Is SWOT Analysis Wrong?


Strengths. Weaknesses. Opportunities. Threats. You have seen the matrix before. SWOT analysis is a popular tool for strategic planners. But does it really work?

The Organizations and Markets Blog debates the issue. Here's the argument against SWOT.

The problem, Makadok explains, is that the relationship between the two drivers of profitability is presented as additive. Thus, in order to earn a high profit, a firm should seek attractive markets and position the firm to have a competitive advantage. However, this "advice is simple, intuitive and wrong" (p.9), because there is an inherent tension between "seeking attractive markets" (thereby advocating a collusion-based approach) and "position to gain competitive advantage" (which implies beating or dominating rivals). In fact, Makadok argues using a simple duopoly model, that the two profitability drivers are likely sub-additive rather than additive.

SWOT analysis is one of those things that is misused because people prefer oversimplification. Business situations are very often complex, but when discussing information with others, we often put things in a simplified form. SWOT is one such simplified form. Problems arise when people like the simplified form so much they use it as a substitute for thinking. They wrongly believe that the simplified tool represents the full analysis. The subtle complexities of the situation get lost, and SWOT (or whatever tool is used) ends up leading to inaccurate results.

Is SWOT analysis wrong? It depends on your perspective. As a quick analytical tool it's quite useful. As strategic dogma it fails miserably.

  • The problem is, people take conceptual models–often very simple ones–and assume that they are *real* rather than just representing one way of looking at things. (The BCG model–cows, stars, dogs, and question marks) seems particularly susceptible to misuse.

    Someone once observed, in the context of World War I generalship, that inferior minds, once provided with an idea, are reluctant to let go of it.

  • David G

    Or, in other words – SWOT takes you straight into RED Oceans where you have to spend heavily on differentiation and on selling its messgae – the critic here must have read BOS :-)

  • “Easy formulas and exotic models may be convenient and occasionally helpful (especially to business gurus who are really just ‘Texas Sharpshooters*’) but they do nothing for your ability to deal effectively with the constantly emerging new realities.”
    T Levitt from the classic book on differentiation, The Marketing Imagination.

    The way to deal with what’s new is to be “widely informed and to think straight.”

    *The Texas sharpshooter is a fabled marksman who fires his gun randomly at the side of a barn, then paints a bullseye around the spot where the most bullet holes cluster.

  • Walter Macd

    SWOT is a tool to help simplify a complex business situation and give a method of examining possible strategies. The strategies which emerge from the use of SWOT must be checked against reality. It is only “wrong” if it is used incorrectly and seen as providing the answer, regardless of what that answer is.

  • SWOT is very much true. Whether some sites believe in it or not, the truth is that people exercise just because they have a fear of being overweight or be unhealthy. SWOT works.