SWOT – Strengths, Weaknesses, Opportunities, Threats. It’s an analysis tool frequently used for formulating strategy. Unfortunately, it is simplistic, random, and misguided.

Typically, members of a strategy team collaborate to fill the four quadrants of a double axis chart, two reflecting the internal state of the company (strengths and weaknesses), and two reflecting the external world (opportunities and threats). From there, a strategy is supposed to emerge. But is this a good approach for aligning the company’s strengths and resources behind the greatest opportunities? No. SWOT as an approach to strategy formulation is flawed for many reasons.

The Customer is Conspicuously Absent
There is no C in SWOT. No V either. And yet, creating value for the customer is the name of the game. How can you not start with the customer? Market need, desire, and change, the most important factors, are merely a subset of one of the four SWOT boxes. That is too little too late. 

Strengths and Weaknesses Depend on Context
What are our strengths? What are our weaknesses? These are easy questions to answer but often of little value. Strengths in relation to what? Weaknesses in relation to what? People will respond in relation to current markets, current products, current operational capabilities, and recent problems and priorities. In other words, the lists of strengths and weaknesses you generate are going to reflect the current mindset. To understand the limitations of this approach, provide three answers to each of the following questions:

• What are your strengths in your current job?
• What are your strengths as a grandparent?
• What are your strengths as an athlete?
• What are your strengths as an elected official such as President of the United States?

Did your strengths change with the questions? Of course. Strengths are only strengths if they support the strategic direction. A random list of strengths is quite meaningless.

SWOT Encourages Operational Over Strategic Focus
Most people gravitate to tactics over strategy. They are hungry for solutions, cool ideas, and welcome changes that address familiar and challenging daily issues. Taking a strategic approach, stepping back, wrestling with ambiguity, and challenging the status quo is less natural and more difficult. Thus, a good strategic process must shift perspectives so that people can see the bigger picture and consider the situation in a new light. Listing strengths and weaknesses does not shift perspectives, even when done in conjunction with lists of opportunities and threats. Listing strengths and weaknesses simply creates energy for operational improvements. As a result, most strategic planning efforts generate primarily operational initiatives that will help the organization do the same thing a little better rather than strategic initiatives that help the organization create a stronger future.

Random Opportunities Are Too Random
The most important SWOT quadrant is Opportunities but a random list of opportunities that reflects the current perceptions of the market, products, and external trends suffers three main flaws:

1. It does not help people see the business and its opportunities in new ways
2. It is likely to lead to an equally random list of initiatives that must fight for resources, not a cohesive new direction or focus for providing value
3. It favors popular, squeaky, and well-articulated opportunities over smart, less obvious insights

Imagine a long, random list of opportunities inspiring Southwest Airlines to create a whole new market niche. Or convincing Apple to develop iTunes. Or sparking Steve Herrell’s original designer ice cream with cookies and candies stirred in. It’s unlikely. Without a framework to uncover suitable, customer focused, strategic responses to an evolving market, you are more likely to chase interesting ideas, run scared, or sit tight. A list of opportunities does not magically become a simple, coherent, and compelling strategy that allows you to provide value profitably.

Threats and Weaknesses Deserve Less Attention
You can develop a tremendously successful, breakthrough strategy without ever considering threats or weaknesses. And yet, with SWOT, half of the initial conversation is devoted to them. The potential for getting derailed and wasting time are both significant.

Threats often focus on the competition and the last thing you want to do is fall into the trap of thinking like your competition. Other threats will simply serve to make you overly cautious. This isn’t how you want to begin your strategic thinking. Once you’ve developed possible directions, you absolutely want to evaluate the implications, critical success factors, and potential problems. But that is not the place to start.

Starting with weaknesses makes even less sense. Internal weaknesses should not drive strategic decisions. On the contrary, your strategic direction should determine whether a weakness must be overcome. Internal weaknesses are just one set of obstacles you must discuss in assessing the viability of your preferred strategic direction.

You Can Do Better Than SWOT!
This article highlights just a few of the shortcomings of SWOT. While the four quadrants provide a simple process with a memorable acronym, SWOT’s popularity provides a testimonial to the value of simple processes with memorable acronyms. Unfortunately, just because people find it easy to use and remember does not mean it provides great results. You can do better than SWOT!