Digital Transformation 101: SWOT and Strategy Development

This tried-and-true tool can help you plan for radical change—but only if you use it as originally designed.

Digital transformation isn’t like flipping a switch. It’s a slow and often messy process, but for those that pull it off, it can make your business more efficient, more productive and more profitable.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what makes for a successful transformation—and how to avoid problems that lead to a digital dead end.

Every month, I’ll share a new lesson on how to steer your organization through the rough waters of digital transformation. Yes, there will be homework. But if you pay attention and put in the effort, it won’t be long before you start seeing real results.

Charting the best path forward for organizations today is a greater challenge than ever before. Covid-19 accelerated technology-based change in most sectors and it hastened the need for radical change. Despite the urgency, many companies are struggling to decide on, and commit to, significant strategic digital transformation.

Major strategic decisions usually involve a high degree of risk. They are based on choices about future products, services and processes that have major financial and other consequences if judgements are wrong or implementation fails. Most organizational leaders have never made decisions of the scale needed. They were employed for their ability to manage today—not to lead a revolution. Their organizations are designed for reliability.

All that makes change difficult. But not impossible, if you can plan properly.

Planning for Radical Change

Significant technological advance requires a wide range of organizational changes, usually including new processes and skills and involving new practices from employees and managers. Strategic planning needs to effectively combine a wide range of knowledge and skills. In siloed organizations, the extent of the collaboration needed is far greater than anything done previously.

Take as an example the transition from ICE to electric vehicles, taking place alongside widespread technological change in manufacturing in the automotive sector. Many automotive producers and suppliers need to make substantial changes to products and processes alongside growing international competition. Similar levels of change are present in most sectors. Adapting to that change requires a plan, a strategy for transformation.

Many tools are used for strategy development. They categorize and guide the areas to consider and can include processes supporting strategic decision making. When determining the best tool to use for digital transformation, it’s important to focus on the desired outcome.

The challenge is to develop a digital transformation strategy with a high probability of successful implementation. The solution lays in both the tool selected and the way it is used. We don’t just want a tool that facilitates strategy creation, but one that enables a range of skills and knowledge to be combined from a large set of stakeholders, and contributes to their commitment and enthusiasm for implementation.

One such tool has stood the test of time, and it’s a great place to start for digital transformation.

SWOT analysis for digital transformation

SWOT (Strengths, Weaknesses, Opportunities and Threats) was developed at the Stanford Research Institute in the early 1960s. Its longevity (the tool is still widely used today) is evidence of its effectiveness. It has a good analytical framework, using categories that reflect the areas of importance in digital strategy formulation, and can be applied to engage a wide range of stakeholders.

SWOT analysis uses a matrix to integrate understanding of the internal and external elements that should be considered together as strategy is developed. Internal factors (the organization’s Strengths and Weaknesses) are combined with external factors (Opportunities and Threats). Strengths can be accentuated and weaknesses minimized, while opportunities can be exploited and threats countered.

The following chart is a simple application of SWOT analysis to a brake pad supplier in the automotive industry:

A simple SWOT analysis for an automotive brake pad supplier. (SWOT template: BDC.)

A simple SWOT analysis for an automotive brake pad supplier. (SWOT template: BDC.)

When it was originally developed, SWOT strongly emphasized involving a wide range of stakeholders in the strategy development process. Today, much discussion on SWOT focuses on how the tool is used to structure strategy thinking. This is valuable, but it is important to understand that its value lies also in facilitating stakeholder engagement. All appropriate knowledge and data should be included in decisions to maximize commitment to implementing the strategy.

7 steps to using SWOT properly

Digital transformation is an organization-wide revolution, and its success depends on a high level of motivation and commitment from everyone involved. Here are seven key points to using SWOT effectively for digital transformation:

  1. As you prepare to develop your digital transformation strategy, provide and encourage access to information that will assist the SWOT discussion throughout the organization. Information on the market, competitor activity, technology options and possible opportunities for employees should be included. Emphasize the collective nature of the change that is coming.
  2. Design a process of engagement to support the SWOT. You should assume that this will take some time (how much will depend on the size of the organization). Provide a range of ways that everyone can engage in the process. Consider town halls, surveys and discussions with groups of employees. This both maximizes the ideas that will emerge and increases confidence that the concerns and fears that people have will be addressed carefully.
  3. Use a simple tool for the process. I like SWOT because it provides an easily understood, transparent framework. Complex tools create confusion and mistrust.
  4. In larger organizations, mini SWOT exercises can be conducted by units, departments or other groups and feed into the process. This is a good way to deal with the volume of knowledge that will be created by the consultation process.
  5. When the senior management team uses the outcome of the SWOT process to develop the whole organization digital transformation strategy, make sure everyone is prepared. Expect that members of the leadership team have reviewed their appropriate data and have it available in the meeting. Use a skilled facilitator.
  6. It is essential that there be appropriate follow up after the strategy is written. Take time to ensure it is understood by everyone.
  7. Continue the discussion. Digital transformation never ends. Encourage everyone to learn about all aspects of digital transformation. Continue to hold discussions about the future. Revise the SWOT through a participative process annually.

SWOT analysis was created to facilitate widespread stakeholder engagement in the strategy development process. Successful digital transformation requires levels of engagement that are rare in most organizations today. Use SWOT to address this challenge.

Your homework

Your homework for SWOT is not to simply apply SWOT to your organization (though there is value in doing this). Rather, it is to think about how SWOT will be used. Design the engagement process that you think will enable the level of participation that your organization requires of its digital transformation strategy development. I’d love to see your work and to discuss it in the comments below!

Pro Tip: As I work with people on their stakeholder engagement in technology-based change, I usually have to ask them to think bigger. Most only consider immediate stakeholders and underestimate the level of activity that is necessary here. Well planned, extensive stakeholder engagement is essential—without it you are guaranteed to fail.

Ready for more digital transformation knowledge? Check out another lesson: How to Choose the Right Technology

Written by

Peter Carr

Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.