History of the SWOT analysis

History of the SWOT Analysis

In recent years I have become rather obsessed with the history and origins of the SWOT, along with PESTLE & SMART.

As the months have gone on I have identified much of the history of SWOT analysis and found may sites which appear to have credible sources – however when one ‘delves deeper’ often the data is clouded, indeed whenever I read of a source I attempted to buy the original book – so have amassed a large collection of old management books.

For example, on the site www.provenmodels.com (link now dead 30/10/11)  it is claimed that

“The SWOT framework was first described in detail in the late 1960′s by Edmund P. Learned, C. Roland Christiansen, Kenneth Andrews, and William D. Guth in Business Policy, Text and Cases (Irwin, 1969).”

However the book I have of the same name and authors – 1965 fourth printing 1967 does not list the term SWOT, although it does talk about a similar concept (but then most strategy based management books did) it says (p31):

“… Application to cases

As the student attempts to apply the concept of strategy to the analysis of cases he should try to keep in mind three questions:

  1. What is the strategy of the company?
  2. In the lights of (a) the characteristics and developments of its environment and (b) its own strengths and weaknesses, is the strategy sound?
  3. What recommendations for changed strategy might advantageously be made….”

In over 1000 pages of copy this is the nearest I can find as a reference to the SWOT analysis framework.

The real history of SWOT:
The origins of SWOT is believed to have started with the term SOFT, not SWOT.

SOFT (Satisfactory (good in the present), Opportunity (good in the future), Fault (bad in the present), Threat (bad in the future)).

This was the outcome from the research work on corporate planning conducted at Stanford Research Institute (SFI) from 1960-1970.

It is understood that the SOFT analysis was presented in a seminar at Zurich in 1964 and Urick and Orr changed the F to a W and called it the SWOT (Humphrey, 2005) analysis.  Here is was presented as a standalone tool rather than being part of a process.

Weihrich (1982) subsequently modified SWOT in the format of a matrix, matching the internal factors (i.e. the strengths and weaknesses) of an organization with its external factors (i.e. opportunities and threats) to systematically generate strategies that ought to be undertaken by the organization.  It is Weihrich who is credited with the four box matrix we now use.

Evidence

Evidence of this is best found in the SRI newsletter of December 2005 in which Albert Humphry himself states the origins of the model.

Tools like SWOT get into the consciousness due to a range of factors – Easy, practical, obvious….

They were the result of sound research but at the time not documented so as they were being used as a real tool, this is probably why it is so difficult to find much documented evidence of the origins.

Certainly from the 1980s onwards SWOT is prolific in journals and publications and yet no-one listed where they heard about the model.

One thing for sure – if used in isolation it does not work, used in context as Humphry and the team describe then it is a powerful tool.

Humphrey’s letter of explanation (Taken from SRI newsletter of December 2005 ):

SWOT Analysis for Management Consulting
by Albert S. Humphrey
Shortly before he died, Albert “Humph” Humphrey prepared a paper that describes the methodology that he learned at SRI in the 1960’s and used as a basis for a 35-yr career as an independent management consultant dba Business Planning & Development. Here is his paper, abridged with permission:

SWOT analysis came from the research conducted at SRI from 1960-1970. The research was funded by the Fortune 500 companies to find out what had gone wrong with corporate planning and to create a new system for managing change. Led by Robert Stewart, the Research Team also included Marion Dosher, Dr Otis Benepe, Birger Lie, and me.

Corporate Planning struck first at Du Pont in 1949, and by 1960 every Fortune 500 company had a Corporate Planner. But nearly all of these companies felt that Corporate Planning, aka Long Range Planning, was not working. They knew that managing change was difficult and often resulted in questionable compromises.

From 1960 through 1969, we interviewed some 1100 organisations. A 250-item questionnaire was designed and completed by over 5,000 executives. Seven key findings lead to the conclusion that the Chief Executive should be the Chief Planner and that his immediate functional directors should be the planning team.
The key research findings were never published as being too controversial. But this is what we found:
1) A business can be divided into two parts: The base business plus the development business. [This was re-discovered by Dr Peter Senge at MIT in 1998 and published in his book “The 5th Dimension”]. The development business turns over every 5 to 7 years.
This was a major surprise and urged the need for a better method for planning and managing change.
2) All people measure what they get from their work and divide it by what they give to the work and this reward/effort ratio is compared to others. If it perceived as too low, the person slows down.
3) The introduction of a corporate planner upsets the sense of fair play at senior level, making the job of the corporate planner impossible.
4) The gap between what could be done by the organisation and what was actually done was about 35%.
5) The senior man will over-supervise the area he comes from.
6) There are 3 factors that separate excellence from mediocrity:
a. Overt attention to purchasing
b. Written departmental plans for short-term improvement
c. Continued education of the Senior Executive.
7) Formal documentation is required for approval of development work. In short, we could not solve the problem by stopping planning.

We started as the first step by asking, ”What’s good and bad about the operation?” Then we asked, “What is good and bad about the present and the future?” What is good in the present is Satisfactory, good in the future is an Opportunity; bad in the present is a Fault, and bad in the future is a Threat. Hence S-O-F-T. This was later changed to SWOT—don’t ask. (I’m told that Harvard and MIT have claimed credit for SWOT…not so!)
Following the analysis step, we sorted the issues into six programme-planning categories of:
Product– process– customer– distribution — finance– administration

By sorting the SWOT issues into the 6 planning categories one can delineate short- and long-term priorities. This approach captures the collective agreement and commitment of those who will ultimately have to do the work of meeting the objectives.

The action plan then becomes “what shall the team do about the issues in each of these categories?” The planning process was developed into a 17-step process beginning with SWOT. This sorting step can be easily done since each issue is recorded separately on a single page called a planning issue. As Robert Stewart said at the time we developed it – “SWOT identifies all of the claims on management’s attention” The first prototype was tested and published in 1966; modifications were completed by 1973. The operational programme was first used to merge the CWS milling and baking operations with those of J.W. French Ltd. The process has been used successfully ever since.
By 2004 the system had been fully developed, and has proven to cope with today’s problems of setting realistic annual objectives without depending on outside consultants or expensive staff resources.

In conclusion, we boiled down the key advice to:
1) Give all members of staff the opportunity to submit their own personal views of what is Good and Bad/ Present and Future from their position in the business;

2) Urge staff to identify trivial issues, for that’s where the gold lies–not in the “Big Ideas”; and

3) Ask staff to write legibly and divide the ideas into the six classifications.
***********
In a final e-mail, Humph said:
“Yes, I am still consulting – rather coaching and a bit of mentoring. I will work in Monaco this coming week for Maia Institute to help them create a development plan to accelerate their research in a predictive model for trading foreign currency. “Then I will help Mortgage Plc create a development plan for competing with the high street mortgage lenders.
“In October I will give a seminar in Rumania for CODEC on “Team Action Management”–also a product of SRI”.
—Humph, 9/7/05

An alternative of this ‘letter’ is often quoted as (source unknown):

SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. The background to SWOT stemmed from the need to find out why corporate planning failed. The research was funded by the fortune 500 companies to find out what could be done about this failure. The Research Team were Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie.

It all began with the corporate planning trend, which seemed to appear first at Du Pont in 1949. By 1960 every Fortune 500 company had a ‘corporate planning manager’ (or equivalent) and ‘associations of long range corporate planners’ had sprung up in both the USA and the UK.

However a unanimous opinion developed in all of these companies that corporate planning in the shape of long range planning was not working, did not pay off, and was an expensive investment in futility.

It was widely held that managing change and setting realistic objectives which carry the conviction of those responsible was difficult and often resulted in questionable compromises.

The fact remained, despite the corporate and long range planners, that the one and only missing link was how to get the management team agreed and committed to a comprehensive set of action programmes.

To create this link, starting in 1960, Robert F Stewart at SRI in Menlo Park California lead a research team to discover what was going wrong with corporate planning, and then to find some sort of solution, or to create a system for enabling management teams agreed and committed to development work, which today we call ‘managing change’.

The research carried on from 1960 through 1969. 1100 companies and organizations were interviewed and a 250-item questionnaire was designed and completed by over 5,000 executives. Seven key findings lead to the conclusion that in corporations chief executive should be the chief planner and that his immediate functional directors should be the planning team. Dr Otis Benepe defined the ‘Chain of Logic’ which became the core of system designed to fix the link for obtaining agreement and commitment.

  1. Values
  2. Appraise
  3. Motivation
  4. Search
  5. Select
  6. Programme
  7. Act
  8. Monitor and repeat steps 1 2 and 3

We discovered that we could not change the values of the team nor set the objectives for the team so we started as the first step by asking the appraisal question ie what’s good and bad about the operation. We began the system by asking what is good and bad about the present and the future. What is good in the present is Satisfactory, good in the future is an Opportunity; bad in the present is a Fault and bad in the future is a Threat. This was called the SOFT analysis.

When this was presented to Urick and Orr in 1964 at the Seminar in Long Range Planning at the Dolder Grand in Zurich Switzerland they changed the F to a W and called it SWOT Analysis.

SWOT was then promoted in Britain by Urick and Orr as an exercise in and of itself. As such it has no benefit. What was necessary was the sorting of the issues into the programme planning categories of:

  1. Product (what are we selling?)
  2. Process (how are we selling it?)
  3. Customer (to whom are we selling it?)
  4. Distribution (how does it reach them?)
  5. Finance (what are the prices, costs and investments?)
  6. Administration (and how do we manage all this?)

The second step then becomes ‘what shall the team do’ about the issues in each of these categories. The planning process was then designed through trial and error and resulted finally in a 17 step process beginning with SOFT/SWOT with each issue recorded separately on a single page called a planning issue.

The first prototype was tested and published in 1966 based on the work done at ‘Erie Technological Corp’ in Erie Pa. In 1970 the prototype was brought to the UK, under the sponsorship of W H Smith & Sons plc, and completed by 1973. The operational programme was used to merge the CWS milling and baking operations with those of J W French Ltd.

The process has been used successfully ever since. By 2004, now, this system has been fully developed, and proven to cope with today’s problems of setting and agreeing realistic annual objectives without depending on outside consultants or expensive staff resources.

The seven key research findings

The key findings were never published because it was felt they were too controversial. This is what was found:

1) A business was divided into two parts. The base business plus the development business. This was re-discovered by Dr Peter Senge at MIT in 1998 and published in his book the 5th Dimension. The amount of development business which become operational is equal to or greater than that business on the books within a period of 5 to 7 years. This was a major surprise and urged the need for discovering a better method for planning and managing change.

2) Dr Hal Eyring published his findings on ‘Distributive Justice’ and pointed out that all people measure what they get from their work and divide it by what they give to the work and this ratio is compared to others. If it is not equal then the person first re-perceives and secondly slows down if added demands are not met.

3) The introduction of a corporate planner upset the sense of fair play at senior level, making the job of the corporate planner impossible.

4) The gap between what could be done by the organisation and what was actually done was about 35%.

5) The senior man will over-supervise the area he comes from. Finance- Finance, Engineering-Engineering etc.

6) There are 3 factors which separate excellence from mediocrity:

a. Overt attention to purchasing

b. Short-term written down departmental plans for improvement

c. Continued education of the Senior Executive

7) Some form of formal documentation is required to obtain approval for development work. In short we could not solve the problem by stopping planning.

In conclusion

By sorting the SWOT issues into the 6 planning categories one can obtain a system which presents a practical way of assimilating the internal and external information about the business unit, delineating short and long term priorities, and allowing an easy way to build the management team which can achieve the objectives of profit growth.

This approach captures the collective agreement and commitment of those who will ultimately have to do the work of meeting or exceeding the objectives finally set. It permits the team leader to define and develop co-ordinated, goal-directed actions, which underpin the overall agreed objectives between levels of the business hierarchy.

Albert S Humphrey
August 2004


A SWOT analysis is a valuable diagnostic tool, but it is only as good as the data and context considered. Remember, keep the analysis real, in context and focussed on the goal you are seeking. 
When using a SWOT analysis, always use the PRIMO-F & PEST or PESTLE analysis profiles to ensure all factors are covered.

Need to know more about SWOT analysis? then check out Mike Morrison's Book – Strategic Business Diagnostic Tools on Amazon or on Kindle

For more on SWOT analysis read our other articles. 


 

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Comments

  1. Great overview. How would you reference a SWOT analysis when writing an academic essay? Is there a specific paper Humphrey wrote? I am struggling to find one at present and would be grateful of any help!

  2. Thanks Mike that has been really helpful to me. It is often difficult to find the true origins of many references, at least now I don’t have to spend hours searching for this one! I shall now cite you and refernce the link.

    Thanks again

    David

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  15. Hi David
    Unfortunately this is not as easy to answer as you may believe.

    The Harvard (and other referencing systems) were developed for the use of academic material. On this and other more popular management models there was no public paper, it was practical research applied. In addition technically unless you had access to the original paper, your reference should be this site (page) and the company newsletter. During my research of SWOT, PESTLE & SMART, I have found many references quoited that are plain incorrect – many by established academics! Many academics seem to blindly trust the research of their colleagues – this is a dangerous thing to do. For example many quote Drucker and “The practice of management” as the source of SMART – it is not, I have been through 5 different editions and there is no reference to the model. Humphrey and the information provided is the nearest I have found to any original documentation.

    The reality is with SWOT is that no one really knows, the piece I have presented is the earliest credible reference, but this does not mean he was the originator.

    So to answer your question, you can only use references to sources of information you personally have used, be they modern or original.

    Recently there has been a move to extend the use of the referencing system to more informal publications (see below) so technically you should reference my site and the newsletter, as these are the nearest things to the source as anyone will find (but I am still on the case but now hopeful)

    Web Pages

    For web pages you must include the full address of the page, not just the address of the site. This can be copied from the address bar which normally appears at the top of the browser.

    Morrison, M. (2006) SWOT Analysis, http://rapidbi.com/SWOTanalysis , Date accessed 16/01/09.

    An extra date, the date you accessed the page is included at the end of the reference, because web pages, unlike books, can be modified and even disappear entirely. Note it is recommended to print pages as paper references as the content of a page is likely to change.

    Writing Harvard references for less formal sources

    Newspaper and newsletter articles

    For newspaper articles the required elements for a reference are:

    Author, Initials., Year. Title of article. Full Title of newspaper/ publication, day and month before page numbers and column line.

    Hack, A., 2005. Corporate mergers:killing our high streets.
    The Guardian, 3 Feb. p.4b.

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