If you’re in business, you’ve heard of a SWOT analysis. You’ve probably done one — maybe more than one.

When did you last do a SWOT analysis for your organization?

Unless you’ve just been doing some strategic planning, it’s likely been awhile. We see businesses wait too long between SWOT analysis sessions. They trudge along under old conceptions of their strengths or weaknesses and fail to effectively respond to the changes around them.

Often it’s because they treat a SWOT analysis as something that’s written in stone, and in today’s world, that’s definitely not the case.

What is a SWOT analysis?

It’s right in the name. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. The 4-quadrant tool was created by Albert Humphrey at the Stanford Research Institute in the 1960s, and millions of businesses have used it as a way to plan for their future.

A SWOT analysis assesses two internal factors (strengths and weaknesses) and two external factors (opportunities and threats).

Internal factors might include things like financial resources or staffing, whether you have a strong employee base or not. External factors might include things like economic conditions or regulatory changes.

How to do a SWOT analysis

Your SWOT analysis will be most effective if you involve multiple people and stakeholders. Bring in representatives of different departments and people who aren’t at the executive level and may have a different perspective on the company.

Have each person fill out a SWOT analysis. Then come together and discuss each element.

Self-awareness is key during this process. For instance, if the CEO of a telecom company puts “technical expertise” as a strength, other members of the team might share that they’re actually seeing competitors outpace the company in digital advancements. That discussion might lead to a deeper understanding of the competitive market as well as how to view internal strengths and weaknesses.

Remaining open to those challenges from team members could help us think more innovatively. In a 2019 Harvard Business Review article, Adam Brandenburger argues for an expanded, upside-down view of SWOT analysis. He recommends that companies consider not only their own strengths and weaknesses, but their competitors’ as well.

Brandenburger also challenges organizations to flip their strengths and weaknesses on their heads. Look at your list of strengths and determine whether any of them could actually be weaknesses — for instance, whether effective systems could have turned into rigid systems that inhibit innovation. Do the same for your list of weaknesses. Could a lack of capital be an opportunity for riskier, nimble development?

The SWOT analysis itself isn’t a rigid exercise. It’s a tool to help you understand your business and its place in the market so you can better plan for the future.

Before closing out the exercise, prioritize each list. If you’ve come up with 17 opportunities, put them in order and choose the top three or four that you’ll focus on. Too many unprioritized options can leave you overwhelmed and unable to take action.

Scenario analysis: how to use your SWOT analysis

You can’t stop with the SWOT analysis itself — that’s simply some nicely organized lists of your strengths, weaknesses, opportunities, and threats (and perhaps your competitors’ strengths and weaknesses).

You must do the next step: scenario analysis. Hopefully you’ve identified goals for your organization. That’s the first step of any effective scenario analysis.

Your SWOT analysis becomes the base for step 2 in your scenario analysis — gathering data. By organizing and understanding your current situation, you can focus your future planning.

You can develop plans that build on your strengths and take advantage of key opportunities. You’ll attempt to eliminate or compensate for your weaknesses and protect yourself against threats.

The truth is, assumptions are getting harder to make. The business climate changes rapidly. We need to better understand our position, where we are in the market, so we can better account for the scenarios that might come our way.

Of course, no one can plan for every scenario. Here, I recommend using the Pareto principle — roughly 80% of the outcomes result from 20% of the causes. By narrowing down your SWOT analysis to the top three or four in each category, you’ve done the first bit of work on this. Then focus on the 20% of scenarios that would have the biggest impact on your business.

If you’re not quite sure what a good scenario analysis looks like, we’re laid out our scenario analysis process in detail.

How often should a SWOT analysis be performed?

Many organizations do a SWOT analysis at a company retreat, once every few years. That wasn’t really enough before 2020, and it’s definitely not enough now.

Your opportunities and threats are changing too often. You should be doing a SWOT analysis (and the scenario analysis that goes with it) a couple times a year. If you’re in rapid growth mode or in a very volatile market, you should be doing it even more frequently.

When I was at CDNow, we were doubling every 6 months. Normally strengths and weaknesses change slowly over time — much more slowly than external factors.

When growth is inorganic like ours was, your strengths and weaknesses can change rapidly. You need to redo your SWOT more frequently because what was once a strength (say, being small and nimble) may suddenly no longer be one. If you don’t keep up with your understanding of the changes, you won’t be able to scale your processes or evolve your culture or figure out how to lead a team, to delegate when you need to.

I’m not suggesting you schedule a company retreat twice a year so you can do a SWOT analysis. To remain agile, you need to treat a SWOT analysis as something that’s both important and impermanent. You can revisit it in an afternoon and make changes quickly because sometimes that’s what the circumstances require.

Final thoughts

SWOT analysis is a mainstay of business planning, and it’s critical not to let its ubiquity stand in the way of its usefulness.

You don’t do a SWOT analysis just for the sake of crossing it off your planning list. You do it to dive deeper into your business, to better understand where you are and where you may (or may not) be able to go. Use it to your advantage. Challenge its assumptions and challenge your own.

Then take what you’ve learned and use it in your planning. Go back to it frequently and check to see whether your position has changed. It probably has.

If you’re way behind in your strategic planning, you may need some help. We work with dozens of businesses every year, helping them understand their organizations and develop plans for the future. Contact us to see how one of our coaches can help you.