Most people have heard of a SWOT analysis -- Strengths, Weaknesses, Opportunities, Threats.  This can be a very useful tool for helping you examine your business and define your strategic direction.  However, over the years I've noticed that many people attempting to use a SWOT analysis have really messed it up. I've even seen it messed up in blogs, educational material, and in some cases even by instructors.  Using a SWOT analysis incorrectly can be a major issue, causing flawed conclusions and consequently leading you to implement flawed business strategy. So do yourself a favour.  Use it right!

The SWOT analysis is one method (just one) of examining your business and the environment in which your business is operating.  Think about that last point 'the environment in which your business is operating'.  That is the essence of the 'opportunities' & 'threats' part of a SWOT analysis.  Opportunities and threats exist in your environment, not in your company.  If you've identified a problem in your company (and I do me 'in' your company as opposed to in you 'environment') then what you have really identified is a weakness.  And herein lies the fundamental problem that I've seen all too many times.

Remember, Opportunities & Threats pertain to positive or negative factors existing IN YOUR ENVIRONMENT. Strengths & Weakness pertain to positive and negative factors existing IN YOUR COMPANY.  The key to figuring out if something is a strength, weakness, opportunity or threat is to ask yourself if it is in your control or the control of your business.  If it's not, then it likely exists in your environment, in which case it's an opportunity or a threat.  Here are some basic examples:

Aggressive competitor: threat.

Weak fundraising skills: weakness.

Technically talented founder: strength.

New gov't legislation mandating the use of your product or one like it: opportunity.

Money in the bank: strength

Award winning product line: strength

Decreasing computer science graduates for hiring: threat

Recession: typically a threat, however if your value proposition is aimed at a cost concious buyer, then this may be an opportunity versus a threat.

Strong patents: strength

Global offices: strength

Limited domain knowledge: weakness.  For example if you're assessing a new growth strategy into the retail sector, but you have limited retail domain knowledge, then the SWOT analysis for this new new strategy should identify your lack of retail domain knowledge as a weakness.

Get the idea?

If you're not fully up to speed on the technical underpinnings of a SWOT analysis and how to use it, spend some time researching it on line.  It can be a very useful tool, but like all useful tools, garbage in, garbage out.  You're success likely depends on keeping the garbage out of the equation.