Ways to Improve your Business Analysis

Before I get into different methods to improve your business analysis, let me be very clear about one thing.

I am not so concerned about the method or methods you use but more importantly that you or someone is DOING an analysis.  In today’s age with all of the types of methods and tools available, I find it absolutely amazing how many companies are either not doing any analysis or do it once and think they are done.   Like death and taxes, one thing you can count on is that your competitors are doing an analysis on you!

Given that let’s first start with the SWOT analysis, some pros and cons regarding it and then a few alternatives methods.

First, SWOT analysis is the identification of Strengths, Weaknesses, Opportunities and Threats that are related to the strategic and tactical direction of a company.   The “scanning “or analysis of the internal factors that relate to your direction and strategy are the strengths and weaknesses.  Examples of strengths could be vertical integration or distinctive skills/ intellectual talent, while some weaknesses could be a poor sales channel or lacking of sufficient financial resources.   Scanning of external forces are opportunities such as new markets or new products, and threats are areas like governmental regulation or lack of market share.  While SWOT analysis is one of the most commonly used methods (2007 global survey of top executives by McKinsey stated that 82% used SWOT, second to competitive analysis)   it like other methods has its pros and cons.

The pros are:

– Easy to understand and the four categories can be acknowledge quite quickly.

-It really does not require a rigorous level of research

-The context is usually within the understanding of the corporation

The cons are:

                -Lists can become long

                – Lists can be poorly defined and ambiguous

                -Not a very detailed or well verified list

Some suggestion on how to improve your strategic analysis:

1-You can augment the SWOT analysis by adding a weight and rating factor to each entry on the SWOT analysis.   The weight is a factor (0 to 1)   that ranges from very important to not important for each internal and external entry.  Next have a rating factor (1 to 5) that indicates how well your company is doing regarding this entry.  Multiply the weight times the rating to get a weighted score. Next, rate each entry how it might impact your company in the short or medium or long term situation.   These enhancement greatly helps eliminating a lot of the guess work, ambiguity, long lists and improves the overall ranking of the to be developed tasks as related to each entry.

2-Another variation of the SWOT analysis is to form a matrix just like one does in the SWOT but have the Strengths, Weaknesses, Opportunities and Threats on the vertical and horizontal axis and is the four sectors produce Strategies for strengths for working on opportunities (SO), Strategies for avoiding threats (ST), Strategies for opportunities to overcome weaknesses (WO) and WT, strategies for a company to minimize weaknesses and avoid threats.

3-A different analysis method is the Balanced Scorecard Method; this tool is used to align business activities to the strategy of the organization.   It works off of four areas; 1-financial by using important financial “levers” or targets,2- customers, it  tracks and measures inputs about how customers view the company,3- business processes that measure where the business excels and 4-growth, measurements to see if the company is growing and improving.

4-A fourth method is the PEST analysis which stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental and scanning component of strategic management.   Here we introduce external factors that in the current environment have become critical to the success or failure of many companies.  One very current example is the price of oil and gas and its impact on companies that are very dependent on oil and gas in one form or another.

In summary, it is not so much which method or tool one uses but most importantly, you must do some form of analysis and do it on a continuous basis!  If you would like to know more about these analytical methods or other methods that might be well suited to your company, send me a note. 

RHL 03/14/12

2 comments to Ways to Improve your Business Analysis

  • Cheri Lieberman

    Very interesting mailing. I was glad to receive it. Thanks.
     
    Cheri

  • Jim Matorin

    I am still amazed how few companies hold up a mirror and go through the discpline of a S.W.O.T. analysis.  If you want to go the distance, perform one for each of your top two competitors.  An eye opening exercise.

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