Tuesday March 03, 2015

Summary: SWOT (strengths, weaknesses,opportunities and threats) often fails to lookhard enough at how risks can cascade throughconnected systems.

By David Patrishkoff

10 Shortcomings of SWOT Analysis If you think that the analysis you use to identifythe strengths, weaknesses, opportunities andthreats (SWOT) in your business is adequate,beware. It is intended to provide a 360-degreeview of your risks and opportunities but oftenfails to fill that requirement because ofsuperficial applications and failure to look atrisks from connected systems.If your risk and opportunity analysis techniquesare lacking, you could be very unprepared forthe next recession, disruptive technology orgame-changing way of thinking that could soonaffect you. Too often, the last domino thatstruck in the last crisis is the main focus of allfuture risk-mitigation efforts. The whole string oftriggers and threatening signals that led up tothat last publicized tipping point and burstingbubble are ignored.Here are the 10 most common shortcomings forSWOT analysis:

Underestimating the role that vertical and lateralcascading human factors can play and having

fragile back-up plansAbsence of war gaming, stress testing anddisruptive failure mode analysis testing of yourleadership mindset, strategy, work culture,processes, products and servicesLack of focus on disruptive innovations; yourespond to them but do not create them withproven innovation-on-demand techniquesAssumptions that cyber security and patentsare safe, so they aren't stress tested withadvanced cyber-circumvention andpatent-busting techniques"Taboo talk rules"; uncomfortable discussiontopics are avoided or not identified with focusedand anonymously solicited inputs fromemployeesIgnoring "Trojan horse" risks that are secretlylurking in the hearts and minds of youremployees or piggy-backing on purchasedtechnology, software, products or servicesLack of use of "gamification" techniques toaddress the most sensitive threats in adisciplined, humane, engaging and effectivemannerFailure to include effective strategies to attractand retain key human talentFailure to identify low-profile threats that createunstoppable cascading risks - from leadershipto culture to processes to bad performance toweak responses to critical situationsLack of use of external perspectives tochallenge group-think assumptions of perceivedsafety and robustness

Simple SWOT analysis and risk-managementtechniques will not offer the protection requiredto survive the next economic crisis or disruptivetechnology. KISS concepts (keep it simple,stupid) have lost their ability to identify andprotect against complex cascading risks. Theworld is a fragile, hyper-connected andcascading system full of surprises that willpunish casual optimists and reward those whohope for the best but seriously plan forworst-case scenarios.The World Economic Forum's 2014 World Risk

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Report describes the global risks that canquietly cascade across borders and affectorganizations in unsuspecting and surprisingways from a variety of threatening and linkedfactors. The complex dynamics that existbetween developed, developing and emergingworld markets is further complicated by the factthat many organizations know very little aboutthe cascading system dynamics within theirown four walls.Classic methods that attempt to describe therisk and opportunity landscape for individualsand organizations have not kept pace with therising complexity and interactions betweenhighly networked workplaces, global economiesand internal and external threats. We have nowentered a new era where we need new ways todescribe and understand the complex world wehave created, which has outgrown the simpletools we like to describe it with.

David PatrishkoffDavid Patrishkoff is president of E3 Extreme EnterpriseEfficiency and the founder of theInstitute for Cascade EffectResearch. He is a Lean Six SigmaMaster Black Belt and the inventorof a cascading risk managementmethodology, which has patentpending status. Before starting hisconsultancy in 2001, Patrishkoff heldmany worldwide senior executivepositions in the automotive andtrucking industry.

2015 Insurance Thought Leadership. All Rights Reserved.