All business students and managers are familiar with SWOT analysis: an in-depth look at a company’s strengths, weaknesses, opportunities and threats, conducted in an attempt to take advantage of its strengths and opportunities, to address its weaknesses, and to thwart its threats. At least in theory.
All business students as well as those involved in various levels of the strategic-management process of most organizations have conducted this basic model of strategy formulation. Unfortunately, many of these organizations fail to obtain the full value of such a critical analysis. In my experience, most companies do a reasonably good job of evaluating their strengths, particularly from a resource point of view. And their examination of threats is usually adequate (although they often myopically focus on direct rivalries, as opposed to potential competition). The distinction between opportunity and weakness, however, is muddled.
The central foundation of strategy formulation is to position the company in such a manner that internal strengths are used to exploit environmental and competitive opportunities while also mitigating potential organizational threats. But stopping here actually gives one a SOT analysis, because the idea of weakness doesn’t enter into it. In fact, the notion of discussing weaknesses has become anathema to strategy formulation in many companies. Too many senior executives simply do not want to talk about them. Doing so is often seen as admitting defeat and appearing vulnerable.
Organizational leaders must bear some of the responsibility for ignoring weakness. But many who consult in this area also share some of the blame by referring to everything the company lacks as an opportunity. We know managers recoil at the term weakness, so opportunity becomes a generic pit into which a broad continuum of true opportunities and veiled weaknesses are tossed. I’ve even witnessed a SWOT-analysis session where poor brand image was earnestly listed as an opportunity. Nonsense! Although the possibility for improvement may (or may not) exist, poor brand image clearly puts the company at a disadvantage when compared to competitors. Moreover, falsely labeling true weaknesses as opportunities actually puts the company at greater risk.
On the other hand, organizations with truly effective strategic processes understand that not all weaknesses are identical. Some weaknesses can be addressed with proper effort and resources, while others simply cannot be changed. Consider an analogy: I enjoy playing basketball; unfortunately, I find myself 20 pounds beyond my ideal weight (OK, maybe 30, but you get the point).