SWOT analysis – The best strategic tool ever?

I wanted to take time out to write about one of my favourite strategic tools. The SWOT analysis. It’s a classic for a reason, and in this blog, we will cover:

1. What is a SWOT analysis?
2. How does a SWOT analysis work?
3. How to complete a SWOT analysis
4. Seven reasons why a SWOT analysis works and what to watch out for
5. SWOT analysis example
6. What we learned from our SWOT

What is a SWOT analysis?

A SWOT analysis is a simple framework designed to help assess something that’s on your mind. We all encounter opportunities, challenges and obstacles that require a bit of thought, and the SWOT analysis is a great tool to help you. 

SWOT stands for “strengths, weaknesses, opportunities and threats." It was originally called the “SOFT approach” as a tool in a strategic planning framework named the System of Plans. 

The SWOT framework is deceptively clever because it calls on you to identify the most important internal factors (strengths and weaknesses) and then compare them on the same piece of paper (or whiteboard!) against the biggest external factors (opportunities and threats) that you can identify. 

How does a SWOT analysis work?

You take a 4 x 4 grid like this:

Then, create a label for each square:

The two boxes on the top row are reserved for internal factors. These are things that you can control, such as your offering, pricing, location, employees, etc. 

The two boxes on the bottom row are dedicated to external factors that are beyond your direct control, but which have an impact on the dilemma you are facing. There are many external factors that can be covered here. Some of the more likely ones include competitors, market forces, trends, and the law. 

How to complete a SWOT analysis

Once you have your grid:

Step 1 - Identify your objective – Be as specific as possible with your objective. You might want to assess a new business idea, a new name for your business, or even the location of your first shop. In this example, I’ll take you through some of the thinking we created with Soul Stirrer, a mobile cocktail business that my business partner Simeon Gunn and I helped to set-up. 

Step 2 - Start with the internal factors – Work through the strengths and weaknesses as they currently stand, not as they might be in the future. There’s no limit to how many you list. Most people find the internal factors easier to list, because they are closer to home, so don’t be tempted to screen them out, just write them down as they come to you. You can refine them later. Then, work on the external factors. Opportunities are external factors to capitalise on. Think of it as gifts from the gods to help you! Threats are external factors out of your control such as competitors or taxes. And they are important to list because they may shape your approach differently, precisely because you are aware of them. 

Step 3 - Refine, prioritise and review - Edit each bullet point so that they are as succinct as possible. Sometimes that means combining more than one suggestion, or conversely breaking them down into separate points. Rank each bullet point from top to bottom, so the bullet points at the top of each square are the ones to take the most note of. If you did this in a group, then now’s a good time to reconvene and review the SWOT analysis, ready for the final part.

Step 4 – Be tactical – Run through each bullet point in each square, then name what you will do about it. These are tactical manoeuvres that you intend to make to strengthen your position. 

Seven reasons why a SWOT analysis rocks and what to watch out for

A SWOT analysis can be a brilliant strategic tool: 

1. It’s versatile – A SWOT knows no bounds. A SWOT framework can aid decision-making if you can name your question or problem. 
2. It is incredibly simple – One objective. Four boxes. Thoughts in bullet points. Boom!
3. It encourages collaboration – Like brainstorms, SWOTs are best done with support from friends or colleagues. Choose people with a different perspective or skill set to you so that they can aid your thought process. 
4. It throws up answers – The point of discussing strengths, weaknesses, opportunities, and threats is to figure out what you can do about them. In this way, you can turn insights into actions. 
5. It encourages competitor analysis – There are lessons to be learned from competitors, from what not to do to what they’ve done that could work for you. 
6. It provides complete focus – It’s easy to be distracted in business. A SWOT enables you to indulge in a conundrum by allowing you to give full attention to it. 
7. It’s an opportunity to step back – Every business has a limited set of resources. SWOTs help you identify when to re-prioritise them. 

What to watch out for

Everything has a downside. There are two things to be mindful of: 

• Take care naming the right question – A SWOT takes time, and no one likes a time waster. 
• Get the right people in the room – Include someone prepared to own it and ensure that insights from the SWOT are followed through into action. 

Let’s take a look at how to create a SWOT and act on the insights it gives you. 

SWOT analysis example

I have based this example on a business I co-founded with the talented Simeon Gunn of Soul Stirrer. When we met to discuss a new business idea, we created a SWOT to get the clarity we needed on what the business could deliver and how it could stand out. Simeon had substantial experience working front of house and behind a cocktail bar for private clients and restaurants. 

What we learned from the SWOT

The strengths gave us the confidence to commit to the idea of a mobile cocktail bar offering. And it became obvious that our USP was Simeon, with his passion and knowledge of cocktails and his ability to be creative with a client brief. Soul Stirrer never makes the same cocktail for another client. There is always a customised twist or variation. That’s special. So, we leaned heavily on Simeon as the face of the brand in the brand creation. In fact, we chose a name that reflected his passion for making cocktails.  

The weaknesses made us realise that we had to prove the mobile bar concept before investing in expensive infrastructure. After 18 months, plans for a van and HQ were underway.

The opportunities convinced us to promote masterclasses as much as the mobile bar service. We still sell an equal split of both, but the masterclasses push the team’s creativity, and teaching always makes a better tutor. Plans for local pop-up experiences are in motion. 

The threats reinforced our belief that we had nothing to lose. Our investment is in the idea, the person running the business, a pop-up bar, and some glassware. What’s the worst that can happen?