Opportunities and threats do not exist

Person climbing a frozen waterfallWhen I was fairly fresh out of business school I was asked to prepare a strategic business plan for a half billion dollar pan-European technology services business.

The industry was undergoing a lot of change, both in terms of the technologies being used and the ways they were being applied. The needs of the customer and the customer’s customers were also changing, so I thought it made sense to apply the well-known SWOT analysis tool we had been taught on the MBA: to list the internal Strengths and Weakness of the business and compare them against the external Opportunities and Threats in the marketplace.

The trouble was, the model didn’t make sense. Or rather, it just wasn’t useful. The shift from old technology to new technology was a threat to the existing business model but if we moved fast to adopt the new technologies then it could easily become an opportunity to upgrade old systems. The rise of cheaper remote programming centres that competitors were building in Ireland (and later India) was a threat if we did nothing. But if we built our own data centres then they would also become an opportunity. The strengths we had in old technologies were fast becoming an irrelevant weakness. And as the needs of our customers and their customers changed, so the ability to deliver what was needed yesterday was fast becoming a ball and chain that was holding us back from delivering what would be needed tomorrow.

What I discovered then was that, during times of change, threats and opportunities do not exist. Neither do strengths and weaknesses.

Yes, there are changes in the marketplace. But whether these turn out to be opportunities or threats depends more on how we choose to respond to them than on any intrinsic characteristics of the situation. Similarly, what seem like strengths can fast become outdated weaknesses. And even a complete lack of ability in an area can become a strength if it allows us to move faster than competitors. (Just look at Airbnb: it owns no hotels but is the world’s largest hotelier.)

Labelling something as an ‘opportunity’ or a ‘threat’ is often based on a mistaken assumption that the world still works the way it used to.

‘Opportunities’ and ‘threats’ do not exist except in the way we choose to respond to a situation.

What are your top three strengths, weaknesses, opportunities, and threats? How might you change the way you respond, to turn the threats into opportunities? How might a competitor or new entrant turn your strengths into weaknesses?

Adapted from Inner Leadership: tools for building inspiration in times of change.

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Photo By Laurel F via StockPholio.net

2 Replies to “Opportunities and threats do not exist”

  1. I still find the SWOT model useful but not used alone. It has to be coupled with a market analysis (for instance with a Porter five forces or equivalent and upgraded and other tools). In a fast moving context with disruptive innovations it could be misleading as you pointed out.
    And yes a deep weakness can generate a strength – think about leapfrogging competition through superior innovation.
    Still answot is a solid framework to start the thought process.

    • Hi Pascal,
      Thanks for your comment.
      I agree the SWOT can be a useful framework to start the process, because it is familiar.
      But I still say that in a time of churning every single one of the answers it produces will then have to be checked against reality.

      Is this ‘strength’ really a strength or is a company in Silicon Valley developing a technology that will make it obsolete within a year (like having “a huge network of retail stores” before Amazon appears)? Is this ‘weakness’ really a weakness or does it mean that we can move faster to build new from scratch (like mobile banking in Africa)? Is this opportunity really an opportunity or will an unexpected political change turn it into a white elephant (like investing in the UK pre-Brexit)? Is this threat really a threat or can we copy it and do it better (like oil companies Could have done with renewables)?

      Yes a SWOT will give us a quick list of answers. But in my view we cannot trust any of those answers. We have to check them all against the emerging reality.

      Maybe that is what you mean by combining it with the Porter Five Forces.

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