SWOT analysis is a simple strategy framework – helping you analyze your firm and identify areas that you need to further develop. The analysis includes four components:
- Strengths: Things that you do better than other firms
- Weakness: Areas that you are not as strong as other companies
- Opportunities: New possibilities that you can take advantage of – ideally taking advantage of your strengths
- Threats: Potential problems that could impact the firm.
This article explores key reasons for startup organizations be conducting SWOT analysis.
Reason 1: Helps prioritize areas to focus on
One of the key benefits of SWOT analysis for your startup is that it can help identify key areas important to be working on. Getting the opportunities and threats on the table can help in prioritizing the most important areas to be working on within your firm.
Prioritizing different areas to be working on is particularly important for startups – that likely have resource limitations – be it finance, equipment or time. Systematically considering what areas to prioritize helps avoid the situation where the areas that get focused on are relatively random – without consideration of what is most important.
Reason 2: Draws attention to the firm's resources and market opportunities
SWOT analysis also helps draw your attention to both internal and external factors. Managers can have a natural tendency of either predominantly focusing internally, taking little consideration of the external market, or to focus externally, with less concern for the firm’s resources.
In reality, both internal and external factors are important. If the firm does not have underlying strong resources, then you will likely run into issues competing in the market and other firms are able to outperform your activities. Similarly, if you are too inward-focused, it is possible to lose sight of the opportunities that are in the external market.
SWOT analysis can bring attention to both the internal and external environment. The strengths and weaknesses components of the analysis are largely inward-focused – highlighting how your resources compare with other companies. The opportunities and threats components have a is more outward focus – helping bring attention to the external environment.
Reason 3: Simple analysis: Helps get everyone involved
A final reason for conduction SWOT analysis is that it can help get everyone involved in the analysis of the firm. The SWOT analysis is a relatively simple analysis – helping get the input of everyone within the firm.
As well as getting employee input, this can be an important component of getting employee involvement and ultimately buy-in to the strategy. Involving employees in the process can thus help with the implementation process – with increased strategic buy-in improving implementation success.