SWT (Strengths, Weaknesses & Trends) The Strategic Tool that goes beyond the SWOT Analysis.
Are your top line, revenue, and gross margin going in the right direction? Are you keeping up with your industry growth rate? And if so, can you double your industry growth rate? If not, someone else is eating your market share.
Strategic planning is your secret weapon to scale. One of the reasons for that is that it helps you create a roadmap to get to the place you envision. It also helps enable the top line and gross margin to go in the right direction at the correct growth rate.
But another important and often missed reason is that a strategic plan enables you to see around corners. When you can see around corners, you know when to develop strategic pivots to maintain toplines and growth margins.
Often people will see a unicorn company and claim the founder had business success because they were super lucky or happened on a great thought for new technology. But most of the time, a ton of work and behind-the-scenes strategy went into their success.
Over time, they built up the muscle memory for reading the market and found a way to thread the needle when others didn't.
The SWT tool is one of the Scaling Up Growth Tools that can help you develop that long-range vision for your industry. Many Scaling Up Coaches have pointed it out as the starting point they use in the strategic planning process when working with clients.
We asked Scaling Up Coach Herb Cogliano to walk us through the SWT tool, how he uses it with his clients, and how he trains entrepreneurs and executives to use it when he teaches the Scaling Up Master Business Course at Growth Institute. His comments include:
How to use the SWT tool in conjunction with the more traditional SWOT analysis
How SWT helps you keep your strategy relevant to market dynamics which are continually accelerating at a faster pace
How SWT enables you to recognize if you should pivot or, you should double down on your current strategy
You can also listen to "Improve Strategy Using SWT: Strengths, Weaknesses & Trends," a conversation we hosted recently in The Scaling Up Coaches Club on Clubhouse.
Listen to Scaling Up Coach Herb Cogliano answer questions and explain how to use the SWT to develop or improve your strategy.
What is SWT Tool?
SWT stands for Strengths, Weaknesses, and Trends. The SWT tool helps you identify market differentiation and dynamic changes occurring around the world in general and in your industry.
The hallmark of a great strategy is the ability to add value for your core client and differentiate your product or service from your competition in the market.
When running a business, there are always more decisions to make than time to address them. When you use SWT in strategic planning, you are using it to help you first identify your strengths, weaknesses, and trends. Then you use it to help you zero in on where to focus.
The SWT Analysis helps you look for what you can change or impact during your planning period, either the next 90 days or a year. Because market forces are accelerating faster and faster, you look within the broad issues for the specific problems you can address right now.
This means that, over time, you will get faster returns because you are working on specific problems within those broader issues.
Herb shared how the SWT tool impacted his decision-making in running a company. "We had to look in the mirror and be brutally honest about what we needed to and could achieve for this quarter. And for the year ahead."
Get all of The Scaling Up Growth Tools including the
One-Page Strategic Plan.
What is the difference between the SWT Tool and the more traditional SWOT tool? And should you use both?
The SWT tool helps you look at trends or external factors happening in the world or other industries that could impact your business. The trends could help you identify opportunities or threats that could hurt your company or help it grow.
The SWOT analysis, which many people are familiar with, analyzes your company's strengths, weaknesses, opportunities, and threats. Your SWOT analysis is generally related to the markets you directly serve in the industry and your head-to-head competition.
The SWT tool is beneficial for upper management. Herb says, "Your senior team uses the SWT to do an outside-in look from around the world based on what is trending in your market or industry." They are generally the team with the most global view of your company and can see the bigger picture and long-term horizons.
The SWOT tool is still vital in helping develop your strategy, but it is most helpful to use with your middle management team.
Herb explains that the SWOT and SWT tools are also helpful in developing your internal talent. By using these tools regularly, you help your team think more strategically and get them ready to make more significant contributions to the company.
"When working with a senior team, we usually work on our annual plan and maybe a little farther beyond in terms of what can impact our future as a company. Often we're meeting for quarterly planning, which is the next 90 days ahead. What's essential in any leadership team is supporting the CEO in the visioning of the company. To do that, you need to be able to see around corners and look at the positive and negative trends that could disrupt your strategy."
"When we go into recession, if we're dealing with another COVID situation, or we're dealing with inflation, political issues, unrest, how would that impact my marketplace and, ultimately, my strategic plan? It would be very naive not to look at those issues and trends and how they impact your company."
We do some work in advance with the senior leadership team around what trends are going on in their industry so that we can sit down and introduce the SWT tool early in the strategic planning process. The SWT tool gets the team outside of the echo chamber. It helps your team expand beyond insular thinking.
In middle management, you're very execution-oriented and tactically oriented, and involved in the day-to-day operations. The SWOT tool is a way to pick their head up from the desk and look at the operation in relation to the markets you serve and your competitors.
"We also recommend using it with your middle managers because they're closer to the market and your competition than senior managers, so they have a more informed view. Getting their views and sharing them with the senior team is essential so they can use them with the SWT as part of your planning process.
What are some examples of how to use the SWT Tool?
Herb shared one example. "Take a look at Facebook. There was a time before they went public. Their app was only on the desktop, yet they started to see with the SWT type leadership thinking that everybody was going to the mobile devices.
"But their products had yet to be mobile enabled. They were seeing it with their ad income revenue. It was starting to dip. A variety of things were just beginning to blip on their radar screen. They looked at it thoughtfully as part of this SWT, strategic thinking as part of a planning process."
"They realized it would be horrendous for growth if they didn't do something about it quickly. During one of those sessions, Mark Zuckerberg and the team planned to become mobile-first. They needed to develop the mobile platform, acquire some talent, and acquire some tuck-in companies."
"As a result, 98% of their new revenue for that year ahead came strictly from mobile ad revenue. If they had not made that pivot using SWT type analysis, they might not have been the company they are today in their public offering. Their IPO would have turned out dramatically different."
What kind of results can you expect from using a SWT Analysis?
Most of us are not born strategic thinkers. It is a development process, like developing many other capabilities in your professional career.
Herb pointed out that one crucial thing to remember about this type of analysis is that it often takes time to see the returns in strategic thinking. If this type of analysis is new to your team, it takes patience for them to understand how to use these tools and get better insights and outcomes from them.
"This didn't happen with our leadership team overnight. Every quarter we went back and reviewed our SWT, and we would update and iterate. Every time we got a little bit better, we were a little more insightful. Over time, our strategic planning insights became that much more valuable.
"It's not a quick hit type of thing. It's a progressive thing. Inside many small to medium-sized companies, the leadership team is traditionally tactical. Using this grows their strategic thinking capacity, making it an excellent asset for any leadership team and planning.
Our middle managers understand the operation. They know the products and the service delivery area because they're managing teams in that effort. They connect those tactical dots with the SWOT analysis for planning and strategic development. They're also going against our competitors every day.
Herb says, "After they have exposure to that process for a while, they are ready for the next phase, which is the trend analysis looking at the difference between the forest and the trees."
What are some examples of strengths and core competencies you would include in a SWT analysis?
Most people think of strengths as strong company culture, strong brand reputation, great market, market coverage, or market service area. Those are all great examples. But in addition to those, you also want to identify your core competency.
Most companies never connect that final dot. They stop at identifying a great brand or culture and never go to the next level to determine the core competency.
When you identify your core competency, you can weaponize it and leverage it in your strategy to create a stream of ongoing growing revenue.
A company typically has inherent strengths and they have three specific attributes.
It is not easy for your competition to imitate them.
It can be reused or repurposed for many products in many different service areas worldwide.
It must contribute to the overall value of your product and benefit the end customer experience.
Herb shared some examples from major brands to help you identify the different types of core competencies that help fuel their growth. "If you look at a company like Honda, a global brand, they are world-class at high revving, small engine manufacturing. They take that one core competency, and they put it in cars, motorcycles, lawnmowers, you name it, in various sizes and options for many different client preferences all around the globe. That one core competency fuels the engine for product development and increased top line and margins."
"Another example is Apple. Their semiconductor design is a core competency. They again take that same conductor design and put it in phones, watches, iPads, laptops, different preferences, and global markets, creating this chain of innovative product revenue and growth.
"Do you remember growing up and using a Casio calculator as a little kid? A Casio core competency is liquid crystal display screens. They put that liquid crystal display screen into miniature calculators, pocket TVs, digital watches, weight scales, and various products. They created the core competency by coordinating diverse production skills and integrating technology streams in miniaturization and microprocessor design in material science. Those things together created this core competency that enables continued topline growth and margin growth for that company worldwide."
Herb also shared an example from an SMB client in the personnel services industry. "Although many people in the staffing industry have access to many resumes, they've created this incredible technology that not only harvests suitable candidates but enables them to develop relationships so that these people are not just a resume.:
"One of the biggest pet peeves in the personnel industry is that people say you contact me about a job you want to submit me for an interview. But you never follow up after the interview. If I don't get the job, I will never hear from you."
"So they created technology that allows them to have continuous ongoing communication that protects their brand, engages throughout the candidate flow, and makes it an excellent experience for the candidate and the customer. And it created an incredible proprietary core competency for this company. They're very proud of what they uncovered during this SWT process."
What are some examples of weaknesses you would include in a SWT analysis?
Herb provided some examples of weaknesses that would go onto a SWT analysis. Again he offered an example from a major brand so that you can recognize their core competency and another from his own former company.
"3M is very successful, but during their process, they learned that direct channel sales were not a strength of theirs. For some reason, no matter how many sales executives they hired, they never mastered it. They always had to go back and try to fix it."
"By understanding direct channel product sales was a weakness, they planned around it in their SWT. As they developed products, they looked for products selling very well through indirect channel models. And they stayed away from channels where direct channel sales were vital to their success."
"By having the insight of that weakness, they could strategize on how to pivot around it. They have the right indirect channel partners for their products and continue doing well."
One of my companies in the staffing industry had incredible recruiters and talent managers, but we were not good at business development.
Although we tried for almost two decades, we never could master it.
So in our strategy, we would partner with managed service providers with incredible sales channel development skills and be their strategic partner in managing talent sourcing. They would do all the business development, and there was a lesser bill rate for those people."
"But my overhead was much lower because I did not have to fund and support a sales team. So my net margins were identical, although my gross margins were lower."
This tool helped pivot around it. If I didn't see that weakness in part of my SWT thought process, I would have kept putting loads of money into sales and being bad at it. And I would have gotten less profit and could have lost money."
What are some examples of exploring broader external trends you would include in a SWT analysis?
Some examples of trends that you would explore or include in completing your SWT are:
Political or Global trends
Trends in adjacent industries
Economic trends.
Interest rates,
Inflation rates
Societal trends,
Work from home
Technology trends, like the use of artificial intelligence
Environmental movements or sustainability efforts
Legal, regulatory, safety, or labor law changes
If you are struggling to find the right trends. Herb suggests you focus on some of the following ideas for research before you complete your SWT.
Ask the other team members for their input on major trends.
Do market research with your trade association about the trends or significant changes they see in the industry.
Look to global publications that cover your industry for trends that might trickle your way from distant markets
Explore the political issues, and economic issues are happening that will influence your industry or region
How often should you do a SWT analysis?
The Scaling Up methodology recommends that you invest time and complete a SWT analysis every 90 days and when doing annual strategic planning.
Herb explains, "I've been running and working in companies for over 35 years. In the last five years, I've never seen such an accelerated rate of change in market dynamics."
"And I don't think that's going to change anytime soon. I don't think it's ever going to get slower. If anything, it's going to speed up. So for your strategy to be relevant. You can't afford to let 6-12 months go by and not keep your eye on it."
"And that's why we have this discipline of every 90 days. You're getting with your team. You're updating the SWT and the SWOT."
Herb also shared that some 90-day periods may be pretty consistent. You may not have any significant updates, which is fine. But you start developing the discipline to review the tool and its insights. You're always prepared when you do that, whether it's significant changes or a minor update.
What comes next in strategic thinking after completing the SWT Analysis?
Herb explained that he asks his clients to use the information they get from doing the SWT and SWOT to start their execution planning and answer questions like:
What do my clients need from me?
What is the one thing that we should start doing?
What is the one thing that we should stop doing?
What is the one thing our company should keep doing to help or serve you better?
These collective insights are all part of a strategy formation mindset that helps you set priorities.
Additionally, he says, "If your revenue is not going in the right direction or at the correct rate of growth, you may need to consider a strategic pivot."
You may need a product innovation or category pivot. During COVID, many manufacturers shifted from making their products to making face shields or other items for first responders.
Or you may need a business model pivot. For example, during COVID, many doctor's offices had to pivot from in-person to telemedicine.
Some companies benefit from a market pivot, such as from selling to large enterprise accounts to shifting to small-medium business accounts.
Or your pivot could be something as simple as an offer pivot. Do you currently offer something bundled with everything under one price point? If so, price sensitivity may be affecting your product. You might need to unbundle and provide your product a la carte.
These are the questions you need to ask yourself to decide if the pivot is required and, if so, which one your team should consider.
Herb shared, "When planning, you want to put your best people on the best opportunities with the amount of resources you have at that time. And this helps you cut through a lot of the clouds in the fog and be brutally honest about your current situation in relation to where you need to go for the next quarter or the following year. You don't have to love everything you uncover, but you have to plan according to it to succeed.”
