A simple business tool can change the way you think about the choices you make.

Making sound decisions isn’t just something that happens by chance. Strong decision-making skills are honed over time with practice and experience. These skills often work in tandem with the use of specific tools that make selecting the right path more of a logical process, taking the guesswork out of making the best possible choice.

One of the most used tools for decision making is the SWOT analysis (also known as the SWOT matrix). If you’re looking for a tried and true method for making solid decisions, read on to learn what exactly the SWOT analysis is and how you can use it to your advantage. 

What Is a SWOT Analysis?

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A SWOT analysis, sometimes called situational analysis or situational assessment, is a strategic planning technique to identify four main aspects of a business—Strengths, Weaknesses, Opportunities and Threats.

This framework was developed by four Harvard University professors in the 1960s. The idea behind these four categories is that writing them out as lists can help with decision-making by giving people the chance to visualize the current situation or environment within the company. The SWOT analysis helps identify the internal and external factors that could hinder or help the any next steps you’re considering taking or even spark structural or directional changes. 

Doing a thorough SWOT analysis can be critical for efficient decision-making. Here’s a look at the four aspects that make up the acronym more in depth:

Strengths

A strength is anything that a company or organization does well, makes it stand out (in a good way) from the competition or that it is known for in a positive light. Strengths are not the same as necessities—they need to be clear advantages you have over other companies or ways in which you unequivocally excel. 

Weaknesses

A weakness is anything that you can improve upon—something that you’re not doing well but could definitely be doing better at in terms of staff, procedures, culture or output. Creating this part of your SWOT analysis requires brutal honesty and a sharp eye. 

Opportunities

An opportunity is a chance for positive growth. Typically an opportunity is an external force like an event, a law, a timely news story, a new technology or anything on the horizon that could benefit your organization. It could be an opening for more exposure, an accolade or recognition, an ability to capitalize on more of the market share—anything that will make your business soar. 

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Opportunities can be large and company changing or small wins that barely move the needle but do so in a net positive direction. 

Threats

A threat is an external force that negatively impacts your business. It could be a lack of job applicants, supply-chain issues, a plunging stock market, a product recall—anything that can bring down your organization or cause major pain points for employees, customers or your overall process. Writing them down helps with anticipating threats and being prepared when you do encounter them. 

Using a SWOT Analysis for Decision Making

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Before taking a business in a new direction, an organization’s leaders might perform a SWOT analysis to take stock of their company’s strengths, weaknesses, opportunities and threats. By understanding clearly where the company is at, leaders can know which direction they should take the business in and devise a plan that takes advantage of opportunities on the horizon while also being mindful of potential threats.  

Here’s how you can use a SWOT analysis to make a key business decision: 

Draw up a SWOT Analysis matrix

Find a SWOT analysis template you can use to create your matrix: a two-by-two grid of four squares, with one square representing each of the four SWOT categories. Doing this creates a visual representation of your company and allows all team members involved in decision making to stay on the same page. When you identify a strength, weakness, opportunity or threat, put it in its corresponding place in the grid. You can even consider having multiple teams create their own grids that you can compare and contrast to find overlap or contradictions, making your discussion of the grid more nuanced. 

Keep your lists concise

Try to shoot for five points in each of your four lists for strengths, weaknesses, opportunities and threats. This helps paint a more succinct picture of your company and it avoids putting lesser or not as critical information on the grid. As a group, you can determine which points are most important, which can help further your decision making discussion. 

Make your points specific

Avoid generalities so that your lists of strengths, weaknesses, opportunities and threats are targeted to your business. The more you can pay attention to language to say what you truly mean to say, the more you’ll get out of this exercise from a decision making standpoint. 

Be honest about your weaknesses

It can be difficult in a business setting to quote-unquote badmouth your own company without fearing repercussions. Especially if your workplace is not big on feedback or constructive criticism, sharing weaknesses can be a tough task.

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To help with this, you can suggest allowing for anonymous input for this category or asking for customer feedback to ensure that the responses are honest and thorough. Being truthful is of paramount importance in order for this exercise to truly work. 

Ground your lists in current reality—but also think ahead

When it comes to external factors—opportunities and threats—try to stay realistic with what could actually happen. You want to be positive and assume the best that can come out of various situations and circumstances, but you also don’t want to overshoot when it comes to your trajectory for success. Likewise, you don’t want to fall into a rabbit hole of negativity when it comes to future threats but you also want to be mindful of what could indeed negatively affect the business. Come at these categories from a grounded place. 

Let your analysis inform future choices

Once you’ve completed a thorough SWOT analysis, take a look at your results and allow them to inform your decision making process. You might be able to connect one of your company’s strengths to an opportunity, allowing you to truly seize the day and take your business to new heights. You might notice a weakness that could hold you back from an opportunity or, worse, become an even bigger issue in the face of a looming potential threat. Seeing all of this mapped out allows you to better conceptualize your company’s direction, organization or future project goals. 

Making Informed Decisions

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While the SWOT analysis is used primarily in business, it can also be applied to making decisions related to personal development or even to a romantic relationship. Being able to identify the internal and external factors that work well, and the ones that need work or have the potential to hurt you, is important in virtually any scenario. 

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