Quantitative SWOT analysis contrasts the internal, controllable aspects of the organization (ie, Strengths and Weaknesses) with external, uncontrollable situational factors (ie, Opportunities and Threats) to create consensus around potential actions an organization might take to reach its goals and objectives.
Qualitative situational analysis provides a poor method for building consensus. In what Dr. Tufte refers to as ‘flatland’, answers pop out at people, but not consensual answers. Therefore, consider using quantitative SWOT analysis, developed by Terrence Metz while attending the Kellogg School of Management at Northwestern University. Traditionally, SWOT provides a narrative description of the current situation. We encourage a quantitative approach whenever you are faced with prioritizing a complex situation involving dozens, or even hundreds of options.
A Quantitative SWOT Overview
SWOT analysis (or as we prefer, SW-OT) reviews the Current Situation by developing shared understanding that helps define WHAT Actions a group should embrace or ratify so that they reach or exceed achieving their Key Measures that include Objectives (SMART), Goals (fuzzy), and considerations (binary). The Current Situation unveils the foundation for justifying Actions. Actions that currently work well are potentially reinforced and renewed alongside developing new Actions. The term used to describe the Actions changes depending on your level in the holarchy. For example, an enterprise will refer to Actions as strategies, a business unit may use the term initiatives, a department or program office may call Actions projects, and a project team may call Actions activities or tasks.
The current situation provides consensual descriptions of:
- Current environment (SW-OT)
- Strengths (internally controlled, as viewed by competitors)
- Weaknesses (internally controlled, as viewed by competitors)
- Opportunities (externally uncontrollable, frequently a trend)
- Threats (externally uncontrollable, frequently a trend)
- Assumptions made in developing analysis
- Model representing how stakeholders view the business
- WHAT the group agrees to do, given their Current Situation, to exceed their Measures in support of reaching their Vision
- What core competencies or strengths should be leveraged?
- What opportunities provide a real chance of success?
- Which threats are most worrisome and justify defense?
- Which weaknesses need to be corrected?
Quantitative SWOT Procedure
Separate the internal things we have control over (ie, Strengths and Weaknesses) and external things we have no control over (ie, Opportunities and Threats). Then use a numerical approach to develop group comprehension and understanding about WHAT Actions they need to embrace, given their Current Situation, to reach their Key Measures (ie, akin to identifying WHAT we should do different tomorrow).
- Have participants prepare their individual factors in advance, but keep them private. Let them reference their factors as we proceed.
- Develop consensual lists and complete definitions (use Definition) for the Strengths, Weaknesses, Opportunities, and Threats. If necessary, reduce each list to the top five to eight candidates (see Categorizing and then use PowerBalls along with BookEnds).
- As you build four different lists, describe each item clearly and carefully. Strengths and Weaknesses are internally controlled as viewed by competitors and outsiders. Opportunities and Threats are externally uncontrolled and frequently represent trends.
- Build and enforce strong definitions and potential measurements behind each SW-OT item. For example, a strength of “Brand” could be measured as the brand preference percentage or the threat of “Transportation Costs” could be indexed to the cost of a barrel of oil or price for a gallon of diesel.
- The best sequence to develop the factors might be:
- External Threats: It’s easy to imagine what could go wrong.
- External Opportunities: Since Threats come easier, remind participants to refer to their list of prepared factors to start off. Do NOT allow them to define internally controllable Weaknesses as Opportunities for improvement. If they are controllable, they are Weaknesses and NOT Opportunities.
- Internal Weaknesses: Participants are usually more sensitive about things going wrong than with what is positive. Please
- Internal Strengths: Begin by referring to their private lists.
- Convert your matrix into a spreadsheet with Strengths and Weaknesses on the horizontal axis and Strengths and Weaknesses on the vertical axis (because it is easier to visually focus on the top items).
- Remind participants that they are on the inside looking out and have them score, using instructions that follow on a subsequent page.
- Aggregate the individual scores into a collective score. If you are using our spreadsheet, it will automatically calculate a group total.
- Review with the group to identify the most impactful Actions—strategies, initiatives, projects, or activities.
NOTE: First, DO NOT let a group define its Weaknesses as Opportunities for improvement. Second, carefully enforce perspective and workshop scope because the strengths and weaknesses MUST BE within control of THIS group, NOT simply the company or organization. For example, the group may not control its budget and or financial resources so they may be viewed as a threat to the group.
- How do you achieve your success currently?
- Personally, what do you know that works well?
- What do you do better than others?
- What do others outside view as your strengths?
NOTE: Some candidate strengths might include financial resources, purchasing power, economies of scale, patents, proprietary technology, cost advantage, brand image, marketing, product innovation, experience, etc.
- What could you improve?
- Personally, what do you know that does NOT work so well?
- What do others outside do poorly and so do you?
- What should you stop doing?
NOTE: Some candidates might include lack of strategic direction, obsolete facilities, lack of management depth, operating issues, underperforming R & D, narrow product line, brand image, distribution network, marketing, financial prowess, excessive cost basis, etc.
- What are you not doing yet but could easily see yourself doing with the right momentum?
- What changes on the horizon in political policy might help?
- Which trends provide a new opportunity for you?
NOTE: Some candidates might include new market opportunities, complacency among rivals, market growth, exogenous economic factors, regulatory trends, supply channel technology, vertical integration, etc.
- What is your competition doing much better than you?
- What regulatory issues could stop or hinder progress?
- Which trends are a real threat to your organization/ project?
NOTE: Some candidates might include new or existing competitors, competitive alternatives, slowing market growth, adverse government policies, vulnerability to recession and macroeconomic factors, changing buyer needs or tastes, adverse demographic changes, etc.
Create a definition package so that each of the characteristics scored is based upon an agreed “operational definition.”
Participant Scoring Instructions
- Working within each column (ie, external condition), one at a time ask: “What am I suggesting we do (to take advantage of this opportunity) or (to defend us against this threat)?”
- You have nine points to be used in each column. Within each column, distribute the nine (9) points according to the impact or perceived value of each proposed Action (ie, WHAT we should do to seize an opportunity or defend ourselves against a threat).
- The total for each column should equal nine (9).
- Avoid assigning one point to multiple items by awarding the most significant items three, four, or more points.
- Strive to assign points to three cells at most in each column. Assigning nine points to only one cell is absolutely AOK. Another approach might be to assign five (5) points to the most important, three (3) points to the next important, and one (1) point to the third most important cell, with the balance of the cells kept blank.
- Use your business understanding—a blank cell does not mean it is unimportant. Rather, it means it is less important than others that offer more impact or leverage. If you are compelled to assign similar values to everything, the results will be watered down and provide less direction for the action plan than if you are able to focus on the most compelling Actions.
NOTE: Participants should think about each cell in a column very carefully, and precisely asking “WHAT can we do to seize this opportunity?” or “WHAT do we need to do to defend against this threat?” They might write their thoughts on a separate sheet of paper and when they have completely analyzed a column, go to the cells that represent the most important thoughts and put the most points in those cells.
- Collect the scoring. Using a spreadsheet, compute the final scores for each intersection, each column, each row, and each quadrant.
- Review the scores with the group and highlight the rows and quadrants with the most significant (ie, highest) scores.
- Have the group identify WHAT Actions the group needs to take to reach their objectives, converting the scoring into narratives. Anticipate the “law of large numbers” as people speaking early will defend themselves with the “large number” on the spreadsheet.
NOTE: In quadrant analysis, proactive organizations will find most of they points allocated to the upper left quadrant, leveraging Strengths to take advantage of Opportunities. Reactive organizations will find most of their points in the lower right quadrant, shoring their weaknesses to defend themselves against threats.
Example of Quantitative SWOT Analysis by One Person
A fictitious software company employee looks at its strengths as experience, good people, creative ideas, and product integration. Its weaknesses lean towards newness to market and development time. Opportunities may be realized through integrated products, new market, and external market research data that is available. Threats develop from recession, other large competitors (eg, Microsoft), and hardware manufacturers. One person may score as follows (scored from 1 to 9, with 9 indicating greatest impact):
Quantitative SWOT Analysis Discussion
The scoring indicates the most important strengths are product ideas and integration. Additionally, development time represents their most significant weakness. Integrated products and growth of computer manufacturers capture the most favorable opportunities.
Remember that strengths matter if they help take advantage of an opportunity or fend off a threat. Also, weaknesses matter if they prevent a group from seizing an opportunity or making them vulnerable to threats. Opportunities require some strength for them to be leveraged and therefore, seized. The matrix helps to highlight which strength and, weaknesses compel strategies, initiatives, or projects.
Eleven Person Aggregate View Using Quantitative SWOT Analysis
Here is a real-life example with eleven participants. Note that the moderate strengths and weaknesses had little or no impact on the plan. Participants largely weighted their most significant strengths and weaknesses to develop strategies. Quantitative SW-OT analysis helps focus future efforts – products, projects, strategies, and actions. It takes a few hours to complete, but it is worth the effort when consensus becomes critical.
Again note in the example below that only the most significant strengths and weaknesses have a demonstrable impact on the planning effort. The stuff in the middle, we call lukewarm, has little or no bearing on the planning process. Consistently we have seen that the moderately important strengths and weaknesses have little impact on planning.
Actions (or WHAT)
Using the law of large numbers,participants convert numerical scores into the WHAT (needs to be done) portion of any plan.
DEFINED: Any strategy, initiative, or project represent a program of Action for reaching Key Measures. Quantitative SW-OT Analysis allows us to interpret WHAT at any level in the holarchy, whether strategies, initiatives, projects, or activities—WHAT needs to be done. We’ll refer to them collectively as “Actions.”
The deliverable captures a concise description of a plan of Actions—what we agree to embrace to exceed the Key Measures. Each proposed Action indicates some level of priority and criticality.
Actions are the core of any plan. The rest of the plan is meaningless without means to achieve results. Each Key Measure must have at least one proposed Action in support of it. Each proposed Action must support at least one Key Measure.
Use the Definition Tool to fully define terms and proposed Actions. There is no need to prioritize the Actions because you should conduct Alignment to create a sense of prioritization.
NOTE: You may also look at the totals in each row to serve which strengths or weaknesses have the greatest impact on successful planning.
- Using BookEnd rhetoric, force rank each Strength or Weakness specific to each external factor. For example, if there are twelve combined Strengths and Weaknesses, we would ask and do the following in each column:
- Instruct each participant to ask: “Of these twelve controllable factors, which has the greatest impact on (taking advantage of this opportunity) or (defending us against this threat)?” More is better so assign the answer a twelve (12).
- Now instruct each participant to ask: “Of the remaining eleven factors, which has the least impact on . . . ?” Assign a one (1).
- Have them continue using the BookEnd rhetoric, which is next most, next least, etc., until all have been assigned a rank.
- Aggregate the scores and continue with the conversion into Action described above.
- You might conduct Quantitative SW-OT for the current situation, and then conduct another Quantitative SW-OT for some agreed upon time in the future. If projections are evidence-based, then the strategy can be unveiled by determining what Actions will get us from here to there.
- To support change management, you could also conduct Quantitative SW-OT at varying levels within the organization. Contrasting the Current Situation at the C-Suite, Director, and Supervisory levels provides interesting and compelling evidence as to WHAT Actions need to occur that will get us from where we are to where we would like to be in the future.
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