SWOT analysis - the AK47 of strategy tools

Discussing an upcoming strategy workshop with a new client recently, they said they wanted to use SWOT as one of the key tools.  SWOT analysis is an almost universally known strategy tool, but - for those who don't compulsively collect strategy tools - it's simply a listing (usually in a 2 x 2 grid) of an organisation's Strengths, Weaknesses, Opportunities, and Threats.   It's basic, sometimes seemingly too basic.  It's the AK47 of strategy tools - widely used (particularly by organisations that can't afford the latest and greatest), robust, can be used  with almost no training. Plus, it's surprisingly effective. And, a bit like the AK47, it's been around for a while: SWOT analysis, or perhaps an early precursor to it, was developed in the 1960s by Albert Humphrey, an American consultant who eventually moved to London (I gather for love, like so many other good consultants).

As I was opening my mouth, getting ready to explain to my client that we really might want to try something a bit more modern, and a bit more sophisticated, I stopped.  In a flash, two thoughts struck me: 1) If sensible business leaders have been using it for so long, and so widely - particularly in organisations, like this one, that didn't have the luxury of faffing about things that don't work - it must be good.  2) When I've used it, even when I didn't expect much from it, it always was useful.

After the meeting I thought for a bit about why it is so effective, when lots of other strategy tools have come and gone.  It focuses attention on  the "here and now" reality of the situation a business faces. And, it covers the waterfront.  It focuses attention on external and internal issues, it focuses attention on the positive as well as the negative.  Organisations often have a bias to focus more heavily on one end or the other of these dimensions; SWOT highlights where there might have been insufficient attention.

But, perhaps most importantly, it stimulates useful discussion and debate. When it comes to strategy, it's generally not the facts that matter.  The interpretation of facts - what they mean and what, therefore, should be done about them - is where the real value lies.

Technology unleashes the revolution

I find New Scientist articles, though seemingly distant from the pragmatic world of commerce, often shed an interesting light on current developments.  A recent article  presented analysis by Kathleen Carley of Carnegie Mellon University that seems to show that the impact of social media in the Arab Spring was much less than has been reported. However, in the same article, another analysis was reported, this one from Philip Howard of the University of Washington, that reached an almost opposite conclusion.  Now, two academics reaching opposite conclusions about the same topic isn't anything particularly new or different.  But, it's an example of how, particularly with the enormous datasets available today, it's generally possible to find plausible analytical support for multiple points of view.

When my clients face these sorts of situations (dueling analysts, PowerPoint decks at 10 paces) I  suggest they  find a different way of looking at the issue.  In this case, happily, Dr Howard does that for us, looking more broadly at the history of previous revolutions: "In each of those other revolutions, there is some sort of media that is new and not controlled by the state. Even newspapers at one point caught dictators off guard."  Viewed from that perspective, it does seem likely that the availability of a new form of communication did lead to a different form of political behaviour.  And, one might comfortably predict that when even newer form of communication arrive (as it seems they will), they too will lead to a further revolutions.

In somewhat the same spirit, it seems likely that the business world is now facing it's own revolution, similar to (though perhaps faster than) the one caused by the internet.  And, it's not just Facebook and Twitter - they are almost extensions of the "old" internet.  The real revolution is likely to come from a combination of things: social of course, but also mobile, local, automated self-monitoring, self monitoring, "free", collaborative innovation, and - as I've heard it described - "the dictatorship of the consumer". Do you see your organisation getting ready?

Storm warning - "Big Data" on the way

We all know there's a lot more data around today than there ever was, that it's coming at us faster, and it's taking on many more shapes and sizes than ever before.  That's a trend that's been going on for some time.  And, like with many trends, once it has a name, then it gets more attention. So, welcome to "big data". This has all the smell of a new management fad, as leading consulting firms, solution providers, and technology firms all tout their particular take on why it's essential and what to do about it.  Like most management fads, at the heart of it is something important that business leaders should pay attention to.  But, two things to bear in mind, as and when you start to hear the question, "What's our strategy for big data?".

First, knowing where you want to take your business is probably more important than finding a faster way to get there.  Here's a checklist to work through before spending too much time on big data:

1. Are we clear and aligned about where we're trying to get to?
2. Can we see where having more, faster, and richer insights about our customers, our suppliers, or other key players in our world would help us get there more quickly?
3. Do we have even a few clues about where in our processes "big data" might sit?

Second, success will depend mostly on the people element, not on the technology.  Shvetank Shah, Andrew Horne, and Jamie Capellá, in "Good Data Won't Guarantee Good Decisions" point out that many managers don't have the data literacy needed to make good use of this new source of insight.  Training and coaching on data usage can help, but there's a deeper issue. Relying too much on the data can make you blind to things that models can't capture.  Equally, going entirely with your intuition can trap you in an outmoded view of the world.  They argue that what's needed are "Informed Skeptics" who can balance analysis with intuition.  And right they are. Building the skill (or habit) of bridging gut-level intuition with head-level analysis is going to be key not only for making "big data" work - but for the bigger task of setting direction in this fast-paced, unpredictable world.

Finally, a great "big data" tip from Dan Woods at Forbes: "I recommend enabling the largest amount of people with the cheapest and easiest tools....".  Not a bad idea to adopt for "big data", and probably most other things.

Ten Questions the Board should always ask about strategy proposals

Boards want to spend more time on strategy.  McKinsey's Global Survey in 2008 showed that 53% of Board members wanted to spend more time on long term strategy. And, over the last few years, when for many businesses there have been big questions about the right future direction, this hasn't changed.  In 2011 fully 70% said they want to spend more time on strategy.  What's even more worrying, about 1/3 said they had "limited or no understanding" of the risks the company faces, and only 14% said they had "complete understanding".  For the company's strategy, 22% said "limited or no", only 21% said "full".  Given the well known human tendency to overrate our own performance, I suspect it may be worse than that.   While time allocation is part of the issue, there's a deeper problem.  Most Boards are just responding to what the management team puts in front of them.  That can spark a bit of Q&A, and some spirited discussion.  But, it inevitably puts the NEDs on the back foot.  They are challenging, rather than contributing fully of their insights, experience and intuition.  

Put differently, it's really hard to really add to the debate once the slide deck is done.  So Board members are often left with a choice of approving a strategy they may not even fully understand, raising a few issues to be addressed at the next Board meeting, or rejecting the proposed strategy - which often means starting a search for a new CEO.     

To make a more effective impact, NEDs should push for a different approach to strategy development that allows them to contribute their experience earlier, before the models are all constructed, the charts carefully drawn and all the messy reality of decision making tidied up.  Imagine having a "pre-strategy" away day to develop a shared perspective on where the business is, what challenges and opportunities it faces, and the broad directions the Board would like to see explored.

However, even if NEDs push hard for this, it make take a while for Exec members of the Board to see why it's a good idea.  So, if you're on a Board and are faced with providing input to a set of strategy proposals, here's a list of questions to ask that should open up the debate in a more useful way.     

1. In examining the various options in front of us, how did you decide amongst them? Whose interests have you considered and how did you balance them?
2. Did you evaluate the various options based on how attractive they are now, or how attractive you expect them to be in the future?  If the future, how did you arrive at your view of what the future will be like?
3. Where in your evaluations did you take into account the reaction on the part of others to our potential actions?
4. How have you included outcomes (positive or negative) that are perhaps unlikely to occur, but game-changing if they do?
5. Besides the options you’ve shown us here, what others did you examine and eliminate? Why were they taken out?
6. Of the options you left in, do you think they are all strategies that reasonable people might pursue? For each, under what circumstances would they be your preferred option?
7. Could you let us know –  of the facts you’ve shown us and the assumptions you’ve had to make to reach your conclusions  – which are the ones that you are least certain of?
8. Where are you most concerned that your models may not have captured all the key dynamics or may in other ways be incomplete or potentially misleading?
9. Which of your assumptions has the most impact on the conclusions you have reached?  How much would these key assumptions (together or individually) have to change before you reached a different conclusion?  How have you estimated the likely range of outcomes for these key assumptions and what were the results of that analysis?
10. How have you taken into account the desires, hopes and aspirations of our people?

The trend of comment

It's been interesting to see how commentators about the economic situation in Greece have been largely lagging the situation. First, most of them started on "Greece must (and will) sort itself out, default is not an option", with exit from the euro an unmentionable and almost unimaginable event. Then, the tone moved on to "default could theoretically happen, but it won't - and it shouldn't - because the other governments will put such pressure on the Greek government that they will be forced to do what they should", through "it might happen, but that would be a disaster (which of course we will avoid)", and now starting to come to "it might happen if we're not careful", and a few brave souls at "actually, default and exit from the euro is the best hope Greece has". Of course, as and when Greece does default and leave the euro, there will be detailed discussion of 1) why that was always inevitable and 2) why it was a still bad idea. When you see this sort of drift in comment from established "opinion leaders", it's a good reminder of how unpredictable the world can be.