What is a SWOT analysis?
Conducting A SWOT Analysis
A SWOT analysis is an essential exercise for formulating new business strategies. It combines an internal analysis of strengths and weaknesses, with an external environment analysis of opportunities and threats.
Objectively looking at the concept for the new business activity, the emphasis is on analysis, diagnosis, synthesis, and interpretation of the lead user information, combined with a careful industry analysis.
Sizing up your venture’s strengths and weaknesses is like constructing a strategic balance sheet, where strengths represent your competitive assets, and weaknesses represent your competitive liabilities.
The strengths are things that your venture is good at doing, or a characteristic that gives it an important capability over competitors in this space.
– marquee customers
– proprietary technologies
– proven domain experts on a venture team
– keen insight to lead users
Weaknesses are things that your venture lacks or does poorly, or conditions that put it at a disadvantage to others in the space.
– no clear strategic direction
– falling behind in R&D/technology
– lack of depth on a venture team
– unable to self-finance (bootstrapping)
– cost structures or revenue models that are out of industry/sector norms
– weak distribution/sales network
– below-average marketing skills
The opportunities and threats not only affect the attractiveness of your venture’s situation but more importantly point to the need of strategic action.
You need to consider two simple questions:
– Are you headed in the right direction with the new product that could lead to other new opportunities?
– Or are you headed toward a disaster?
Opportunities arise from:
– moving on lead user insights
– seeing a technological change before others
– creating strategic partnerships with key suppliers and controllers of sales channels
– hoarding cash
– expanding overseas
– just plain luck
Threats to any new business venturing will most likely come from the industry risks we discussed earlier.