Corporate Strategy

October 2006 » Columns
There are numerous acronyms in the business world that represent various fads of productivity enhancement, corporate communication, and financial strategy. Many of us have probably learned about, implemented, or been affected by things such as ISO, TQM, QMS, or 6-Sigma. Most of these programs represent significant investments in time and human resources to maintain, which may be an impediment to many small engineering firms. However, one technique in particular can be a valuable addition to the corporate strategy: SWOT analysis.
Jason Burke, P.E., MPEM
There are numerous acronyms in the business world that represent various fads of productivity enhancement, corporate communication, and financial strategy. Many of us have probably learned about, implemented, or been affected by things such as ISO, TQM, QMS, or 6-Sigma. Most of these programs represent significant investments in time and human resources to maintain, which may be an impediment to many small engineering firms. However, one technique in particular can be a valuable addition to the corporate strategy: SWOT analysis.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is a method that lends itself to customization by a firm depending on its size, strategy, time, and culture. A quick search on the Internet illustrates the power of such an exercise and details the various ways it might be implemented. The firms I have worked for and with in the past have usually had a firm grasp on the first two terms. They relate mostly to the internal operation of the company and its employees. If the firm is open to employee suggestion, strengths and weaknesses can be addressed quickly for the benefit of all. The latter two aspects relate more to the external environment in which the firm operates, and may not be as readily apparent to those outside of the upper levels of management.

Nevertheless, identifying potential opportunities and threats is a critical step in the strategic plan of any firm, even if it is not done is this structured way. Examples of these important variables may be changes in the firm's market, technology, regulatory environment, available workforce, or finances. Whether or not there is a formal procedure in place, management needs to stay abreast of these and other external factors on a regular basis. One method for accomplishing this is to identify specific timelines for these areas and discuss them regularly, at least annually if not more frequently. In addition, whenever something significant occurs in these areas, the team should quickly evaluate how it might fit into its strategy and act accordingly. There is no way to eliminate purely reactionary decisions, but with a regular schedule in place, management is prompted to revisit these crucial aspects of their business in a more proactive manner.

The follow-up to any identification of these factors is just as critical to success. Those O's and T's are a direct reflection of the corporate vision and should be communicated to the staff as completely as possible. If the firm sets goals based on its findings, those goals will only be reached effectively if the staff understands the motivation behind them. How many times do we hear about or are a part of a corporate vision that has no execution?

If, for example, the firm's leadership identifies a new target market and wishes to move in that direction, the means and methods may differ from those in its regular business. This may manifest itself as sacrificing some profitability to "buy" work, providing additional services for a discounted price, adjusting internal standards to conform to new requirements, or other similar changes. The employees that work on those projects, then, need to have a clear understanding of why these changes are being implemented and how it will benefit the firm in the long run. Further, prior to making any major decision, someone should have performed a cost/benefit analysis, and a summarized version should be expressed to the appropriate staff.

A regular assessment of a company's status is a keystone of its future success. A critical component of this is an evaluation of how it fits into the external business environment. Short- and long-range planning must take into account the anticipated market conditions, and these plans must be communicated effectively throughout the firm to ensure complete buy-in. The SWOT analysis is one tool that is available to managers that allows for a systematic but flexible method of observing the market and planning for the future.

Jason Burke works for Allied Engineering (www.alliedengineering.com) in Bozeman, Mont.

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