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The SWOT Analysis

Originally published: 01.01.08 by Jim McDermott

Getting started on a strategic plan for your company will ensure a successful future.

In the November 2007 issue I talked about the role of leadership in developing the high-performance organization. A fundamental task, perhaps initial task, is the need to develop and effectively communicate the strategic objectives that will take the company and its associates into a growing and successful future.

Strategic planning is one of those business management concepts that sounds a bit esoteric or time consuming to bother with for many organizations. Many may feel it is too difficult and of dubious value. None of it is true and don’t let any of those negative concepts stop you from this essential task. In fact, it is one of the most useful and helpful tools you have to move your company toward excellence in performance.

The Baldridge Criteria for Performance Excellence (www.quality.nist.gov/Business_Criteria.htm) states:

“Knowledge of an organization’s strengths, vulnerabilities, and opportunities is essential to the success and sustainability of the organization. With this knowledge, you can identify those products, service and program offerings, processes, competencies, and performance attributes that are unique to your organization.”

The basic strategy tool used to define a company’s competitive position is the SWOT Analysis. It’s

a fairly simple way to get started on your strategic planning, a critical leadership task.

There are a number of reasons why strategic planning is important, but perhaps none more basic than giving employees confidence in leadership that they know where they are going and how they will get there.

It also communicates the path to the future and the benefits the company provides to its owners, employees, and customers.

To quote the Cheshire Cat from Alice in Wonderland, “If you don’t know where you’re going, any road will get you there.” How enthusiastic, committed, and motivated will employees be starting on a journey with someone they’re not sure knows which road to take on the journey to success?

Developing the roadmap to get your company from point A to point B is essential and forms the basis for developing an action plan. Here are some guidelines to get started on your journey.

Strategic planning starts with a fairly simple examination of your organization’s strengths and weaknesses. The basic tool used for this initial step of strategic planning is the SWOT Analysis. It’s a powerful technique that helps analyze your ability to achieve your goals and execute an effective action plan.

If you have never done one of these, this is a good time to start. It’s not complicated and it doesn’t take too long to do. You can do this by yourself, with a group of employees, with your management team, or with your banker or accountant. Or you can have different groups within your company do a SWOT Analysis independently of each other and compare results for added insights.

Strengths and Weaknesses apply to internal factors that are under your control.Opportunities and Threats are external factors, usually outside of your immediate control. This type of analysis helps you focus on your strengths, minimize threats and take advantage of the opportunities available to your organization.

What makes this tool so useful is that it will help you uncover opportunities that you are well placed to take advantage of. And by understanding the weaknesses of your business, you can manage and eliminate threats that you might not have been aware of.

And by looking at yourself and your competitors using the SWOT Analysis, you can craft a strategy that will help you compete successfully in your market.

The first step in SWOT Analysis involves an assessment of the company’s ability to efficiently deliver its services and products to meet or exceed customer expectations.

To visualize the company’s Strengths and Weaknesses, use the sample questions in this column as your starting point. To get started, you will need to make your own blank SWOT sheet. Using a large piece of paper, place four blank boxes on the paper. Each box will have one of the following titles: Strengths, Weaknesses, Opportunities and Threats. Start filling in the blanks as succinctly and as concisely as you can. The purpose is to oppose the strengths and weaknesses with the threats and opportunities. For example, if the strengths easily overcome the weakness, it tells you which direction to move or sets in motion the analysis to move to the next level. On the other hand, if the weaknesses overwhelm the strengths, you need to develop a strategy to strengthen the internal situation before you address the external factors.

Using the chart, you can start with a brainstorming session that will realistically list the company’s major strengths and weaknesses. Keep the answers short and be brutally honest.

The following questions are suggestions to help you get started. As you move through them, you will easily develop questions specific to your company and market environment.

• What advantages does our company have?
• What do we do better than anyone else?
• What are our major strengths?
• What are we really good at, excel at?
• What are we passionate about?
• Why do our customers buy from us?
• Who are our best customers and why?

• What can we improve?
• What needs improvement?
• What should we avoid?
• What are people in our market likely to see as weaknesses?
• What factors lose sales?
• Where do we need the most improvement?
• Where do we waste the most time and money?
• What basic processes need the most improvement?
• What are our weakest sales areas? Opportunities
• What market trends present new opportunities for the company?
• What technology changes can we take advantage of to enhance or improve our work processes, sales, marketing?
• What changes in the economic environment present new and/or different opportunities for the company?
• Can eliminating any of our weaknesses create new opportunities?

• Who are our major competitors and what major threats do they pose to our sales and marketing efforts?
• Do we have cash-flow or bad-debt issues that haven’t been addressed?
• Will lack of employee training threaten our ability to compete effectively in the marketplace?
• Are there any outside issues or companies that could threaten our business?
• Has the market weakened? Will downturns in construction affect our sales?
• Have new competitors entered the market? How much do we know about them?

Use this analysis to help clarify and put into perspective where the problems and opportunities are and what you will have to do to address them. This sets the stage for developing a specific and well-thought-out action plan that is designed to make major improvements in your organizationa performance.

Obviously, the more input and ideas you can get into the SWOT Analysis, the more valuable it becomes, which also makes this a great tool for employee involvement and input. Try doing the SWOT Analysis with different groups within your company, compare results, opinions, and reap the benefits of the innovative ideas that emerge for opportunities to grow and improve your company.

Editor’s Note: For advanced planning, a SWOT Analysis can be used as the basis for developing action plans by using the Fishbone Diagram, described in the September 2006 issue of HVACR Business. You can download the Fishbone diagram and instructions on its use atwww.hvacrbusiness.com/DownloadCenter/

Thirty-eight years of publishing experience helped to solidify Jim’s expertise, not only in the field of publishing, but in the heating and air conditioning industry as well. He is highly adept in business management, training and development, and is a strong ally to the hvac industry. He also is HVACR Business' editorial director. Jim can be contacted at jmcdermott@hvacrbusiness.com

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