Agile Insights Blog

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A Letter From A Recovering SWOT Analysis Junkie

Jan 14, 2016 11:35:16 AM

You’re not alone. Recently, a coworker presented to a large auditorium and asked the attendees how many of them had ever done a SWOT analysis in their jobs, and just about everyone raised their hands.

Then he asked how many of them incorporated the customer voice, or customer data, into their SWOT analysis, and no hands were raised. NO ONE.

Believe it or not, our most popular blog post of 2015 was titled: Breaking Up with SWOT Analysis, and it started with a “Dear John" type letter to SWOT Analysis. Basically, “it’s not you, it’s me – it’s just not working anymore… I need something new." Clearly people could relate, and it started a good discussion.

Perhaps this is because business leaders operate in the face of amazing complexity, and SWOT presents a way of simplifying important strategic concepts. It’s a way of easily organizing different sources of information, and anyone with a basic understanding of your business can pull one together.

And it has a name that’s so catchy and easy to remember. And…. let’s not forget, it’s FREE!

So, SWOT serves a purpose – it’s essentially a way of organizing your own thoughts about your business in a way you can communicate to others. It makes your internal world external.

But if it’s your only method for monitoring your market position with changing customer needs, then you’re opening yourself up to risk, because you just don’t know everything you need to know. You need customer data.

Amazingly enough, it’s pretty common practice to make strategic decisions without considering what customers are looking for and why they choose one offering over another.

Why? Do we lack proper motivation? Do we not understand the importance of including the customers’ voice in decision-making? Or are we just not sure how to do it effectively?

Part of it definitely has to do with the speed in which we need to make decisions. In our haste, we fall back on our own seasoned judgment and perspective because it’s easy and fast. We start with the words “I think…."

  • I think this is what matters most to customers.
  • I think that why customers are going to our competitor.
  • I think this is where should invest for the future because there’s a need out there.

So how do we get to ‘I know’? The traditional tools we’ve had available to help us (like SWOT) are sorely lacking.

A great place to start is to actually ask customers. Sounds obvious, but there’s a reason not everyone does this. There’s the perception that it takes too long or is expensive. It seems complicated, and, if we admit to just a little arrogance, we might think we’re smart enough without it.

But today’s market leaders are differentiating themselves by having better data and using it to make better decisions.

Customer data and competitive intelligence are differentiators!

An agile organization is constantly innovating, identifying and capitalizing on new opportunities, and evolving with the customer. Therefore, executives need new tools that show them where to focus and how to win.

SWOT analysis is useful as a starting point for discussion, but it’s not perfect. In fact, there are five notable risks when you depend on SWOT Analysis:

1. It’s loosey-goosey. People’s interpretation of the method varies, and there’s no rigor to how often or for what situations an analysis should be conducted. There’s the risk of missing changes in your market and not acting quickly enough. On the flip side, you might make a mountain out of a mole hill and acting when you shouldn’t. Usually, a SWOT analysis is a tool used early on in the strategy development process – to research an issue, a new competitive threat, or a trend that has been identified.

2. It stays too general. Teams can spend an entire day collaborating on a SWOT analysis and generate a TON of information, but not all of it is useful for determining next steps.

Often, a SWOT is used to review an entire company, region, or product line, and “the customer" is discussed broadly at the aggregate level. But the real opportunities and meaningful tactics are found within the granular details – not the global level. The risk of focusing at a high level is that you may create a strategy that works for everyone and ends up working for no one.

3. It doesn’t offer solutions. A lot of individual interpretation is needed to figure out how to take the SWOT summary from concepts on paper to ideas about solutions and ultimately all the way to implementation. There’s a risk of knee-jerk reactions based on a SWOT analysis… and there’s also the risk that no action will be taken as a result of a SWOT analysis. (We could do another poll here to ask who has been involved in a SWOT analysis that ultimately didn’t result in any changes and is now collecting dust on a shelf. I’d raise my hand, and I bet I wouldn’t be alone.)

4. It doesn’t prioritize what to focus on. There’s no guidance on how to evaluate the importance of each piece of data. Often the organization and relevance is determined by the author. (In other words, it can be used just to promote a personal agenda.)

5. It’s biased. You’re human, so you’re biased by your own point-of-view. No blame here, it’s just how we’re wired. Because it doesn’t rigorously apply customer data to test internal assumptions, a SWOT analysis is usually dominated by your internal view – your perceptions of your performance and market. There’s no obligation to verify your assumptions with data.

This is probably the most dangerous. In my work with clients at Vennli, the internal view of customer needs and competitive positioning NEVER matches the actual customer view. In fact, sometimes that’s a very uncomfortable moment when we’re presenting the findings to the leadership team. But it’s normal, and that’s why we capture customer data to make better decisions!

Our co-founder Joe Urbany has done a project using our model with over 1000 eMBAs over at Notre Dame in which executives predict the value they believe that customers seek and then interview real customers to learn the truth.

If knowing your customer prior to doing any research was the test, just about everyone would fail.

Why are we so bad at thinking like our customers? A researchers named Dahl revealed a fascinating insight - the more we try to think about customers, the more we think like ourselves. Executives project their own thinking onto customers. In fact, they found that the best, most experienced marketers, are actually the worst at putting themselves in the customers’ shoes.

This no small thing, leading to sometimes significant miscalculation of how customers will respond to marketing and business efforts.

It also means that if you correct those mistakes, there is significant opportunity to grow your business.

There are four basic gaps Professor Urbany has observed between what executives predict and what customers actually say:

  1. There are other competitors than you think. (When Joe surveyed 421 past executive students that completed one of these strategy projects, 28% indicated that customers brought up competitors that they had not considered.)
  2. There are considerations customers think about when making choices that you don't know about.
  3. What you think is important to customers may not be (and vice versa).
  4. What you think customers believe about what makes your brand better is often wrong.

The faster you can correct for these gaps and properly diagnose ways to enhance customer value, the faster you can reach your goals. SWOT analysis will only take you so far. You need data about the drivers of customer choice and how you compare to the competition in order to make better decisions about your product, marketing, and sales.

Topics: General

Written by Vennli

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