Lesson 9

WHAT IS A SWOT ANALYSIS?

SWOT stands for: Strength, Weakness, Opportunity, Threat. A SWOT analysis guides you to identify your organization’s strengths and weaknesses (S-W), as well as broader opportunities and threats (O-T).

The SWOT analysis is a basic straightforward model in environmental scanning which helps the company in identifying four key elements: Strengths, Weaknesses Opportunities, and Threats.

WHY SHOULD YOU USE ONE?

To develop a fuller awareness of the situation helps with both strategic planning and decision-making.

WHEN DO YOU USE SWOT?

A SWOT analysis can offer helpful perspectives at any stage of an effort. You might use it to:

• Explore possibilities for new efforts or solutions to problems.

• Make decisions about the best path for your initiative. Identifying your opportunities for success in context of threats to success can clarify directions and choices.

• Determine where change is possible. If you are at a juncture or turning point, an inventory of your strengths and weaknesses can reveal priorities as well as possibilities.

• Adjust and refine plans mid-course. A new opportunity might open wider avenues, while a new threat could close a path that once existed.

• SWOT also offers a simple way of communicating about your initiative or program and an excellent way to organize information you've gathered from studies or surveys.

WHAT ARE THE ELEMENTS OF A SWOT ANALYSIS?

A SWOT analysis focuses on Strengths, Weaknesses, Opportunities, and Threats.

Remember that the purpose of performing a SWOT is to reveal positive forces that work together and potential problems that need to be recognized and possibly addressed.

Participants should answer these simple questions:

1. What are the strengths and weaknesses of your business?

2. What are the opportunities and threats facing it?

LISTING YOUR INTERNAL FACTORS: STRENGTHS AND WEAKNESSES (S, W)

Internal factors include your resources and experiences. General areas to consider:

• Human resources - staff, volunteers, board members, target population

• Physical resources - your location, building, equipment

• Financial - grants, funding agencies, other sources of income

• Activities and processes - programs you run, systems you employ

• Past experiences - building blocks for learning and success, your reputation in the community

Don't be too modest when listing your strengths. If you're having difficulty naming them, start by simply listing your characteristics (e.g.., we're small, we're connected to the neighborhood). Some of these will probably be strengths.

Although the strengths and weakness of your organization are your internal qualities, don't overlook the perspective of people outside your group. Identify strengths and weaknesses from both your own point of view and that of others, including those you serve or deal with. Do others see problems--or assets--that you don't?

How do you get information about how outsiders perceive your strengths and weaknesses? You may know already if you've listened to those you serve. If not, this might be the time to gather that type of information. See related sections for ideas on conducting focus groups, user surveys, and listening sessions.

LISTING EXTERNAL FACTORS: OPPORTUNITIES AND THREATS (O, T)

Cast a wide net for the external part of the assessment. No organization, group, program, or neighborhood is immune to outside events and forces. Consider your connectedness, for better and worse, as you compile this part of your SWOT list.

Forces and facts that your group does not control include:

• Future trends in your field or the culture

• The economy - local, national, or international

• Funding sources - foundations, donors, legislatures

• Demographics - changes in the age, race, gender, culture of those you serve or in your area

• The physical environment (Is your building in a growing part of town? Is the bus company cutting routes?)

• Legislation (Do new federal requirements make your job harder...or easier?)

• Local, national or international events

HOW DO YOU CREATE A SWOT ANALYSIS?

WHO DEVELOPS THE SWOT?

The most common users of a SWOT analysis are team members and project managers who are responsible for decision-making and strategic planning.

An individual or small group can develop a SWOT analysis, but it will be more effective if you take advantage of many stakeholders. Each person or group offers a different perspective on the strengths and weaknesses of your program and has different experiences of both.

Likewise, one staff member, or volunteer or stakeholder may have information about an opportunity or threat that is essential to understanding your position and determining your future.

WHEN AND WHERE DO YOU DEVELOP A SWOT ANALYSIS?

A SWOT analysis is often created during a retreat or planning session that allows several hours for brainstorming and analysis. The best results come when the process is collaborative and inclusive.

When creating the analysis, people are asked to pool their individual and shared knowledge and experience. The more relaxed, friendly and constructive the setting, the more truthful, comprehensive, insightful, and useful your analysis will be.

HOW DO YOU DEVELOP A SWOT ANALYSIS?

Steps for conducting a SWOT analysis:

1. Designate a leader or group facilitator who has good listening and group process skills, and who can keep things moving and on track.

2. Designate a recorder to back up the leader if your group is large. Use newsprint on a flip chart or a large board to record the analysis and discussion points. You can record later in a more polished fashion to share with stakeholders and to update.

3. Introduce the SWOT method and its purpose in your organization. This can be as simple as asking, "Where are we, where can we go?" If you have time, you could run through a quick example based on a shared experience or well-known public issue.

4. Depending on the nature of your group and the time available, let all participants introduce themselves. Then divide your stakeholders into smaller groups. If your retreat or meeting draws several groups of stakeholders together, make sure you mix the small groups to get a range of perspectives, and give them a chance to introduce themselves.

5. The size of these depends on the size of your entire group – breakout groups can range from three to ten. If the size gets much larger, some members may not participate.

6. Have each group designate a recorder, and provide each with newsprint or dry -erase board. Direct them to create a SWOT analysis in the format you choose-a chart, columns, a matrix, or even a page for each quality.

7. Give the groups 20-30 minutes to brainstorm and fill out their own strengths, weakness, opportunities and threats chart for your program, initiative or effort. Encourage them not to rule out any ideas at this stage, or the next.

8. Remind groups that the way to have a good idea is to have lots of ideas. Refinement can come later. In this way, the SWOT analysis also supports valuable discussion within your group or organization as you honestly assess.

9. It helps to generate lots of comments about your organization and your program, and even to put them in multiple categories if that provokes thought.

10. Once a list has been generated, it helps to refine it to the best 10 or fewer points so that the analysis can be truly helpful.

11. Reconvene the group at the agreed-upon time to share results. Gather information from the groups, recording on the flip-chart or board. Collect and organize the differing groups' ideas and perceptions.

12. Proceed in S-W-O-T order, recording strengths first, weaknesses second, etc.

13. Or you can begin by calling for the top priorities in each category -the strongest strength, most dangerous weakness, biggest opportunity, worst threat--and continue to work across each category.

14. Ask one group at a time to report ("Group A, what do you see as strengths?") You can vary which group begins the report so a certain group isn't always left "bringing up the end" and repeating points made by others. ("Group B, let's start with you for weaknesses.")

15. Or, you can open the floor to all groups ("What strengths have you noted?") for each category until all have contributed what they think is needed.

16. Discuss and record the results. Depending on your time frame and purpose:

17. Come to some consensus about the most important items in each category

18. Relate the analysis to your vision, mission, and goals

19. Translate the analysis to action plans and strategies

20. If appropriate, prepare a written summary of the SWOT analysis to share with participants for continued use in planning and implementation.

21. More ideas on conducting successful meetings can be found in Community Tool Box resources on conducting public forums and listening sessions, conducting focus groups, and organizing a retreat.

HOW DO YOU USE YOUR SWOT ANALYSIS?

Better understanding the factors affecting your initiative put you in a better position for action. This understanding helps as you:

Identify the issues or problems you intend to change

• • • Set or reaffirm goals

    • Create an action plan

As you consider your analysis, be open to the possibilities that exist within a weakness or threat. Likewise, recognize that an opportunity can become a threat if everyone else sees the opportunity and plans to take advantage of it as well, thereby increasing your competition.

Finally, during your assessment and planning, you might keep an image in mind to help you make the most of a SWOT analysis: Look for a "stretch," not just a "fit." As Radha Balamuralikrishna and John C. Dugger of Iowa State University point out, SWOT usually reflects your current position or situation. Therefore one drawback is that it might not encourage openness to new possibilities. You can use SWOT to justify a course that has already been decided upon, but if your goal is to grow or improve, you will want to keep this in mind.

What Is an Ishikawa Diagram?

An Ishikawa diagram is a diagram that shows the causes of an event and is often used in manufacturing and product development to outline the different steps in a process, demonstrate where quality control issues might arise, and determine which resources are required at specific times.

The Ishikawa diagram was developed by Kaoru Ishikawa during the 1960s as a way of measuring quality control processes in the shipbuilding industry.

Understanding Ishikawa Diagrams

Ishikawa diagrams are sometimes referred to as fish bone diagrams, herringbone diagrams, cause-and-effect diagrams, or Fishikawa. They are causal diagrams created by Kaoru Ishikawa to show the causes of a specific event. They resemble a fish skeleton, with the "ribs" representing the causes of an event and the final outcome appearing at the head of the skeleton. The purpose of the Ishikawa diagram is to allow management to determine which issues have to be addressed in order to gain or avoid a particular event.

Other common uses of the Ishikawa diagram include using it as a methodology for creating product designs that solve practical problems. It can also be used in quality defect prevention to identify potential factors causing an overall effect. Each cause or reason for imperfection is a source of variation. Causes are usually grouped into major categories to identify and classify these sources of variation.

Process to Make an Ishikawa Diagram

To make an Ishikawa Diagram, a group will need a white board, flip chart, and some marking pens.

1. The group should agree on a problem statement (effect).

2. Write the problem statement at the center right of the flipchart or whiteboard, box it, and draw a horizontal arrow running to it.

3. Brainstorm the primary categories of causes for the problem. For instance, it might make sense to start with these generic headings: methods, machines (equipment), people (manpower), materials, measurement, and environment.

4. Write the categories of causes as branches from the main arrow.

5. Brainstorm possible causes. Ask: “Why does this happen?” As each idea is given, the facilitator writes it as a branch from the appropriate category. Causes can be written in several places, if they relate to several categories.

6. Ask the question “why does this happen?” again. Write sub–causes branching off the causes. Continue to ask “Why?” and generate deeper levels of causes. Layers of branches indicate causal relationships.

7. When the group runs out of ideas, focus attention to areas in the chart where ideas are thin.

Understanding Porter's Five Forces

Porter's Five Forces is a business analysis model that helps to explain why various industries are able to sustain different levels of profitability. The model was published in Michael E. Porter's book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors" in 1980.1 The Five Forces model is widely used to analyze the industry structure of a company as well as its corporate strategy. Porter identified five undeniable forces that play a part in shaping every market and industry in the world, with some caveats. The five forces are frequently used to measure competition intensity, attractiveness, and profitability of an industry or market.

Porter's five forces are:

1. Competition in the industry

2. Potential of new entrants into the industry

3. Power of suppliers

4. Power of customers

5. Threat of substitute products1

Competition in the Industry

The first of the five forces refers to the number of competitors and their ability to undercut a company. The larger the number of competitors, along with the number of equivalent products and services they offer, the lesser the power of a company. Suppliers and buyers seek out a company's competition if they are able to offer a better deal or lower prices. Conversely, when competitive rivalry is low, a company has greater power to charge higher prices and set the terms of deals to achieve higher sales and profits.

Potential of New Entrants Into an Industry

A company's power is also affected by the force of new entrants into its market. The less time and money it costs for a competitor to enter a company's market and be an effective competitor, the more an established company's position could be significantly weakened. An industry with strong barriers to entry is ideal for existing companies within that industry since the company would be able to charge higher prices and negotiate better terms.

Power of Suppliers

The next factor in the five forces model addresses how easily suppliers can drive up the cost of inputs. It is affected by the number of suppliers of key inputs of a good or service, how unique these inputs are, and how much it would cost a company to switch to another supplier. The fewer suppliers to an industry, the more a company would depend on a supplier. As a result, the supplier has more power and can drive up input costs and push for other advantages in trade. On the other hand, when there are many suppliers or low switching costs between rival suppliers, a company can keep its input costs lower and enhance its profits.

Power of Customers

The ability that customers have to drive prices lower or their level of power is one of the five forces. It is affected by how many buyers or customers a company has, how significant each customer is, and how much it would cost a company to find new customers or markets for its output. A smaller and more powerful client base means that each customer has more power to negotiate for lower prices and better deals. A company that has many, smaller, independent customers will have an easier time charging higher prices to increase profitability.

The Five Forces model can help businesses boost profits, but they must continuously monitor any changes in the five forces and adjust their business strategy.

Threat of Substitutes

The last of the five forces focuses on substitutes. Substitute goods or services that can be used in place of a company's products or services pose a threat. Companies that produce goods or services for which there are no close substitutes will have more power to increase prices and lock in favorable terms. When close substitutes are available, customers will have the option to forgo buying a company's product, and a company's power can be weakened.

Understanding Porter's Five Forces and how they apply to an industry, can enable a company to adjust its business strategy to better use its resources to generate higher earnings for its investors.

This strategic planning model is a departure from the typical management exercise that focuses on number crunching and competitive benchmarking. Here are key points of the Blue Ocean Strategy:

• It’s more than theoretical. Some strategic planning models are based on theories that don’t quite pan out during go-to-market executions. In contrast, Blue Ocean Strategy originated from a study that took place over 10 years and analyzed company successes and failures in more than 30 industries. It’s based on proven data rather than unproven ideas.

• The competition is irrelevant. Taking a Blue Ocean approach means your goal isn’t to outperform the competition or be the best in the industry. Instead, your aim is to redraw industry boundaries and operate within that new space, making the competition immaterial.

“Taking a Blue Ocean approach means your goal isn’t to outperform the competition. Instead, your aim is to redraw industry boundaries and operate within that new space, making the competition immaterial.”

• Differentiation and low cost can coexist. The Blue Ocean Strategy argues that consumers don’t have to choose between value and affordability. If a company can identify what consumers currently value and then rethink how to provide that value, differentiation and low cost can both be achieved. This is termed “value innovation.”

• You have a framework to test ideas. The Blue Ocean Idea Index is part of the overarching strategy and lets companies test the commercial viability of ideas. This process helps refine ideas and identify opportunities with the most potential, minimizing risk.

4 Examples Of Blue Ocean Strategy

Seeing is believing. Here are a few organizations that successfully captured a blue-ocean market:

• • • • Netflix: In this David versus Goliath story, Netflix came on the scene when Blockbuster was at the top of the video rental game. Rather than trying to compete with the popular giant solely on price or entertainment choices, Netflix reinvented the market by creating an entirely new kind of online DVD rental service. It utilized postal mail rather than brick-and-mortar stores. And its flat-fee monthly payment model solved two major pain points many Blockbuster customers experienced: return deadlines and late fees. Netflix customers could keep a DVD for as long as they wanted, without incurring any late fees. Plus, they could browse and select a video to rent, without having to leave their house. Netflix has continued to innovate since then by switching from DVDs to streaming, and then by creating their own shows and movies. By using the Blue Ocean Strategy, Netflix has been able to constantly move to new, uncontested spaces to capture demand.

      • Uber: Before Uber was founded in 2009, customers looking to get from point A to point B without their own vehicle had to rely primarily on taxis to obtain a private mode of transportation. But the taxi industry hadn’t done much in the way of innovation since its inception more than a century earlier. The founders of Uber recognized the industry’s shortcomings—including limited payment options, a lack of customer trust, and the absence of location tracking—and decided to create a new type of mobility service that would compete in a slightly different space. Instead of trying to buy its own fleet of vehicles, Uber sought out drivers who were willing to use their own cars to provide on-demand rides requested via mobile app. Today, Uber has annual revenues of over $11 billion, and more than 19,000 employees.

      • iTunes: When iTunes entered the market, it solved the recording industry’s problem of consumers illegally downloading music while simultaneously addressing the demand for digital, a la carte songs. iTunes’ Blue Ocean Strategy created an entirely new category of music sales that allowed artists to profit and consumers to buy single songs versus entire albums. ITunes has dominated this market space for years and is largely credited with driving the growth of digital music.

      • Meta (Previously Facebook): In October of 2021, CEO Mark Zuckerberg announced that Facebook’s new name would now be Meta. When Facebook started, it was at the forefront of its own blue ocean, known as social networks. More than a decade later, social networking has become a red ocean. With the name change, Meta can steer its product offerings into something new, exciting, and unconquered: the “metaverse.” In the metaverse, Zuckerberg pictures holograms, virtual reality, and digital worlds that feel like the physical world. Although the strategy change is unproven, it’s clear that the idea of jumping from the red ocean of social media to the blue ocean of the metaverse played a part in the decision.

Using Blue Ocean With Your Existing Strategic Planning Model

Most likely, your organization is already running on an existing strategic planning model. Luckily, the Blue Ocean Strategy can be paired with other models. It doesn’t need to replace your current mode of operation.

Here are a few examples:

Blue Ocean + SWOT

Ø A SWOT analysis helps determine areas where an organization is doing well and areas it needs to improve.

Ø By running both frameworks together, you’ll be able to identify how your organization can grow in the future.

Blue Ocean + Balanced Scorecard

Ø The Balanced Scorecard (BSC) is a framework used for tracking and managing an organization’s strategy.

Ø By running both frameworks together, you can find uncontested markets (blue oceans) and chart the course to get there.

Think of the Blue Ocean Strategy as a way to open up opportunities and markets for a new organization, or an existing organization looking to grow. Your current strategy reporting model will help execute the blue ocean ideas.

When you begin your strategic planning, recognizing the difference between a red and blue ocean may not be as easy as the colors would indicate. Start by identifying what your target market needs and doesn’t currently have. Then look at what existing organizations are doing well (or not so well) to serve that market and determine how you can differentiate (for example, by price point or audience). Use the above checklist as a guide through the process and hold internal brainstorming sessions for each point.

Blue Ocean challenges companies to push the boundaries of their industries and offer consumers something unique of immense value. By defining and seeing examples of the Blue Ocean Strategy, your organization can learn how to execute on this strategic planning model and successfully reconstruct your market. Once you know where you’re competing, you can add unique goals and measures to track your progress in charting that blue ocean.

Resources:

• https://ctb.ku.edu/en/table-of-contents/assessment/assessing-community-needs-and-resources/swot-analysis/main

• https://www.investopedia.com/terms/i/ishikawa-diagram.asp#:~:text=An%20Ishikawa%20diagram%20is%20a,are%20required%20at%20specific%20times.

• https://www.investopedia.com/terms/p/porter.asp

• https://www.clearpointstrategy.com/blue-ocean-strategy/