Feature
Hidden Strengths
The proper use and great strengths of the
By Dr Brian D Smith
For most firms, creating a
strong strategy begins with
making sense of complexity:
c u s t o m e r s , competitors,
suppliers, channels-to-market
make for an often confusing
“task environment”. Add to this
is the “remote environment” of
social, legal, economic, political
and technological factors
and both combine to make
understanding the market
difficult. And without market
understanding, success is a
matter of luck. To help them do
this, marketers and strategists
have an armoury of tools and
techniques, from segmentation
to life-cycle, from scenario
planning to value chain. But
perhaps the best known of
these, at least to the layman,
is SWOT analysis, which most
people know involves the
consideration of strengths,
weaknesses, opportunities and
threats.
But despite or perhaps because
of its fame, SWOT is one of
the least understood and
most abused techniques in
the strategists’ toolkit. In their
research, Hill and Westbrook
found that most SWOTs are long
lists of meaningless, unverified
factors that were of little use in
practice. This is disappointing
in two respects. Firstly, it means
many firms are wasting their time
doing useless SWOTS. Secondly,
they are failing to realise the
benefits of what is, when used
well, a powerful aid to strategy 5-forces and SLEPT (or PEST)
making. How might this sad
situation be resolved? Study of
what effective firms do reveals
three rules for the proper use comparison, benchmarking, and
of SWOT.
Figure 1:
Where SWOT fits
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analysis
The right tool in the right
place
The most common misuse of
SWOT is using it as a stand-alone
technique, separate from other
tools. The correct use of SWOT
is as receptacle for the outputs
of other techniques, as shown in
Figure 1.
It is best to use a range of tools
to provide the inputs for SWOT.
Market segmentation, Porter’s
analyses are among the most
useful for identifying factors
external to the firm. Value-chain
market-mapping are useful for
understanding what is important
within the firm’s own value chain.
When used like this, SWOT takes
positive or negative findings from
any internal analysis (i.e.strengths
or weaknesses respectively),
positive or negative findings
from the external analysis
(i.e. opportunities or threats
respectively) and, as we shall
discuss later, matches them to
each other. Before that, however
we need to consider the second
common mistake in the use
of SWOT.
Using the right ingredients
Most SWOTs are far too long and
subjective. Often, the same factor
is put in more than one box, as a “real” strength or weakness. number of each type of factor
leading to confusion and what In practice, this reduces the left, but each of those factors is
is put in is not really important. number of “real” strengths very important to understanding
This is the inevitable result when and weaknesses to a small the market. The strategist is
all of the outputs of the previous number of very important now in a position to execute
analyses are “dumped” into a factors. the most important part
SWOT without any selection. of SWOT process, aligning the
It is like cooking by throwing For external factors, the factors.
the entire contents of your appropriate filters are shown
fridge into a pot. More effective in Table 2. Again, the important Alignment is everything
firms filter the outputs of other point here is that a factor
analyses to remove irrelevant must pass all four tests to get The origins of SWOT alignment
or false factors and leave only through. As with strengths and go back to the 1960s, when
useful information for use in the weaknesses, this filtering in academics stressed that strategy
SWOT. practice reduces the number of was a process of aligning
“real” opportunities and threats the company to the outside
For internal factors, these to a small number of important world. To this day, alignment
filters are shown in Table 1. The factors. remains the critical stage
in making SWOT work and
Table 1: Filtering tests for Strengths and Weaknesses the one most often neglected in
practice.
A strength is only a strength if it is A weakness is only a weakness if it is
VRIO MUDU
Alignment involves two
Valuable: it can create value for the Meaningful: it makes a significant important thought processes:
firm or the customer difference to the customer or the firm
1. Looking for the
Rare: it is not shared with rivals Uncommon: it is not shared with rivals
relationships between, on
Inimitable: it is difficult or costly to Difficult: it is not easy or cheap to fix the one hand, strengths
copy and opportunities and,
on the other, weaknesses
Organisationally aligned: the firm is Uncompensated: it is not and threats.
able to use the strength counterbalanced by some other factor
2. Drawing out the
implications for strategy
important point here is that a If SWOT is used in the right place of those
factor must pass all four tests and only filtered factors are relationships.
to get through and qualify used, the result is usually a small
If the inputs into the SWOT are
of good quality, then the first
Table 2: Filtering tests for Opportunities and Threats
thought process is much easier.
Good, VRIO tested strengths
An opportunity is only an A threat is only a threat if it is
usually leap out as connecting to
opportunity if it is CLAL USUL
good, CLAL tested opportunities
Complementary: it does not prevent Unmitigated: it is not removed or and the same applies to the
taking advantage of another, better, significantly reduced by some other connection of MUDU weaknesses
opportunity external factor and USUL threats. Executing
the SWOT therefore involves
Large: it is big enough to justify the Significant: it is a large enough threat writing connected factors
costs of winning it to make a significant impact on the firm
in the same line of the SWOT,
Accessible: it can be taken advantage Undefended: it is not removed or as shown in the right and left
of by the firm significantly reduced by some action columns of the simplified
the firm is already undertaking example in Table 3.

Lasting: it lasts long enough to be Lasting: it lasts long enough to have a

taken advantage of significant impact on the company The second thought proc-
ess then involves filling in the

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 Feature

middle column. These key is- seem to balance, with two to do in order to leverage the
sues take the general form of many or two few internal fac- firm’s strengths against market
“a strong strategy would use tors to match the oppor- opportunities and guard its
strength A to attack opportu- tunities and threats. If this weaknesses against threats.
nity B” and, correspondingly, “a happens, it suggests that
strong strategy would guard there is a weakness in the ear- A General’s View
weakness C against threat lier steps and either not all
D”, as shown in our simpli- important factors have been The outputs of a good SWOT do
fied example. Like many other spotted or some less important not dictate strategy, but they
tasks, this final thought proc- factors have escaped the filtering should influence it strongly.
ess is straightforward if the process. In effect, the key issues are a
preparation has been done well General’s view of the battlefield,
but almost impossible if it has So the output of a good SWOT showing where the attack should
not. And there is a word of cau- is a list of key issues, usually only be focussed and the ditches
tion here. Often, the right and a small number, that suggest should be dug. This makes
left-hand sides of a SWOT do not what a strong strategy needs SWOT, arguably, the single most
useful weapon in a strategist’s
Table 3: Simplified example of a completed SWOT analysis armoury. In reality, however, very
few firms use SWOT effectively.
Strength Key issue Opportunity Most make the three mistakes
of using it separately, dumping
We have superior technical A strong strategy should There is a segment of information into it unfiltered
capabilities compared to consider using our the market that places and not aligning internal and
our competitors technical capabilities high value on technical
external factors. Those simple
against the technically capabilities
oriented segment. but common mistakes are
what makes most company’s
SWOTs their weakness, but can
We have superior A strong strategy should The pharmaceutical sector provide your firm with a hidden
distribution strength in the consider focusing on contains a large proportion strength.
pharmaceutical sector the technically oriented of technically oriented
segment within the customers
pharmaceutical sector

Our British heritage, A strong strategy should SLEPT factors are

language skills and consider leveraging our increasing the market
positioning is a more British heritage in Asian opportunity in Asian
important factor in Asia markets markets
than in Europe

Weakness Key issue Threat

We have a high cost base A strong strategy should There is an increasingly

relative to our competitors consider avoiding price large price-sensitive
sensitive segments segment

We have little brand A strong strategy should Increasingly crowded

salience outside of the EU consider developing our markets mean that the
brand salience in non-EU brand is more important Dr Brian Smith is
markets to customer choice than a Research Fellow
before at Cranfield and
Birmingham business
We have no significant A strong strategy should Asian customers place a schools. His research
customer base outside of consider forming high value on supplier into marketing exc-
ellence can be found
the EU and US alliances or distribution relationships
at www.pragmedic.com. He welcomes
arrangements in Asia.
comments on this article at brian.smith@
pragmedic.com

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