SWOT analysis: how to make a SWOT that leads to choices, with a worked example

A SWOT analysis lists your strengths and weaknesses, which are internal, and the opportunities and threats in your environment, which are external. Almost every business plan contains one, and many of them end in the drawer: four boxes full of bullet points that nobody uses to decide anything. The tool is not the problem. The way it is filled in and, above all, what happens next decides whether it is worth the effort.

Below, the SWOT is built from the results of the external and internal analysis and then put to work in a confrontation matrix: a grid that shows where your strengths and weaknesses meet the opportunities and threats that matter. The example is Norvane Building Services, the fictitious building services firm with 35 staff that is choosing between new-build projects and maintenance and retrofit work.

A SWOT analysis is a starting point, not a result

Terry Hill and Roy Westbrook reviewed how consultants used SWOT for UK companies in a government support scheme. They found long lists of over 40 factors on average, general descriptions, no priorities and no attempt to verify any of the points (source: Long Range Planning, February 1997). Worse, nobody used the outcomes later in the strategy process. Their advice was to question the tool. A more useful reading is that a SWOT only works as a summary of real analysis, followed by a step that turns it into options.

Where SWOT really comes from

Popular accounts credit SWOT to various people. Archival research by Richard Puyt and colleagues traces it to Robert F. Stewart, who led a planning research group at the Stanford Research Institute from 1962. Stewart published the SOFT approach in 1965, in which managers sorted planning issues into safeguarding the satisfactory, opening opportunities, fixing faults and thwarting threats. In 1967 the label became SWOT. In the original method, every manager wrote down the key planning issues of their own unit, and groups of managers discussed them before proposals went to the planning committee. SWOT was meant as a shared, structured conversation, not a template filled in by one person.

What goes in each quadrant of a SWOT analysis

The dividing line is control. A strength or weakness is something you can change yourself; an opportunity or threat happens whether you act or not. The results of the internal analysis fill the top row, the ranked list from the external analysis the bottom row.

How to do a SWOT analysis, step by step

1. 01

   Restate the strategic question

   Write it at the top of the sheet. Every point has to earn its place against that sentence.

2. 02

   Bring in the ranked opportunities and threats

   Take only the findings above your cut-off from the external analysis, in order of score.

3. 03

   Add strengths and weaknesses with evidence

   Take them from the internal analysis, each with a figure, a comparison or a customer quote.

4. 04

   Score the confrontation matrix

   Each participant scores every combination alone, then the group discusses the cells where scores differ.

5. 05

   Mark the hot spots

   Circle the strongest positive and negative cells and hand them to the TOWS matrix as input for options.

Five rules for a SWOT that leads to choices

• Start from the strategic question: include only factors that touch the question you set in step 1.
• Keep it short: five to eight points per quadrant at most, ranked. If you have more, you have not chosen yet.
• Be specific and give evidence: "maintenance contracts with six landlords, none lost in five years" instead of "loyal customers".
• Think relative: a strength counts only if it is stronger than what relevant competitors offer; your profit and cost benchmark helps here.
• Keep actions out: "open a webshop" is not an opportunity; "customers in our segment are moving their orders online" is.

SWOT analysis example: a building services firm

Norvane's two analysis sessions produced the following SWOT. Each point passed the cut-off in step 2 or came out of step 3 with evidence.

Fictitious Firmfocus example.

The confrontation matrix: where inside meets outside

A SWOT lists factors side by side; a confrontation matrix makes them meet. Put the strengths and weaknesses in the rows and the opportunities and threats in the columns. For each cell, ask one of four questions:

• Strength and opportunity: can we use this strength to capture this opportunity?
• Strength and threat: does this strength help us fend off this threat?
• Weakness and opportunity: does this weakness stop us from capturing this opportunity?
• Weakness and threat: does this combination make us vulnerable?

Score each cell from +2 (strong positive combination) through 0 (no relation) to -2 (serious problem). Let every participant fill in the matrix alone first, then discuss the cells where scores differ most. Those discussions are often where the real insight comes from.

Worked example: Norvane's confrontation matrix

Fictitious Firmfocus example. Scale from +2 to -2; row and column totals are sums of the cells.

What the matrix showed Norvane:

• The main lever: both strengths score +2 on the retrofit opportunity. Landlords that trust Norvane, and whose buildings it already knows, are the natural first clients for retrofit programmes.
• The main blocker: the shortage of technicians runs through everything, with the W1 row at -5 and the T1 column at -4. Any route that needs more people needs a plan to find them.
• A cushion: stable maintenance income (S1) softens the new-build slowdown (T2) and buys time for a shift.
• A combination to reduce: low-margin new-build meets a shrinking new-build market (W2 and T2, -2), and it absorbs technicians who could do retrofit.

Note that the biggest opportunity, O1, has a column total of only +1. The weakness in staffing cancels out the strengths. That is why you read the pattern of the cells, not just the totals.

From matrix to strategic options

The hot spots of the matrix are raw material, not yet a strategy. Heinz Weihrich turned them into a method in Long Range Planning (1982): the TOWS matrix, which derives a type of strategy from each combination of quadrants. That is the next step, step 4b, from SWOT to strategic options.

SWOT in a small business and in a larger organisation

Common SWOT mistakes

• Long unranked lists: forty points, ten per quadrant, give a confrontation matrix of four hundred cells and no focus.
• Strengths every rival has: "experienced staff" counts only if yours are measurably better.
• Opportunities that are actions: they skip the analysis and jump to a favourite solution.
• The owner's view only: the person who built the business is the least likely to see its weak spots.
• No next step: a SWOT without a confrontation and options is a list, not an analysis.

Limitations of a SWOT analysis

A SWOT is a snapshot. It ignores how competitors will react, depends heavily on who is in the room and puts no money value on an opportunity. Use it to organise what you know, not as a replacement for the analysis behind it. When the future is very uncertain, make a separate confrontation matrix for each scenario and look for moves that work in all of them.

The SWOT sits in the middle of the strategy process in five steps: it depends on the analyses before it and feeds the options after it. All strategy topics are in Strategy.