Adapted from "S-O-F-T Analysis", by Blue Rock Capital

"Problem-solving" is not planning

"Planning" is not the same as "problem-solving"

Effective planning can not be done without addressing the problems that are critical.

Not all problems deserve attention. Some just go away.

"SWOT" is an acronym which represents "Strengths", "Weaknesses", "Opportunities", and "Threats". To undertake a SWOT analysis, ideally, the first step is to make a long list of every factor that defines the company's situation. If you have a detailed one-sentence description of the company, this is a great place to start. If the company already has a business plan, page through and start "circling" the various factors that are descriptors of the company and its situation.

The next move is to triage this long list in order to sort the entries into legitimate "planning issues" (List A) and true "problems" (List B).

Take List B and determine which of the "problems" are likely to "just go away". Put the issues that are likely "just to go away" off to the side and focus on List A (true "planning" issues) plus the balance of list B (problems that are not likely just to go away).

Then assign the issues to the specific categories of the SWOT analysis - which ones are "Strengths", which ones are "Weaknesses", which ones are "Opportunities", and which ones are "Threats?"

Note that a company's "Strengths" and its "Weaknesses" (its "flaws") are obviously internal considerations. In "Strengths", list your company's internal strengths that make it competitive in the marketplace. In "Weaknesses", list any weaknesses along the value chain of your venture that must be strengthened to ensure success.

Note that a company's "Opportunities" and "Threats" in a company's operating environment are clearly external considerations. In "Opportunities", list the opportunities in the market your venture is going to capitalize on. In "Threats", list the external threats that your venture must be aware of problems that it has to solve.

Equally obvious is the fact that "Strengths" and "Opportunities" are both positive considerations. "Weaknesses" and "Threats" are both negative considerations. To express these relationships, it can be helpful to think of these factors in a 2 × 2 matrix (see below).

In order to do effective strategic planning, there are specific ways that this information can be used by the company. In general, it is clear that the company should attempt

• to build its Strengths

• to reverse (or disguise) its Weaknesses

• to maximize the response to its Opportunities, and

• to overcome its Threats.

Using the matrix below, try this exercise for your company.