– Thoughts on Strategy and Management

No, the SWOT-Analysis isn’t outdated

Management models and tools like the SWOT have been around for a while. Actually, they have already been with us in the good old times that were more stable and less disruptive. Therefore, these tools are sometimes perceived as a bit old-fashioned. Conventional wisdom is that something that was designed to make sense of a stable, slowly changing environment can’t cope with today’s challenges.

I have stated more than once, that these tools are not outdated at all. They are still relevant. You just have to adapt your way of using them. Last weekend I flipped through my bookshelf and happened to stumble upon some up-to-date application of the SWOT analysis – although the term ‘SWOT’ had not been mentioned there one single time.

The book is Good Strategy Bad Strategy: The Difference and Why It Matters by Richard Rumelt. OK, it is from 2011, which isn’t exactly brand-new. However, you will agree that was written at a time rapid change, uncertainty and disruption. I am confident that this book’s wisdom is still relevant today.

Let’s remember briefly: The SWOT analysis is usually described with a 2 x 2 matrix. The boxes are labelled ‘Strengths’ and ‘Weaknesses’ – i.e. internal factors – and ‘Opportunities’ and ‘Threats’ – i.e. factors from the external environment. I wrote more on the SWOT in this article.

Back to Good Strategy / Bad Strategy: I re-read only the first two chapters of part one. During these 23 pages, my mind frequently took mental notes: this is SWOT … SOWOT again … and again …

Take the first two sentences of the introduction:

The most basic idea of strategy is the application of strength against weakness. Or, if you prefer, strength applied to the most promising opportunity.

The whole text is packed with SWOT-terminology. Richard never uses the term ‘SWOT’, never draws boxes and fills them with findings from an analysis in the hope to come up with some revelation.

However, he frequently thinks in the categories of strengths, opportunities and so on. In doing so, he perfectly transfers this tool into current times. Richard uses on strengths and weaknesses as well as those from competitors to create unexpected strategies and strategies that shift power. For illustration, he provides a range of examples:

  • Apple’s turnaround strategy in 1997 / 1998: Steve Jobs directly tackled a fundamental weakness of Apple by radically reducing complexity. He cut back products, services, distributors and manufacturers to Apples core, thus creating a new strength.
  • Asked for his long term strategy in 1998, Steve Jobs is reported to answer ‘I am going to wait for the next big thing’. Richard Rumelt concludes: … he was actually focused on the sources of and barriers to success in his industry – recognizing the next window of opportunity.
  • Richard uses the ancient story of David vs. Goliath as another example for the victory of apparent weakness over apparent strength. David had taken advantage of a strength that nobody had realized – his experience with a shepard’s sling. This strength allowed him to make use of Goliaths critical weakness, neutering his opponents supposed advantages of size and strength.
  • Then, Richard gives an interesting insight into how he discusses the case study of Wal Mart with MBA students. In the beginning, they come up with the obvious conclusions: Wal Mart created a new advantage (i.e. strength) with his network of stores, distribution centers and information flows. Only after deeper discussion they come up with the insight, that – by creating this centralized network – Wal Mart turned the decentralized structures of its competitors into a disadvantage (i.e. weakness).

At the end of chapter 2, Richard summarizes:

Identify your strengths and weaknesses, assess the opportunities and risks (your opponent’s strengths and weaknesses), and build on your strengths.

Do you still think that the SWOT is outdated?

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