Note: This article was previously posted in Course and Direction.
People make a lot of the SWOT analysis in strategic planning. As a rudimentary approach to thinking about strategy, the SWOT works pretty well. Decades of experience has shown us that great strategy requires much more focus on strengths and opportunities.
There is so much more to great strategy than a simple SWOT analysis. Sure, it’s a great buzzword, but I’d much rather see a strategic plan built around the strategic competency work of C.K. Prahalad and Gary Hamel. Why? There are three main reasons. First, the SWOT methodology creates unnecessary friction around the weaknesses and threats. Second, SWOT-based strategies seldom push the management team hard enough on creating a truly distinctive competitive advantage. And third, there has been little, if any, effort put into making the SWOT analysis more data-based (by most practitioners).
Interestingly, as we have put more and more emphasis on competency-centered strategic planning, we have naturally found that the “W” in SWOT — weaknesses — has become an optional exercise in most companies. This isn’t to say that you should never examine your weaknesses — just that strategic awareness of competencies is far more useful. For example, McDonald’s would be far better served focusing on the convenience of their offering than by attempting to fix the things people dislike about McDonald’s food. This is because many of the things that put McDonald’s ahead of their competition have nothing to do with qualities like healthiness and refined taste. Getting slightly better marks on healthy eating is unlikely to score a big win for McDonald’s over a vegan restaurant. Being slightly more convenient, on the other hand, will definitely get people choosing McDonald’s over Wendy’s.
What does a competency-centered strategic planning process look like? The core of the current approach to Simplified Strategic Planning is well-suited to recognizing, building and exploiting competency. It’s critical that the team be asked to examine and consider possible competencies in the first (situation assessment) meeting, then return to those candidates and choose one to build the strategies around in the second strategic planning meeting. The team should select most objectives for implementation to do one of two things: (1) Build the competency (by increasing your skills or increasing your uniqueness with those skills) and (2) Exploit the competency (by applying it to gain advantage in the marketplace). This will lead to much of the third (execution planning) meeting centering on activities that, while they may appear tactical, will create strong competitive positioning.
A side benefit of this approach is that strategic alignment becomes much easier to attain in organizations that build their strategy this way, since the competency and related strategies and objectives are clearly framed and easily communicated. This means that everyone in the organization will have a clearer picture of how their work contributes to the strategic success of the organization. If you want everyone pulling the company in the same direction, this is clearly a useful result!
So why not just toss out your old SWOT analysis if your strategic planning isn’t working for you this year? I think this is a darn good question.
Furthermore, for more information on how to take your strategic planning to the next level please listen to our webinar: Why Isn’t My Strategic Planning Working?