Analyze This

Nobody knows who the first SWOT analyst was, but the technique has been widely used for decades. In recent years, SWOT had a somewhat lower profile, overshadowed by newer, trendier techniques such as scenario forecasting. Alhough these sophisticated tools are more complex, that doesn't necessarily make them better. "People often believe if a question isn't complicated, it isn't valid," Shapiro says. "But there are real advantages to SWOT because [it requires entrepreneurs to ask] very fundamental questions."

A SWOT analysis should be done annually as part of preparing the coming year's business plan, according to Barbara Lewis, president of Centurion Consulting, a business consulting company in Los Angeles. Fred Fry, a management professor at Bradley University in Peoria, Illinois, recommends using SWOT when working on multiyear strategic plans and ad hoc plans in response to changes in the business environment. A SWOT analysis is also a good vehicle for explaining your strategy to investors, customers and others.

This article was originally published in the June 1999 print edition of Entrepreneur with the headline: Analyze This.