SWOT: ASSESSING YOUR CHALLENGES AND OPPORTUNITIES
by Pamela Millard
There are signs that the economy is improving. Some have even suggested that the recession is over. Let’s hope so. For many businesses like yours, it’s been a tough year. Who knew when you put together such an aggressive growth plan back in the fall of 2008 that things would go so wrong so fast? This doesn’t mean that planning “doesn’t work.” However, it might mean that you need to refine the process.
Before you tie a ribbon around your strategic plan for next year, make sure you’ve done a thorough assessment of your strengths, weaknesses, opportunities, and threats (SWOT).
SWOT
A key aspect of the planning process is to create a baseline for where your agency is today, compared to where you could be in the future. Often referred to as a SWOT analysis (Don’t you just love those acronyms?), this baseline provides both a retrospective and a prospective view of your business
There are a few basic rules.
- Be realistic about the strengths and weaknesses of your organization.
- Be specific. Avoid grey areas.
- Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
- Keep it simple. Avoid complexity and over-analysis.
SWOT is subjective. Although some of the information you need to complete the SWOT analysis is based on facts, understanding whether the facts create threats or opportunities requires judgment. Is the fact that you have X number of carriers writing an average of $YYY create an opportunity or does it mean that you don’t have as much capacity as your competition.
Strengths and weaknesses are generally internal to the agency, while opportunities and threats are usually external forces Build upon your strengths, minimize or eliminate your weaknesses, capitalize on your opportunities – and overcome threats.
Sometimes the lines between strengths, weaknesses, opportunities, and threats can become blurred. For example, an analysis of one agency’s Personal Lines book shows that it’s aging rapidly. Most would consider this a weakness, or even a threat. Attrition usually accelerates with the age of the book. The agency might address this weakness by targeting a younger clientele and/or targeting the older book for sales of Long-Term Care.
Strengths are clear capabilities of your agency that you can rely on to compete and succeed. Identify your key capabilities so that you can use them to help you develop and meet your goals. For example, “Our educational commitment has made us more knowledgeable about coverages and better able to act as risk managers to our small Commercial clients than our competitors.”
Weaknesses are current characteristics that might cause trouble now or in the future. Ideally, you make plans to eliminate weaknesses. However, if you can’t eliminate them, you need to compensate for them or at the very least avoid their most negative effects. For example, “We recently expanded the agency and bought new automation equipment, which has had a negative impact on our cash flow.”
Opportunities are realistic options to exploit or capitalize on a situation, to strike out on a new path, or to move out of your comfort zone and change. For example, “ABC Agency has a good book of business and the principal wants to retire. This might be a good acquisition for us.”
Threats are factors that could hurt your business in a substantial way. They can come from inside or outside your agency. You need to a game plan to deal with threats directly. For example, “The market continues to be soft/competitive while the economy is weak.”
Be sure to involve your staff in determining the agency’s strengths and weaknesses and the threats and opportunities that will affect it in the future. Ask employees to provide their input through formal or informal surveys. You’ll also want to have:
- Fact-based information and the ability to compare it to industry benchmarks or your own standards and goals.
- Results of Customer surveys or other feedback mechanisms.
However, do not skip this part of the planning process. The strengths, weaknesses, opportunities and threats you identify will form the basis of developing your goals and game plan. With a solid SWOT, you can plan to:
- Match strengths to opportunities to create competitive advantage
- Convert threats and weaknesses into strengths and opportunities
- Maximize strengths and opportunities
- Minimize or mitigate weaknesses and threats.
Pamela Millard is president of Transformation Advisors (Diamond Springs, CA), a client-focused management consulting firm. You can contact her at (530) 295-108, e-mail [email protected], or www.transformationadvisors.com.