A SWOT Analysis is often used by businesses and organisations in their strategic planning process.
In order to devise an effective strategy, organisations need to understand their own situation and the world around them through an objective analysis or ‘reality check’. This involves an Internal Analysis of the organisation and an External Analysis of the world in which it operates.
The Internal Analysis can use the PRIMEFACT checklist (see also below) to examine an organisation’s characteristics in a systematic and objective way. This leads to the identification of Strengths and Weaknesses.
The External Analysis needs to thoroughly understand the ever-changing world in which the organisation operates and the factors at play that it largely cannot control. A PEST Analysis (see also below) is often used but an ICEDRIPS Analysis (see also below) is much more thorough. The External Analysis leads to the identification of Opportunities and Threats that relate to the organisation.
A SWOT Analysis is the combination of the Internal Analysis and External Analysis which identifies Strengths, Weaknesses, Opportunities and Threats (ie S.W.O.T) for any particular organisation or business.
Some characteristics of an organisation could be both a strength and a weakness – depending on the markets and situations in which the organisation operates. For example the fact that an organisation is small could be regarded as both a weakness (fewer resources) but also a strength (more agile).
So another approach to this ‘internal analysis’ of strengths and weaknesses is to use a more neutral term and list the ‘characteristics’ of you and your enterprise. You can then ask in which creative fields, which business situations, or with which particular customers, do these characteristics become strengths. It is also important to assess the strengths and weaknesses of an organisation in relation to rivals. You may have a particular strength, but if your competitors have it too, or are even better, then it does not give you any Competitive Advantage, so it is your relative strengths that are an essential element of your Competitive Advantage.
Similarly, the identification of Opportunities and Threats depends on what you are planning to do. Opportunties can be identified but they might also be equally strong opportunities for rivals. Any Opportunities that you can exploit better than rivals give you Competitive Advantage. Threats may apply to all players in a market, but if you can minimise or avoid particular Threats better than rivals, you can derive a Competitive Advantage.
Strengths, Weaknesses, Opportunities and Threats need to by analysed in relation to competitors.
SWOT Analysis needs to be undertaken in the context of the competitive environment; it tells us nothing useful if we don’t factor in competitors.
We really need to identify
– Relative Strengths and
– Relative Weaknesses;
– Opportunities we can use better than competitors and
– Threats we can avoid better than competitors.
In this way, a SWOT Analysis combined with an analysis of Competitive Advantage helps create a winning business strategy.
The PRIMEFACT checklist for Internal Analysis of Characteristics, Relative Strengths and Relative Weaknesses
What are the strengths and weaknesses of our people? Employees, directors, members, associates, advisers and other stakeholders.
Reputation (or Brand).
What is our reputation with our target customers? What are the strengths – or weaknesses – of our brand or brands?
What intellectual property do we have? How is it protected? How easily can it be turned into income streams?
Market Research/ Marktet Information.
What information do we have about market segments and market trends? What do we know about individual clients and their specific needs?
Ethos (or Values or Culture).
What is our ethos, our values and our organisational culture? Do all stakeholders subscribe to this same ethos?
Finances, ie money.
What is the current state of profitability, cashflow and assets? How much money do we have to invest or can we borrow?
Agility (or nimbleness or change-ability).
Are we agile enough to seize new opportunities. Are people prepared to change and ready for change? Or are we unable to change?
Collaborators (Alliances, Partnerships and Networks).
What are the strengths and weaknesses of our associations with other businesses and organisations (including government)?
Talents (competencies and skills).
What are our core competencies. What skills do we have available and what gaps are there? Are we able to learn new skills?
A PEST (or STEP) Analysis invites you to list all the relevant external forces using four headings: Political, Economic, Sociological and Technological. These are useful headings; it doesn’t matter that some items might be both political and economic (eg taxation and exchange rates).
However, to look in eight rather than four directions, use the ICEDRIPS checklist that follows…
ICEDRIPS Analysis of Relative Opportunities (we can use better than rivals) and Relative Threats (we can avoid better than rivals)
Innovation including new technology and the Internet (of course) but other innovations too which may be particular to an industry.
Competitors. Not only direct competitors but threats from substitute products etc .
Economic factors such as inflation, exchange rates, downturns in the industry, public spending etc.
Demographics. The relevant statistics of age, gender, geography, social class etc, and changes in these.
Regulatory environment, ie laws, regulations, agreements and conventions.
Infrastructure such as telecommunications networks, transport, public services and utilities.
Partners. Strategic alliances with other companies or organisations.
Social trends, including acceptance of technology, use of leisure time, fashions and changing beliefs.
NB: The factors above are not in order of importance, the checklist merely provides an easy to remember acronym.
Tip: the best way to use ICEDRIPS is to jot down lots of ideas quickly – maybe in a group – and without pondering or challenging them at first. Afterwards you should sift through them to identify the important few factors from the trivial many. (According to the 95:5 Rule, it’s likely that just 5% of opportunities and threats could have 95% of the positive or negative effects on your business.)
This PRIMEFACT checklist and the ICEDRIPS checklist were first published in the book ‘T-Shirts and Suits: A Guide to the Business of Creativity’ and feature in the Designing Your Creative Business ( DYCB ) toolkit and workshops.
David Parrish helps creative and digital businesses to become even more successful by combining their creative talent with smart business thinking. He works internationally as a business adviser, keynote speaker, trainer and writer. Contact David Parrish to discuss how he can help your creative business.