Your Swot Analysis Is Broken (Here's How To Fix It

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jakaria
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Joined: Tue Jan 25, 2022 4:26 am

Your Swot Analysis Is Broken (Here's How To Fix It

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Isn't it wonderful to have certainty, confidence and clarity about what you are going to do in the future? In the context of our increasingly disrupted, globalized and multicultural world, business leaders greatly appreciate the security and comfort of clear strategic plans for the future. After all, following our hunches in the moment frequently leads to business disasters, and strategic plans help prevent such problems. Tragically, popular corporate strategic analyzes intended to address weaknesses in human thinking through structures and planning are deeply flawed. They give a false sense of comfort and security to the business leaders who use them, dragging those leaders into the exact business disasters they seek to avoid. Take the most popular of these, SWOT analysis, where you try to determine the strengths, weaknesses, opportunities, and threats your business faces. SWOT ignores the dangerous errors in judgment revealed by recent research in behavioral economics and cognitive neuroscience. These mental blind spots — what researchers call cognitive biases — turn a SWOT analysis from a potentially valuable tool into a dangerous liability. Relying on SWOT to inform your strategic plans without considering cognitive biases leads to terrible oversights that ruin profitable businesses and bring down high-flying careers. For example, two surveys show that we tend to follow our instinctive reactions and therefore fall into the trap of cognitive biases in our buying decisions, which are driven by our external context to a surprisingly powerful extent. Fortunately, recent research shows how you can use pragmatic strategies to address these dangerous misjudgments, whether in your work life, your relationships, or other areas of life. To be successful, you need to assess where cognitive biases are hurting you, other members of your team, and your organization.

Then you can use structured decision-making methods to quickly make daily “good enough” decisions; deeper for moderately important choices; and a depth for the really important decisions. Such techniques will also help you to implement your decisions well and formulate truly effective long-term strategic plans. Additionally, you can develop habits and mental skills to notice cognitive biases and prevent yourself from slipping into them. Mental Blind Angles in Business Leadership How do cognitive biases apply to mailing list business leaders? One of the most dangerous blind spots for business leaders is overconfidence bias. Researchers have found that business leaders at all levels – top, middle and bottom management – ​​tend to be overconfident and make poor decisions as a result. You may not be surprised that those who have had the most success in the past are the most confident. In fact, these people tend to believe that they are not prone to dangerous errors of judgment, which itself is a mental blind spot called a bias blind spot. To quote Proverbs 16:18: "Pride goes before destruction, and pride goes before a fall." A related issue is optimism bias, our tendency to look at life through rose-colored glasses. Research shows that top leaders, whether CEOs or founder-entrepreneurs, are especially likely to be overly optimistic about their success, which undermines their ability to craft effective strategic plans. They tend to overestimate their skills, knowledge and abilities. Such optimism leads to problems ranging from overly high profit forecasts to excessive payouts when acquiring businesses, to poor business investments. Cognitive biases and SWOT How does this compare to SWOT? When I accept new coaching and consulting clients, I always ask them if they have strategic plans. Of the roughly 70% of my clients who have done some sort of strategic planning, whether for their business or personal career, just over half have done a SWOT analysis. Do you know what I find? They invariably list – and I mean always, in every case I've seen – too many opportunities and strengths, and too few weaknesses and threats. Their overconfidence and optimism lead them to ignore the risks and overestimate the rewards. Such issues apply not only to SWOT, but also to other popular strategic assessments, such as scenario planning. For example, consider Saraj, a tech startup founder.

His venture capitalists encouraged him to turn to me for coaching as his company crossed the $10 million equity mark. Saraj showed me the SWOT he himself had done several months earlier for his own role as a leader. I was surprised that he didn't mention effective delegation as an area of ​​weakness, as some of the investors who referred him to me expressed it as a concern. Asking him the question, I heard an immediate defensive tone. Clearly, I hit a nerve. He felt a strong ownership of what he perceived to be the core business of the startup, recoiling from the possibility of delegating these tasks. Indeed, SWOT allows business leaders to sweep under the rug areas of weakness and threats against which they feel defensive. Their optimism and overconfidence justify the failure to solve these problems. With Saraj, an effective communication technique based on research allowed me to persuade him that effective delegation makes him a stronger leader, able to best serve the startup in the long term. This is particularly problematic when SWOT is performed in a group, as cognitive biases are often increased exponentially in such environments. A particularly big problem is known as groupthink, where groups tend to coalesce around the opinions of a powerful leader. Martha, CEO of a Midwestern healthcare company that runs several hospitals that I started consulting for in early 2016, showed me her SWOT analysis from mid-2015. I was surprised to see that his analysis didn't include any discussion of political threats to Obamacare, despite his company's growing reliance on patients covered by that program. We discussed the matter, and she told me that she didn't see much likelihood of a threat to Obamacare and other health care company executives either. To me, this was a clear example of groupthink, ignoring the elephant in the room (and on the ballot).
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