“SWOT can be a good tool if used wisely. It offers the standard framework for discussion. But in the wrong hands it can also do damage by reinforcing the status quo mindset.” So says Paul Schoemaker as published on Inc.com in September 2014 (‘five-traps-swot-analysis’ accessed on 22.9.14.) The commonly used tool which looks at internal strengths and weaknesses along with external opportunities and threats has some inherent limitations. The author suggests that there are five common strategic planning pitfalls which could “set your company in the wrong direction.”
Here are the limitations of SWOT analysis along with further considerations (“et alors”):
The Limitations of SWOT Analysis
Schoemaker suggests there are five common pitfalls to avoid when using SWOT analysis to make strategic plans:
1. Too much navel-gazing
With an internal focus, the ‘strengths’ and ‘weaknesses’ may become a laundry list of all and sundry ranging from micro-issues to macro-ideas.
Labeling an item as a plus or minus involves a “value judgment in which your current strategy becomes the implicit reference point.” To avoid these pitfalls, make sure the focus in outside-in (cf. point #4.)
2. Imprisoned by the status quo
The concept of ‘opportunities’ and ‘threats’ “forces you to prejudge whether external change is a positive or a negative with the current strategy as the natural reference point.”
It is therefore better to consider “neutral” language such as asking which external forces orissues could impact your business.
3. Insufficient Systems Thinking
Systems thinking (“grasping how external trends and uncertainties may be changing your playing field”) is very difficult; in addition, trends are useless when viewed in isolation.
The strategist needs to ask when the key trends might stop, “over what time frame the key uncertainties could play out and how the pieces of the puzzle interact.”
4. Poor Outside-in Analysis
Internal topics tend to get preference in the SWOT analysis. The changing world needs to be considered before looking internally. The analysis needs to be “outside-in.”
Instead of asking “how can we serve our customers better”, ask “why aren’t more customers buying from us” and instead of “how should we improve” ask “how are our competitors superior?”
5. Little “Future-Back” Thinking
SWOT analysis can reduce value by taking complex strategy questions and reducing them to a list of items that “in isolation are hard to assess.”
Instead, “by reimagining how the entire market can be served better… strategic leaders discern which actions today will create new options for tomorrow.”
There are two principle tenets to Schoemaker’s critique of SWOT analysis: firstly that it is too internally focused and therefore ‘anchors’ the strategy analysis to center around the status quo. This is a huge risk for companies as the changing environment is not fully taken into account. An arbitrary judgment of opportunities and threats can overlook how easily both of those can change, whereas what is really needed is “options.” The second main point is the challenge of seeing the dynamic. The SWOT analysis is at a point in time and can be likened to the ‘snapshot’, when what really needs to be reviewed is the changing ‘movie.’ Simply put, a current strength can be your biggest future weakness! The solution to address these two key points is to use scenario planning to focus the strategy review on an outside-in basis, to consider the forces and issues at play and to look for options in every eventuality so that you can be best placed to win tomorrow (and not just today)!