We live in paradoxical times and some of the tools businesses use to navigate their way into the future may not be up to the job. You may have heard the old saying, ‘If your only tool is a hammer, you will treat every problem as though it was a nail needing to be pounded’. In this article Oliver discusses the advantages and challenges presented by the use of the tool SWOT.

SWOT Analysis: Take with a pinch of salt!

Over the past few months I have had the opportunity to talk to many senior executives as they review or create their strategic and business plans. Each situation is unique but they also generally share in common the use of powerful tools such as STEP or SWOT Analysis.

Most leaders are familiar with the very powerful conceptual tool called SWOT (Strengths, Weaknesses, Opportunities, and Strengths) – many businesses use it as part of their ritual of doing Strategic and Business Planning. It entails identifying and carefully analysing two types of factors: (a) the environment in which your business operates, and (b) your organisation’s internal situation.  Crudely put, having done this, the task of senior management is then to match the external reality with internal resources.

This is a really useful tool but there are problems. As Paul Lemberg observes in his book, Be Unreasonable:

“Taking another look at the American Auto industry in the early 1970s, we find the well-developed, highly profitable business structure that actually invented the SWOT concept.” 

SWOT gives you a set of strategies based on the probable; it looks at what already exists, and enables you to take the best advantage of things that are already in play. As such, however, SWOT is not capable of maintaining the passion and vision required when times get difficult.  At Caret, we find that our clients are seeking something far more dynamic and engaging – they are looking for strategy from the Inside Out.

Strategy from the inside out

One of the challenges of strategy is that the focus tends to be on what is feasible and can lack the engagement of the rest of the management team, never mind the rest of the organisation. There are, nevertheless, organisations that manage to combine being driven by passion and values on the one hand, and robust structures and processes on the other. They know how to live with ambiguity and uncertainty and, when faced with uncertainty they respond by:

• Accepting that they are operating in an uncertain world.
• Assessing the level of uncertainty they are facing using all available inputs, models, and data, even if they are dealing with an event that seems regular as clockwork.
• Augmenting the range of uncertainty just estimated.

These prescriptions (as suggested by Spyros Makridakis and his colleagues in the recent book Dance With Chance) call for a humility of attitude. This humility should be characterised by confidence.

This attitude of robust and confident humility will mean we are less likely to approach planning as mere prediction. We become more skillful in living with ambiguity and moving into the future energised by a sense of adventure and discovery. Of course, we will need strong and effective planning tools but we will be happy to face the unknown.

I am reminded of the now well known story of the little child who tells the teacher she is drawing a picture of God. “But no one knows what God looks like”, the teacher observes. The child replies, “They will in a minute”.

© Caret, 2009. All Rights Reserved

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