SOME CONSIDERATIONS FOR THE USE OF STRATEGIC PLANNING MODELS Robert F. Everett, 978-837-5406, [email protected] Catherine Rich Duval, 978-837-5410, [email protected] Girard School of Business and International Commerce Merrimack College 315 Turnpike Street North Andover, MA 01845 ABSTRACT Analytical models for strategic planning, particularly SWOT Analysis, have become an integral part of our business culture in both practice and academia. Yet, despite their widespread use, thoughtful scholars have, from time to time, criticized their use and proposed alternative methods for strategic analysis or, in some cases, proposed abandoning the use of strategic models altogether. Focusing on SWOT Analysis, this paper reviews some of the most relevant problems that have been discussed about SWOT in the context of how this tool is most commonly used. We then propose how SWOT can be used in new, more powerful ways. Keywords: SWOT, Analysis, Strategy A Brief History of SWOT Analysis The origins of SWOT Analysis can be traced back to a 1965 text by Learned, et al [8] in which they described the basis of business strategy formulation in terms of matching organizational competence and resources to environmental opportunities and risks. From that point, the use of SWOT as a strategic tool has grown to the point where a Google search of term “SWOT Analysis” produces over 1.3 million hits, and a keyword search on Business Source Premier produces over 13,500 hits. The Apparent Trouble with SWOT Despite its clear popularity, SWOT has had its detractors. Wharton professor J. Scott Armstrong [1] advises “Don’t do SWOT.” Hill and Westbrook [4] argue that “It’s Time for a Product Recall.” Several other authors have made meaningful critiques of the tool. [2] [3] [5] [6] [7] [9] [12] Valentin [12] (another opponent of SWOT) identified the following problems with SWOT Analysis: • • • • • •

It yields banal or misleading results It has a weak theoretical basis It implies that organizational factors can be “neatly” categorized as positive or negative It encourages “superficial scanning and impromptu categorization” It promotes list building as opposed to thoughtful consideration It does not look at tradeoff among factors

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It promotes muddles conceptualizations, particularly between accomplishments and strengths

In general, we agree with these points. However, we propose that the problem is not with the fundamental concept of SWOT Analysis, but rather with how SWOT has come to be used in business and taught in the classroom. The Real Trouble with SWOT We believe that there are two fundamental problems with the common use of SWOT Analysis and it is these two problems that produce the deficiencies Valentin and others articulate. The first of these problems is a simple overestimation of the power of SWOT as a tool for strategic analysis. SWOT Analysis should not be considered sufficient to produce the information and insights that a responsible strategic planner needs. Replacing SWOT with another single tool deemed to be better (e..g., [4]) may, in some circumstances, marginally improve results. However, it leaves the planner still dependent on a single tool. We use multiple tools to do many common tasks such as yard care, replacing a faucet washer, or styling hair. Why would we think that there has to be one, unique tool that satisfies all of our basic strategic analysis needs? Another factor in the overestimation of the power of SWOT lies in the fact that it is usually done as a one-time task, rather than an ongoing process. Strengths and weakness must be identified evaluated in the context of specific perceived opportunities and threats. Opportunities and threats must be evaluated in terms of specific strengths and weaknesses. This mutual adjustment requires an iterative process, not a simple enumeration. The second major problem relates to how a SWOT Analysis is performed and the expectations we have from it. As practiced and taught today, a SWOT Analysis usually is done as follows: 1. The individual or group performing the SWOT Analysis sets aside some time and place to address this task. The time may be as little as a few minutes or hours for an individual to a couple of days for a group to meet offsite to a few weeks for a designated committee. 2. Facts, beliefs, impressions, and ideas regarding organizational strengths and weaknesses are enumerated along with the potential opportunities and threats presented by the organizations environment. 3. These SWOT factors are then assessed by the group and consensus is sought regarding the importance of the factors identified. 4. Factors may then be weighted in terms of importance. 5. The individual then examines the organizations strengths and weaknesses in the context of environmental opportunities and threats. 6. Organizational strategies emerge from this examination. The major reason why these issues are problematic for SWOT Analysis lies in the assumption that a SWOT Analysis, when comprised entirely of internally generated data, is even capable of providing an accurate and unbiased picture of an organization and its environment. As intuitively appealing as the SWOT process may be, there are some critical underlying assumptions regarding how it is most commonly done that are problematic at best.

First, there is the assumption that the information needed to assess the various SWOT factors actually resides within the individual, the committee, or even the organization performing the analysis. The experience of the authors, as consultants, has shown this to be highly unlikely. Both individuals and organizations have biases, preconceptions, misunderstandings, and gaps in their knowledge about themselves and their world. We have found, however, that it is these biases and gaps that may be the most important things for strategic planners to understand, because these biases may be creating the organizational problems the strategic planning effort is trying to correct. Second, individuals within an organization may not even know the right questions to ask regarding themselves and their environment. There may even be the tendency to focus on certain issues in a SWOT Analysis not because those are the most important issues, but because those issues are most fully understood. Third, even if the right questions were asked and the information was available within the organization, it would be difficult for that information to be accessible to any committee or individual performing a SWOT Analysis. There are a number of reasons for this: 1. Turf: Individuals like to think that they are experts in their own field of operations and are resistant to contradictory information from people in other areas. 2. Insecurity: Some people may not want to appear ignorant about areas where they are supposed to be knowledgeable. 3. Fear: Some people may be reluctant to contradict superiors when those superiors are wrong for fear of some sort of retribution. 4. Conventional wisdom: There may be some ideas so firmly ingrained in the organizational culture (e.g., “We produce quality products.” Or “We care about our employees.”), that those ideas are presumed to be true without challenge. 5. Ego: Some people in positions of authority may simply declare things to be true because they think so. 6. Expedience: Because a SWOT Analysis is usually a task people must do in addition to their main responsibilities, some people may be reluctant to fully engage difficult or controversial issues because doing so would take too long. Finally, there may be internal resistance to the direction that a given SWOT Analysis is taking when that direction impinges on the performance evaluation of management authorities within the organization; or the individual or members of the committee performing the analysis. The key point we are making here is that it is exceedingly difficult to perform a SWOT Analysis using internal information sources and get to the truth, without substantial bias. The Real Benefits of SWOT This does not mean that an internally done SWOT is not an exceedingly valuable exercise. It simply produces valuable results other than the ones for which most managers look. We believe that there are at least three of these additional benefits. 1. Assessing organizational belief systems: An internally based SWOT Analysis can also help an organization assess its own belief system. If we accept that SWOT Analysis, as commonly done, may contain a wide variety of biases, preconceptions, and other deviations from objective accuracy about the “real” nature of the organization and its

world, it may, in fact, present a quite accurate view of organizations internal beliefs about itself and its world. By this suggestion, we mean that, to an astute, unbiased observer, the inconsistencies, inaccuracies, omissions, and distortions contained in an internally done SWOT can reveal a great deal about how organizational decisions are made. In particular, one can examine: • • • • • •

The extent to which strengths may be overestimated and/or weaknesses underestimated Inconsistencies in the evaluation of certain factors and which individuals within the organization hold the contradictory views The extent to which those involved in the SWOT process are willing to think out of the box or support those that do The presence of systemic or individual preconceptions or biases regarding customers, markets, and competitors. The extent to which identified preconceptions or biases are defended when challenged. The extent to which a searching and fearless examination of truth is valued in the organization.

2. Generating questions: As any trained researcher will attest, the value of any answer depends on the question being asked. When the focus of attention is on identifying the right questions to ask instead of attempting to identify “truth,” a SWOT Analysis can become a very stimulating form of brainstorming. As issues are identified, the following questions can be raised for discussion: • • • • •

What current beliefs do we have regarding this question? For each belief, how do we know this? By assumption, judgment, or evidence? Is there someone within our organization that knows more about this issue than I/we do? How would I go about gathering evidence to clarify or test this belief? How would I classify this issue? o An accurate assessment is critical for strategic success o An accurate assessment would be helpful o An accurate assessment would be nice, but not worth investing in

3. Identifying research agendas: Once potential areas for inquiry have been identified and their importance assessed, a program for more formal organizational assessment and/or market research can be formulated. This agenda would also have to take into account timelines and available resources to invest in the effort. However, given that the most critical research issues would have been identified and there would be clear justifications for the investments made, it would be more likely that top management would invest in these, rather than ad hoc, research programs. 4. Providing inputs to other analytical processes: By using a SWOT Analysis to generate issues, questions, and awareness of potential biases, other analytical methodologies (e.g., BCG Analysis, GE Business Screen Analysis, SPACE Analysis [10]) can be fed more well-considered and vetted raw material.

5. Helping to understand the complex and dynamic nature of an organizations operating environment. By examining how perceptions of strengths and weaknesses vary in the context of various identified opportunities and threats, management can develop a greater appreciation for the truth about its own organization and be better able to prioritize its own organizational development investments. 6. Part of an ongoing strategic planning system: Finally, we would recommend making strategic analysis in general and SWOT Analysis in particular, part of a continual assessment program. Organizations monitor financial performance on a continual basis and invest substantially in executives, personnel, and computer system to do so. In the same way, organizations should track internal and external environmental issues with at least the same diligence. After all, that is where the dollars come from. References [1] Armstrong, J. Scott (2009) “Don’t do SWOT, A Note on Marketing Planning” Manyworlds.com [2]

Bernroider, Edward (2002) “Factors in SWOT Analysis Applied to Micro, Small-toMedium, and Large Software Enterprises: An Austrian Study,” European Management Journal; Vol. 20 Issue 5, p562.

[3]

Chermack, Thomas J. and Bernadette K. Kassahanna (2007) “The Use and Misuse of SWOT Analysis and Implications for HRD Professionals,” Human Resource Development International; Vol. 10 Issue 4, p383-399.

[4]

Hill, Terry and Roy Westerbrook (1997) “SWOT Analysis: It's Time for a Product Recall,” Long Range Planning; Vol. 30 Issue 1, p46-52.

[5]

Edwards, Colin C. (1993) “What's SWOT?” Management Services; Vol. 37 Issue 6, p38-38.

[6]

Houben, G. and K. Lenie (1999) “A knowledge-based SWOT-analysis system as an instrument for strategic planning in small and medium sized enterprises,”.Decision Support Systems, Vol. 26 Issue 2, p125.

[7]

Humphreys, John (2007) “Weakness or Opportunity?” Review; Vol. 48 Issue 3, p96-96

[8]

Learned E. P., C.R. Christensen, K.E. Andrews and W.D. Guth, Business Policy: Text and Cases, Irwin, Homewood, IL, 1965.

[9]

Lee, Kuo-liang and Shu-chen Lin (2008) “A fuzzy quantified SWOT procedure for environmental evaluation of an international distribution center,” Information Sciences; Vol. 178 Issue 2, p531-549.

MIT Sloan Management

[10] Rudder, Luetitia and Lynette Louw (1998) “The SPACE Matrix: A Tool for Calibrating Competition,” Long Range Planning, Vol. 31 Issue 4, p549-559. [11] Valentin, Erhard K. (2005) “Away With SWOT Analysis: Use Defensive/Offensive Evaluation Instead,” Journal of Applied Business Research; Vol. 21 Issue 2, p91-104.

[12] Yüksel, Đhsan and Metin Dagˇdeviren (2007) “Using the analytic network process (ANP) in a SWOT analysis – A case study for a textile firm,” Information Sciences; Vol. 177 Issue 16, p3364-3382.