Reference
SWOT analysis: how to use it
A SWOT lists a business's strengths and weaknesses inside it, and the opportunities and threats outside it. Under the grid sits the "so what": the two or three challenges the four lists add up to. The lists are the raw material, and the challenges are the output.
What it is
SWOT has no single agreed author. It came out of business planning work in the 1960s, and is now the most widely drawn grid in strategy. Strengths and weaknesses describe the business itself. Opportunities and threats describe the market, rivals and trends around it.
| Helps | Hurts | |
|---|---|---|
| Inside the business | Strengths
| Weaknesses
|
| Outside the business | Opportunities
| Threats
|
Then write the so what under the grid: the two or three strategic challenges the four boxes add up to.
The grid reads two ways. Across the top, what helps the business and what hurts it. Down the side, what sits inside the business and what sits outside.
When to use it
Use a SWOT to frame the challenge quickly, at the start of a strategy or before a first meeting. It suits a team that needs a shared picture in an hour. It also gives a review a place to collect what the other frameworks found.
A SWOT does not choose a strategy. It says what the strategy has to answer.
How to run it
- List the strengths: what the business does better than rivals, in customers' eyes.
- List the weaknesses: where it lags, and what it would need to build.
- List the opportunities: where it could win share or earn more.
- List the threats: what would cut sales or profit if nothing were done.
- Write the "so what": two or three challenges the four lists point to.
Record it on the diagnosis worksheet.
How to write the "so what"
- Keep each list short. Five points at most, each one something a customer or a rival would recognise.
- Read across the lists. A strength that meets an opportunity is a place to push. A weakness that meets a threat is a place the business could be hurt.
- Write two or three challenges. Each is one sentence a sceptic would accept, in plain words.
- Test each challenge on the plan. If no part of the plan answers it, either the plan or the challenge is wrong.
A worked example: a regional building supplier
Illustrative: an invented business, to show the method.
A family-owned supplier sells timber, plasterboard and fixings to builders in one city. Its owners want to know where to put next year's money.
| Helps | Hurts | |
|---|---|---|
| Inside the business | Strengths. Same-day delivery to sites across the city. Counter staff who can price a job from a drawing. | Weaknesses. Prices above the national chains on common lines. No way to order online. |
| Outside the business | Opportunities. New housing estates on the city's edge. Builders who want to order from site on a phone. | Threats. Two national rivals opening yards in the city next year. Large builders buying direct from mills. |
Read across the lists, and two challenges stand out:
Our delivery speed is the only reason trade customers pay our prices, and two rivals are about to match it.
Builders on the new estates will order from their phones, and we cannot take an order that way.
Each challenge points at a choice. The first asks how the business keeps its customers once delivery is matched. The second asks whether it builds online ordering before the rivals open.
Common mistakes
- Four long lists and no "so what". The lists are the raw material. The challenges you write under the grid are the output.
- Mixing inside and outside. A new rival is a threat, and a new product of yours is a strength. Put each point where it belongs, or the grid stops reading cleanly.
- Strengths any rival could claim. "Our people" and "our reputation" appear on many SWOTs. If a rival could sign the same list, it is telling you little.
- Points with no evidence. Each point should rest on a fact someone could check, such as a price, a customer's words or a rival's plan.
Frequently asked questions
How long should a SWOT take? An hour for a first draft with the leadership team. Longer only where a point needs evidence that nobody has yet.
Where do the opportunities and threats come from? From the market and rivals. The five forces and a list of trends supply most of them.
What comes after the SWOT? The challenges become the start of the strategy. Each one needs a choice that answers it, and the plan should show where.
Where to go next
- The strategy health check, about ten minutes.
- SWOT in the frameworks library, beside the other frameworks for one business.
- A SWOT is only useful with its "so what", a short piece on the step most SWOTs miss.
- The move guide on facing the real challenge.