SWOT Analysis for Digital Business Models

SWOT stands for: Strengths, Weaknesses, Opportunities, Threats

The SWOT analysis is considered a strategic tool that can help with decision making and setting a direction or a course of action. Specifically, it will guide you to elaborate on internal strengths & weaknesses as well as external opportunities and threats and put them into relation to each other where it makes sense.

Like most simple tools, it is a relatively high-level tool when used in the original sense. An experienced facilitator can, however, take it to a level that is appropriate for the objectives and participants.

The SWOT analysis has been around for a long time, enjoys great popularity and exists in many different alterations and extensions.

In this article we will take a look at how the SWOT tool can be used for Digital Business Models.

Objectives and intended outcomes

It is commonly satiated that the outcomes of a SWOT analysis be used for a variety of objectives, such as:

business / product areas to invest in,
business areas that need improvement,
gaining an understanding of the competitive landscape and markets,
identify changes / risks that you may need to mitigate and
more broadly: build on strengths, minimise weakness, exploit opportunities, mitigate threats.

We have to call out, however, that no real-world business (except probably for very small ones) will ever make such decisions on the basis of a SWOT analysis alone.

When done right SWOT would only be a starting point for more detailed, quantitative work. In large tech companies it would lead to dense, data-informed documents with dozens (sometimes hundreds) of pages. But even in smaller companies and startups it should lead to more analysis and further iterations. When done right a SWOT analysis can give pointers on what kind of initiatives to analyse in more detail.

The breadth of the SWOT analysis: can be company-encompassing or focusing on a product line, a value stream or a specific aspect of the business model. It will depend on the objectives (and participants present).

SWOT - Strength, Weaknesses, Opportunities, Threats

Let’s now briefly cover the elements of the SWOT analysis.

Remember that the SWOT analysis typically should be about a chosen subject and not just a brainstorming session of whatever comes to the participants’ minds.

Strengths & Weaknesses: What are the strengths & weaknesses of your business relative to others (mainly competitors) in relation to the subject of your analysis?
Threats & Opportunities: What are external (and internal) risks & opportunities in relation to the subject of your analysis?

Internal vs external: Typically the Strength & Weaknesses sections are seen as internally focussing whereas Threats & Opportunities are seen as externally focussing. As always there can be exceptions but typically this is how the method is intended to be used

Possible Strategies

Several strategies have been suggested to be applied on the findings of a SWOT analysis, in particular:

Weaknesses(W) - Threats(T) → mini-mini: minimise / mitigate selected items among W&Ts
Weaknesses(W) - Opportunities(O) → mini-maxi: if opportunities exist that are difficult to harness due to corresponding internal weaknesses, what’s how can Weaknesses be mitigated so that the Opportunities can be exploited
Strength(S) - Threats(T) → maxi-mini: how can internal strength be used / enhanced to counter existing external threats
Strength(S) - Opportunities(O) → maxi-maxi: How can external opportunities be exploited when aligning with internal strength to further increase their competitive position

Benefits of a SWOT analysis

Simple: If you have the right group of people together, it can be done in an hour or two (at least an initial iteration).

Flexible: It can be applied to various levels of scope (from product to company level) as well as done with different objectives in mind.

Quick: When done well and the right people, it can come to meaningful results in just a few sessions.

Disadvantages of a SWOT analysis

The disadvantages of SWOT are tied to its benefits.

Subjectivity: Because a SWOT analysis is generally done in one or a few sessions, the outcomes can depend on subjective perceptions of some individuals (esp the most senior or regarded ones) who, however, don't need to be right.

Bias: There can be a bias to the most recent developments as well as the prevalence of groupthink.

Unstructured: It can end up very unstructured, with a lack of clear actions, priorities and will often be difficult to explain to those who were not in attendance.

It would be best used to initiate more focussed work that looks into actual data that informs further iterations of the process.

How to Conduct a SWOT Analysis

Set out the scope & objectives of the analysis and/or use the first part of the first session on agreeing on it
Get the right (diverse) people to the session
Give everyone a voice (an experienced facilitator can help a lot).
Use data in between sessions
That also means don't do it all in one session
Document your outcomes
Revisit your outcomes a short while after - set clear actions and track progression against them (some defined goals and metrics would as always be very useful)

SWOT for Digital Business Models

Here’s a SWOT with some very prevalent items for digital business models right now.

Next let’s take a very concrete example.

Example Etsy

We have been covering Etsy for a while as an example of a specialised eCommerce player. You can find Etsy’s biz model canvas here and their investor update summaries (from a biz model perspective): here for Q223 and here for Q323.

Based on what we learn there, here’s how a SWOT Analysis could look like.

Focus: Etsy Marketplace (i.e. excluding Reverb and Depop) and esp on near term revenue growth.