same time they could be a weakness in the face of others.
In order to deal with this aspect of the exercise in some way, some author has suggested that “in order of precedence comes the objective that the SME wants to meet, which determines the strengths and weaknesses that it presents for that objective and only later and in depending on the chosen environment, opportunities and threats will appear as a logical consequence of previous decisions ” .
I don't see how we could define a goal if we still don't have the elements to evaluate if it is viable. Why do we need SWOT if we already have a goal? Wasn't SWOT itself the one to reveal it?
Other opinions have emerged that attempt to explain alternative analysis sequences based on the acronym we use when referring to the tool (SWOT or SWOT). They suggest that when speaking of "SWOT" we are referring to a procedure that considers external factors first, while if we speak of SWOT it is the other way around (?).
It is not very clear why the name would have something to do with the variant, but I agree with this perspective anyway.
Be aware that, by definition, situations in the external context are beyond the control of the company, which can only adapt or perish. How will do? Simple: controlling your internal factors, the only ones you can modify. Therefore, we must start from the unchangeable, which in reality is what most conditions the analysis.
In summary, the sequence of activities that I propose up to this point is as follows:
- Taking into account our activity and the different areas through which it manifests, identify and describe the situations or factors of the external context that could significantly affect it. We do not need to categorize them as opportunities or threats (yet). In view of these situations, describe the internal constraints that have the task of facing them and what their current state is, quantifying it if possible (as exemplified in the case of investment capacity). It is not necessary to categorize them either. When we have described the whole scenario, assess or prioritizethe relative importance of these elements within each category, according to the criteria you decide to use. This assessment will be necessary to carry out the weighting that I explain below.
Reciprocal interaction of the 4 dimensions
The time has come to build the SWOT matrix. But not just any matrix, but one that allows us to foresee the confrontation of each one of the internal situations with each one of the external ones and to estimate the impact that this confrontation can have on the organization.
Yes, I know it sounds complex. But how else could we establish, with reasonable certainty, which of our internal characteristics are strengths and which weaknesses? And also, how will we know which external situations the same internal situation is a weakness and which others a strength?
This matrix is capable of answering the most basic questions of the analysis:
- What internal factors can be considered strengths or weaknesses and to what extent with respect to which external factors are strengths and against which are weaknesses, what level of impact can be assigned to each confrontation, according to previously agreed criteria, what weight value accumulates in each of the elements internal analysis, which allows us to identify the true weaknesses and strengths of our company and its strategic significance, which weight value accumulates in each of the external elements, to better identify threats and opportunities.
This information is invaluable in designing the actions that allow us to reinforce our areas of weakness in the face of external situations that we are interested in addressing and to solidify the strengths that could be our main strategic differentials, in line with our organizational Mission.
I reiterate: it may sound complicated, but this is only due to our genetic limitations in handling complex information, which can be overcome through the tools that technology offers us, even the most basic of them, such as a spreadsheet. The benefits that this methodology can bring to the strategic planning of the company are enormous.
Well worth the effort. Any effort to develop such a SWOT will be more than rewarded in the form of sustained success.
Keywords
Quality, foda, dafo, dofa, iso 9001, strategic planning, strengths, weaknesses, opportunities, threats, management.
revistacientifica.fce.unam.edu.ar/index.php?option=com_docman&task=doc_download&gid=18&Itemid=31
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