Simple Tool to Develop Creative New Strategies Some time ago, I came across a discussion in a strategy related group on LinkedIn. The poster asked whether fellow group members were still using (the somewhat outdated) SWOT analysis tool. I didn’t have time to respond back then, but would voice my 100% recommendation for SWOT now in this short article. Not all things old are outdated and useless. Aged vintage wine is an example, SWOT is another. SWOT has been around for many decades; however, its innate capability to uncover critical insights is still 100% applicable today. SWOT analysis is really the bread and butter of strategic management. I’ll use examples to illustrate later and let me explain SWOT itself first. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It’s an analysis tool to help a business (or individual) to develop a thorough understanding of its current state and design plans to achieve a future state. SWOT examines things through two lenses: internal and external. Anything related to the entity (business, organization or individual) itself is internal, and is further broken down to strengths and weaknesses, which could include brand equity, human resources, customer care expertise or technical know-how etc. What’s important is to identify things that you do well relative to your rivals, and this needs to be something valuable to the customers at the same time. For everything else that is out of the control of the entity in question, i.e. opportunities and threats, they are external factors that are happening in the market place or competition front. These might include a shift in customers’ tastes, emerging new markets, new technologies, new entrants etc. With a MECE (Mutually Exclusive and Collectively Exhaustive) way to organize like this, we have a comprehensive framework to analyze and gather insights. The idea is to use your strengths to capture and capitalize on opportunities, while being mindful of weaknesses when tackling threats. The key is to link external factors with internal ones. Once you do, a clear strategy pops up. Take Blackberry as an example, last year when Blackberry was designing the turnaround strategy, these things were on their radar: Strengths: R&D capability of developing smartphones and software that increase productivity while ensuring security, strong reputation of productivity and security among business users Weaknesses: less design expertise in consumer products when compared with Apple and Samsung, relatively higher smartphone cost structure Opportunities: growing importance of Internet of Things, growing number of IT security breaches in corporate world, increasingly stringent environment in regulated industries (government, healthcare, financial), trends of BYOD and COPE Threats: entry of new players in the EMM (enterprise mobility management) space, rapidly declining device market share reducing service revenues Therefore, going back to the enterprise root of Blackberry to capitalize on the BYOD trend is a natural strategy to use. On the other hand, catering to the consumer smartphone market was a mission “less possible” given Blackberry’s weakness in that market. The overall strategy in that regard should then be retreating from that market. Blackberry CEO John Chen achieved this through: one, focusing on business oriented devices; two, improving cost efficiency by forming partnership with Foxconn. By doing this, Blackberry also addressed the threats of declining profitability by reducing inventory related costs. This example shows us how much insight we can get by doing a simple SWOT analysis. So, next time when you are thinking of formulating a strategy for a business, try SWOT first. You’ll be able to get some quite powerful working hypothesis to start off your analysis.
Posted on: Sun, 23 Nov 2014 06:44:58 +0000