To “SWOT” OR not to “SWOT”?

What you see...
What you see… Photographer Adam Taylor

Sometimes it is the only tool in a company’s strategy toolbox… S.W.O.T. (you know: Strengths, Weaknesses, Opportunities, and Threats). Some like it, others love it, and I don’t really like it. And with that I mean that I don’t really think it is a helpful distinction. I am not the only one….

Rob Grant (author of one of the best strategy textbooks) also warns against SWOT. Here’s his “test”:

Alex Ferguson, now former coach Manchester United… strength or weakness at the time he was a coach?

Obviously, a strength as one of the best and most experienced coaches…. then again, a 70-year old with no successor…. also a weakness.

Global warming? A threat or an Opportunity for the big automotive automobile producers?

A threat, if you consider higher taxes on fuels and restrictions on car use. However, it can be an opportunity if consumers switch to more fuel efficient and electric cars.

A recent publication in the strategic management journal confirms this SWOT issue. It turns out that managers in the same company differ in their attention to opportunity versus threat aspects of the same external event.

  • When a manager’s self/group interest are more directly affected by an external event (i.e. closer shock distance) he/she will respond more positively to an opportunity and more negatively to threat interpretation.
  • A manager with a lower perception of their company’s resource-base (i.e. lower capability perception) will form more negative early beliefs about the same external event than colleagues who think more highly about the company’s resources. As a consequence, the former group will tend to focus on threat rather than opportunity.

So, whether you label an external event as threat or opportunity depends on how highly you think of your company and it depends on your distance to the event (either more positive or more negative).

Perhaps it is better to not prematurely label an external event as either threat or opportunity, but to carefully identify these events and to then in a multi-functional team determine  in what ways these events can impact the company and what this could entail.

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