Analyzing Prospective Change within an Organization: using SWOT and PESTLE
There are many ways to analyze an organization or business. For a Business Analyst, it is best to focus on a purpose and ask why you need to analyze a company. Being able to understand the cultural characteristics that comprise a company, where it stands in the marketplace, who its competitors are, and where it plans to be in the short and long term, can provide an initial starting point. Using standard business tools or frameworks helps to provide this analysis. Let us take a closer look at a comparative analysis of two types of tools, SWOT and PESTLE, and see how they can be used to influence change in an organization.
SWOT
SWOT attempts to categorize the Strengths, Weaknesses, Opportunities and Threats of an organization, which can heavily influence business objectives. SWOT can provide clarity to formulate a route to achieve these desired objectives. The end result is to craft a profitable fit within a business environment through key decision-making and optimal strategic planning. For example, we could attempt to transpose a weakness into a strength, or exploit a threat by turning it into an opportunity.
SWOT can be applied to a multitude of industries, whether the military, government, project management, business analysis, consultancy, technology, health care, etc. This range between public, private or non-profit industries is what gives SWOT its flexibility.
Internal forces, which affect an organization’s strengths and weaknesses could include corporate culture, principles, values, skills and resources, staff morale, time pressures, or even leadership styles. External forces, which create and influence opportunities and threats for an organization, could include technology, the economy, wars, natural disasters, or government policies and procedures.
Though SWOT does not spell out a strategic plan, it can provide a suggested direction to the next stages of the change process. For example, during the scoping phase of the project, a SWOT analysis can be used to identify risks which could be recorded in a risk plan. This would alert the project team on how to exploit a risk into an opportunity, and how to reduce the exposure to threats, thereby reducing the probability of risks.
Of premium importance is how to ask crucial questions. For strengths, one may ask what valuable assets or resources does the company have. For opportunities, you could ask if there are any emerging trends or potential partnerships beneficial to the company. For weaknesses, you could ask where are we vulnerable, what are our limitations, where can we improve, or what are our gaps or barriers to success. For threats, you could ask what economic or environmental conditions or public policy will affect or restrict our product development, or what would happen if we lose key staff members, and what are the challenges we need to overcome. In full, you want to reveal where priorities of change are possible. Based on answers to these questions, an organization can start to make an assessment on where to focus their strategic plan for the near future.
Advantages of SWOT
The advantage of SWOT as a valuation method is that it allows for preliminary research. It is less theoretical and can be applied in a practical way to a business environment, for strategic planning and growth. And, it can be exercised at an enterprise level or higher.
Disadvantages of SWOT
The disadvantage of SWOT is that it is difficult to quantify strategic elements or dependency factors. SWOT focuses more on qualitative analysis like skills and professional expertise. This means there is an assumption that some factors might be independent of other factors, which may not always be the case. Thus, SWOT by itself is not a very comprehensive evaluation, and may appear a bit superficial or incomplete. Hence, why it is best to employ a hybrid approach, combining SWOT with other tools like PESTLE, for instance. Together, these tools can provide a more comprehensive decision-making outlook. Be cautious that SWOT may not provide transparency if a “lack of openness” culture already exists in an organization. Be aware that this could hinder growth, if growth is the end goal.
PESTLE
PESTLE can provide a wider depth on the external side of a business, allowing us to see things from a different perspective. As a strategic framework, PESTLE is an acronym for Political, Economic, Social, Technological, Legal and Environmental issues. These are all external elements that affect an organization, from the planning stage, through execution, to policies and procedures, as well as corporate culture. PESTLE is a tool predicated on macro-environmental factors to ostensibly look at market influences in areas of business position, growth, and decline.
The political side looks at tariffs, labor or environmental law, goods and services, war, or maybe even tax policies. Economic encompasses areas like interest and exchange rates, export prices, employment, and elements that invariably affect business growth and operations. Social looks at social and cultural trends, demographics, lifestyles, population, all of which can influence consumer demands for specific products. Technological elements may focus on AI, technology, research and development, or licensing, all of which stimulate innovation, quality, and levels of production. Legal has to do with many aspects of the law, whether antitrust, employment, regulatory bodies, safety, and so on. All these items influence the demand and ultimately the cost of products. Environmental are those factors like weather or climate change which can have a profound impact on industries such as travel, tourism or farming. COVID-19 is a perfect example of how the travel and tourism industry has been unduly curtailed because of an imposing virus. Or, take the example of an initial demand to build hybrid cars because of a conscious awareness to reduce air pollution, as was the case with the PESTLE study by Toyota.
In SWOT, internal forces within an organization are specific to a company or to a project within that company. However, external forces are often uncontrollable or are less known from an organization’s perspective. External forces are ever changing. Therefore, it is markedly important to have PESTLE factors reviewed and revised on a regular basis. These frequent updates can detect trends, which make PESTLE even more effective in identifying items which otherwise would go unnoticed.
PESTLE can help businesses avoid embarking on projects that would potentially fail. And, it can clarify assumptions and constraints about business markets. Like SWOT, PESTLE requires specific questions to be asked to spark discussion, which aim at resolving particular needs of the business. With precise answers to these questions, PESTLE can help businesses minimize or manage risk.
Advantages of PESTLE
The advantage to SWOT and PESTLE is that they are both easy tools to utilize and understand, but their purpose can have far reaching effects in the sphere of strategic thinking. Both tools can lessen or anticipate future threats to a business, and expand or advance potential opportunities
Disadvantages of PESTLE
A disadvantage to reviewing PESTLE data sources is that it might be cumbersome or time consuming. But it is well worth it in the long run. Different perspectives on PESTLE data take time to collect. Because of constant change within the environment, gathering data might be difficult to obtain, or anticipating events might be hard to foresee. By all means it is imperative to avoid analysis paralysis from gathering too much information, which could impede the main purpose of PESTLE in identifying threats.
Review
It is important to understand that SWOT and PESTLE do not often apply uniformly to an entire project or business department. Some parts may have more severe implications on certain departments or specific sections of projects. Pinpoint exactly where and why SWOT or PESTLE affects some areas more than others. It is paramount that one tool not be used in sole isolation. A more comprehensive study can be brought to light by using both tools, which complement one another well, when analyzing prospective change within an organization.
