Commentary

SWOT analysis: Critical aspect of your strategic plan

All organizations have their strengths, weaknesses, opportunities and threats. This is why the SWOT analysis is one of the most important aspects of a strategic business plan.

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October 4, 2021 by Ray Friedrich — CEO, Sterling Services

There are many elements that go into creating your company's strategic plan and then executing it. You first have your building blocks for crafting your strategic plan. As discussed in part one of this two-part series on strategic planning, the foundation is defining your vision and mission statements.

Once you know the vision or the "what" and "why," you then craft the "how" in your mission statement. Your principles and values statement will give you a basis or rules to follow for your process. The next step is to conduct your SWOT — strengths, weaknesses, opportunities and threats — analysis. Here is where the rubber meets the road.

Why it matters

Being realistic and honest about your current reality is necessary. The fact of the matter is that no one company is great at everything they do. All organizations have their strengths, weaknesses, opportunities and threats.

Making an honest and accurate assessment of these four categories will help you identify strategic initiatives that will be required to take your company to the highest level possible. Unless you identify what and where you need to improve, and unless you understand what opportunities you have and what threats you face, you can't make the decisions necessary to achieve your long-term strategic goal.

There are consultants that can help with this critical part of the process.

SWOT analysis is best conducted in several group brainstorming sessions. It is important to include the people in your organization closest to the topics you are working on. Getting perspective from those closest to the ground and those affected by the decisions of other business segments bring very different perspectives to the question at hand.

Sales decisions affect operations and administration functions. Operational decisions can affect sales efforts and financial outlooks. Your installation team's decisions can affect purchasing and warehouse operations.

All business segments are interconnected even if they think they're are on an island all unto themselves. Questioning everything, being objective and honest about your current reality is critical to success in conducting a SWOT analysis.

When conducting this analysis don't forget to bring your principles and values into the room with you.

Establishing strategic initiatives

Before you can move to the next phase of achieving your strategic goal you must use your SWOT analysis to best determine what strategic initiatives you need to focus on and in what order. Your strategic initiatives are the means through which an organization translates its goals and visions into practice.

Such initiatives are typically aligned with a company's main strategic goal and so the pressure to execute them well is often very high. Using your SWOT analysis is the best way to determine what is important, what is not and what sequence they need to be done in.

Oftentimes you may have multiple strategic initiatives running concurrently or some may be closely related. You may have to focus on "A" before you can focus on "B."

What are your strengths?

Your company's strengths may be obvious on the surface, but being honest with yourself is critical. Your strengths are an important part of your organization and will require the least amount of attention, so think about what makes your company "hum." What do you do better than anyone else? What values drive your business?

What unique or lowest-cost resources can you draw upon that others can't? Identify and analyze your organization's unique selling proposition, and add this to the "strengths" section. Then turn your perspective around and ask yourself what your competitors might see as your strengths.

How do you differentiate yourself to the the sale ahead of your competition?

What are your weaknesses?

When it comes to weaknesses it is best to be honest with yourself now than face dire consequences later. You need to focus on all of your people, systems, processes and procedures in every business segment.

Weakness comes in many forms. From the people you have in place to the way the organization's workflow functions. Once again, imagine (or find out) how other people in your market see you. Do they notice weaknesses that you tend to be blind to? Take time to examine how and why your competitors are doing better than you in specific areas. What are you lacking?

What are your opportunities?

There are advantages you may have in the marketplace, but you must identify and seize them for yourself. Opportunities often arise from external factors outside your control.

Part of evaluating opportunities requires looking down the road into the future to things that may happen. It could come from new technologies, developments in your marketplace or a situation with a competitor. It could come from changing market trends, changes in government policy, changes in social patterns, population profiles and lifestyles. All of these scenarios can throw up pportunities. Some opportunities are immediate and small while others require a great deal of thought.

What are your threats?

Threats can include anything that could negatively affect your business from the outside, such as supply chain problems, shifts in market requirements, labor shortages, pandemics or unforeseen new competitors outside the usual suspects. It's vital to anticipate threats and to take action against them before you become a victim of them and your growth stalls.

Your best competition will not give up when they lose to you. They will reevaluate why they lost and develop new and better strategies to beat you next time. Their perceived opportunities are your new threats.

Always consider what your competitors are doing and whether you should be changing your organization's emphasis to meet the challenge. But remember that what they're doing might not be the right thing for you to do and avoid copying them without knowing how it will improve your position.

Bring it all together

The data you derived from SWOT is the basis for plotting your strategic initiatives. Remember, there is a logical order to the process. Once you know where you are going, how you will get there and the rules of the journey, you need to work on the most important initiatives that align with your strategic plan.

Every business, large or small, vary in what they are good at and what they are not. Change and continuous improvement are the only constants. Organizations that do not have and execute a strategic plan will never see their full potential. They will not achieve a maximum value for their business and will inevitably waste time, money and valuable resources on non-high pay-off activities.

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