Doing a SWOT analysis is like being drunk and thinking you’re writing a masterpiece essay, only to wake up the next day sober thinking what the hell did I write? The solution is to do SWOT in reverse.

But before we get to that point, let’s address the biggest criticism of SWOT.

Some of you may have heard SWOT stands for serious waste of time.

SWOT gets the bad rap of being fluffy content that doesn’t help businesses. And those naysayers would be right, if they were doing it the old-fashioned way.

Definition

SWOT stands for strengths, weaknesses, opportunities, and threats. It was made created over 60 years ago. Today SWOT is primarily used as a business strategy tool to assess how an organization compares to its competition.

SWOT is usually displayed in a 2 X 2 grid where the external factors are weighed against the internal factors.

Here, internal factors are things you can control, which are your strengths and weaknesses. These are considered positive factors.

On the opposite end, external factors are things you can’t control, which are opportunities and threats. And these are considered negative factors.

Here’s a list of what you can focus on when creating your SWOT analysis:

Strengths: What do you do well? What unique resources can you draw on? What do others see as your strengths? Skills?

Weaknesses: What could you improve? Where do you have fewer resources than others? What are others likely to see as weaknesses? Limitations?

Opportunities: What opportunities are open to you? What trends could you take advantage of? How can you turn your strengths into opportunities? Consumer behavior?

Threats: What threats could harm you? What is your competition doing? What threats do your weaknesses expose to you? Competitors?

When filling out your grid, you should use detailed phrases or a sentence instead of one or two-word descriptions.

SWOT

For example, let’s say you were thinking of opening a doughnut shop. Under the old-fashioned SWOT analysis, you would start your analysis in the following order: strengths, weaknesses, opportunities, and threats.

Here, I listed things for my SWOT analysis that I thought were important, but they turned out to be completely meaningless as we’ll discuss a little later.

DOUGHNUT SHOP SWOT ANALYSIS (EXAMPLE)

Start with Strengths:

• The doughnuts are made from scratch daily.
• The company follows health regulations.
• The service staff is adequately trained.

Move onto Weakness:

• I have no experience in the restaurant or food industry.
• The menu only has 5 doughnuts.
• The company has only two employees.

Next is Opportunities:

• We can expand our menu to offer gluten-free doughnut options since our local competitors don’t offer this.
• We can offer online shipping to reach more customers.
• We can sell our doughnuts through distributors.

Then it’s Threats:

• People think doughnuts are unhealthy.
• My local competitors sell doughnuts that are $2.00 cheaper.
• There’s an ongoing high overhead cost due to inflation and supply chain issues.

TOWS

Now, let’s flip it around using the TOWS analysis.

Keep in mind, you shouldn’t focus on whether a threat or opportunity is positive or negative.

Under a TOWS analysis, you would start the analysis in a different order. Start with Threats and Opportunities, move on to Weaknesses, and focus on Strengths last.

DOUGHNUT SHOP TOWS ANALYSIS (EXAMPLE)

First, it’s Threats:

• There’s an ongoing high overhead cost due to inflation and supply chain issues.
• We’re unable to produce 100 of each doughnut flavor daily like our competitors.
• We took out a loan to start the business and the payments will become due in 6 months, which we anticipate a possible default.

Move onto opportunity:

• There’s a local best restaurant doughnut competition and the grand prize is $25,000 and an article in the local magazine.
• We can offer mobile doughnut delivery for local customers.
• We can get contracts with local businesses to supply breakfast for meetings and conferences.

Next is weakness:

• The company has only two employees.
• We have limited capital to expand the business.
• I need to have more suppliers instead of relying on just 1 supplier.

Then it’s strength:

• My business partner is a local public figure that can secure contracts with the top local businesses.
• We have an excellent reputation which leads to an 81% customer retention rate or very high customer loyalty.
• We are the only local shop that offers savory doughnuts, which account for 40% of sales.

SWOT vs. TOWS

So, let’s compare the two.

The problem with SWOT is that it limits your perspective. And the TOWS analysis allows you to uncover things you may have missed.

For example, under my SWOT analysis example [in the Strengths section], I listed “doughnuts are made from scratch daily.” How is this unique or special? I doubt bakeries are warming up Little Debbie cakes in the kitchen. And almost bakeries are making their own baked goods from scratch daily.

So, what about “the company follows health regulations?” Again, this is standard for staying open as a restaurant business. Do you want a cookie or a doughnut for following the rules? Because this isn’t bragging rights or something that sets you apart from the competitors.

Now, moving onto the Threats section. I listed the meaningless threat that “people think doughnuts are unhealthy.”

Look people. I Googled it, and doughnuts have been sold in the U.S. since 1673. Doughnuts are here to stay and they’re not meant to be healthy.

So, you shouldn’t focus on those healthy consumers because those aren’t your customers. And focusing on customers who wouldn’t be your target customers is pointless, which is another topic for another day.

And finally, there’s no correlation between any of the items listed in the Strengths and Weaknesses sections and the Threats and Opportunities sections. So, this analysis is a serious waste of time.

For example, let’s pick on the statement “people think doughnuts are unhealthy” for a second time. This statement has nothing to do with the strengths (how often the doughnuts are made, following the health laws, and staff training).

Nor does it have anything to do with weaknesses (your experience, number of doughnut options, or employees).

Now under the TOWS analysis, I’ve listed meaningful threats: supply chain issues and inflation, the limited number of doughnut flavors, and the possible default of a business loan.

Keeping these threats in context, it’s a meaningful strength that my business partner is a local public figure that can secure contracts with the top local businesses, which can reduce the threat of defaulting on the business loan.

Also, our other strength of high customer loyalty reduces the threat of being only able to produce a limited supply of doughnut flavors. Because it appears that getting customers is the primary issue. But once we get that customer’s business, they will be a repeat customer.

Finally, let’s look at these weaknesses: the company only has two employees and limited capital to expand the business. These weaknesses can be minimized if we use mobile doughnut delivery for local customers through third-party services such as DoorDash and Uber Eats. So, it doesn’t matter if we have only 2 employees, because we can outsource this task, increase profit, and gain new customers.

Also, if we can get contracts with local businesses to supply breakfast for meetings and conferences, we can raise more capital to expand the business and pay down the business loan.

Wrapping It Up

So, if you want to be strategic, you need to respond to the right threats and opportunities. And your threats and opportunities will provide the proper context or perspective for identifying appropriate strengths and weaknesses, instead of things that aren’t related or don’t matter.

For example, it’s not really a strength if it doesn’t allow you to minimize a threat or take advantage of an opportunity.

Also, leave your bias at the door and take off your rose-colored glasses. People tend to overestimate their strengths and underestimate their weaknesses.

If you’re realistic about your analysis and do it in the reverse, your analysis won’t be a serious waste of time.

And the final tip is “don’t set it and forget it.” Market trends change over time and so should your business strategies.

So, new startups should do an analysis every 2 months. And established businesses should do an analysis every 6 months.