Good strategy execution starts with what could be, not what is or what will be. Both are important. Yet where you start really does matter – including in the way you use strategy tools. Like SWOT.
Many of us have heard of, encountered, or performed a SWOT analysis. It is a common, useful tool for strategy development and execution. Most people start with Strengths and Weaknesses, then move to Opportunities and Threats – just as its name suggests. They use the SWOT lists as building blocks for understanding themselves and their environment in order to capitalize on strengths to capture new opportunities. That’s reasonable.
But, what if we turned it around? Rather than starting with strengths and weaknesses, consider opportunities and threats first - an OTSW analysis, if you will. Does it matter?
We think where you start matters – and the difference in our outcomes can be extremely important.
Together, opportunities and threats describe our external environment. They help set the context in which we must operate while also focusing attention outside of our organization. That ‘environmental scan’ also serves to avoid corporate myopia or being blind-sided by an unexpected shift in our business context.
By definition, strengths and weaknesses are internally facing, commenting on our internal capabilities. They offer a quick assessment of where we stand today so that we leverage strengths and mitigate weaknesses to create new opportunities. For example, a company that’s missing a critical piece of technology that its customers demand might buy the technology (or the company that makes it) to serve its customers better or avoid being squeezed by a competitor.
An OTSW analysis looks externally first. OT frames the context by identifying the opportunities and threats that could help or hinder achievement of our strategic objectives. Having identified these, we can then assess our internal capabilities – or strengths and weaknesses. Focus only on those strengths and weaknesses that matter most in the context of our already identified opportunities and threats.
Starting with opportunities and threats allows room for ambition and, in our experience, a greater degree of stretch in setting and achieving objectives.
It also can prevent us from spending too much time on "what is" by directing ourselves to think about "what can be".
Otherwise, considering internal capabilities first risks missing critical strengths needed for success in the emerging environment – or weaknesses that could derail it. Or, we spend a lot of resources mitigating weaknesses that appear important when viewed first, but diminish in importance when placed in the new context.
Let’s be clear: all four elements of the analysis are important and are never meant to be just laundry lists of everything we can think of in each category. The value of the analysis lies in understanding the interdependence of these four elements and in using these to inform choices about what we will/will not do and why.
So what’s in a name? In the case of SWOT vs. OTSW, we’d argue: everything. Change the order to shift not only the letters, but the entire mindset of your team.
Skeptical? Try it. Analyze the external environment first. Figure out what’s likely to have the greatest impact on your business. In a separate conversation – and based on what you learned about your external reality – consider your strengths and weaknesses. In that context, now which are most important?