545 words.

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How SWOT Wrecks Your Strategy.

 by Dov Gordon

There are some very serious problems with the SWOT analysis that many companies use to formulate corporate strategy.  (SWOT = Strengths, Weaknesses, Opportunities and Threats.  See here for an explanation:  http://www.quickmba.com/strategy/swot/)

In a recent email discussion, the CEO of a sizeable company wrote to me saying "I like SWOT as it is not something we do on a regular basis and provides us with the opportunity to hold a mirror to ourselves and think."  Maybe so, but as a framework for strategy formulation SWOT is like a tiny 2x2 inch (app 4x4 centimeters) mirror.  To create a clear, superior strategy that your people will be passionate about implementing, you need something more sophisticated.  You need the floor-to-ceiling, wall-to-wall variety.

To understand why SWOT is weak, let us first identify what kind of process does help you develop superior strategy that leads to superior results.

To be effective, the strategy formulation process you choose to be your guide must have these three key components:

(1)   A Big-Picture Context:
An effective strategy formulation process provides a context, a big picture, in which to work.  Strategy takes place on several levels so you need an approach that helps you always know where you are.  SWOT, however, leads to a hodgepodge of information that lacks a larger context.

If you are familiar with our work you know how firmly we believe that Clear Thinking Is the Most Valuable Work(TM).  Out-of-context information makes smart decision making super difficult.  A big-picture model shines light on the available data so you can identify what really matters.  Otherwise, it's sort of like digging through your fridge with the lights turned off.  Is the sandwich you found fresh from today or is it last week's leftovers?

When you work within the context of a clear big-picture you always know what to do next.  SWOT doesn't tell you what to do next.  It isn't enough to say "We will build on our strengths and shore up these weaknesses, pounce on those opportunities and protect ourselves from these threats." In real life, we must make difficult choices and SWOT doesn't provide any means to do that.

(2)  Focused Questioning:
The antipode of Big-Picture Context, focused questioning helps you zero in on the details.  Within the big picture, there are dozens of factors that will affect your strategic decision making.  You need questions that will help you develop a deep, clear understanding of them all.

 The SWOT questions, "What are our Strengths, Weaknesses, Opportunities and Threats?" are too broad to help you achieve this clarity.

(3)  Addresses the Four Fundamental Strategic Decisions:
The four most fundamental strategic decisions every company makes are (1) What products and services should we should offer - and not offer?  (2) What markets should we serve - and not serve?  (3) What will be our competitive advantage - and what will it NOT be?  and (4) What key capabilities do we need in order to profitably offer those products to those markets in a way that they perceive us as providing an advantage?

A superior strategy process helps you uncover the information you need to debate and develop criteria for making these key decisions.

Once again, SWOT leaves you hanging.  If there is a place for SWOT analysis, it is as a tactical tool not a strategic tool.

While you can't teach strategy formulation in a brief article, here are several resources that can help you immediately. 

>>> If this made sense to you, read our new white paper on the subject, Spitting In the Wind: A Single Obvious Insight to Focus and Sharpen Your Strategy.

>>> Here is another article on the subject, previously published by The Marker and CEO Refresher.  http://www.gordongroupec.com/Articles/implement.html  

DOV GORDON helps senior executives make better, wiser decisions and quickly get things done.  He is sought after for his perspective and advice on formulating and implementing strategy, developing an innovation culture and cultivating superior team work.  Dov can be reached via his websites www.GordonGroupEC.com and www.Superior-Strategy.com.

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Dov Gordon helps senior executives at small and mid-sized companies around the world to earn the respect and admiration of their marketplace.  Clients benefit from clarifying their strategies, sharpening their focus, better decision making, improved teamwork and growing into great leaders.

Management and Strategy Consulting.

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See our recommended reading list at:   www.GordonGroupEC.com/books.html         

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