Origins of SWOT

When starting to analyse an existing business for investment or looking to build a new business, it’s often said in strategy circles that you should do a ‘SWOT’ analysis.

For those that don’t already know, SWOT stands for ‘Strengths, Weaknesses, Opportunities and Threats’ and is seen as a good framework to formulate your thoughts on a specific business.

The origins of the technique goes back to 1965 and were formed by Robert Franklin Stewart. Stewart first worked for Lockhead Aircraft and then later at the Standford Research Institute (SRI) developing his theories and was seen as a pioneer in corporate development. It was originally called the SOFT approach and asked managers to record 8-10 planning issues faced by their unit and categorise them as ‘(safeguarding the) Satisfactory, (identifying) Opportunities, (fixing) Faults or (thwarting) Threats’.

Robert Franklin Stewart created this approach to hedge against top down strategy being imposed on an organisation and introduced both diversity (of opinion) and creativity into how business strategy is formed.

There have been many papers written over the years criticising the approach with critics pointing out that it is a ‘point in time’ tool and doesn’t help when a business is changing or adapting to a shifting environment.

My own view is that it’s a valuable technique especially when used in conjunction with something like Porter’s Five Forces. It helps neatly frame the work you are doing and can assist if you weight the factors towards level of importance or impact. Not all lists are created equally.