Whether you lead a government entity, nonprofit organization, for-profit business, or educational institution, it is essential to understand internal and external factors that impact sustainability and success. Environmental scans and SWOT analysis are two of the top ways to do this.
In fact, before you start a strategic planning or other strategy process, development and marketing experts recommend decision-makers engage in environmental scans and SWOT analysis.
While tools like environmental scans describe current conditions, their most important purpose is to guide future decisions.
In this article, we’ll look at what environmental scans and SWOT analysis are, how organizations use them, and how they can help strengthen your organization’s sustainability, strategy and resilience.
What is the Difference Between an “Environmental Scan” and “SWOT Analysis?”
Both environmental scans and SWOT analysis are designed to provide a snapshot of an organization’s current operating context, with the aim of helping leaders prepare for future decision-making.
The primary difference between an environmental scan and a SWOT lies in the scope. A SWOT analysis typically identifies and addresses internal factors that can influence future decisions, while environmental scans encompass external realities capable of the same.
While each process is independently valuable, decision-makers will capture a more precise picture of their organization’s landscape if they conduct both an environmental scan and SWOT.
Using a SWOT Analysis
The SWOT analysis is by far the most recognized approach to conducting an internal assessment. The SWOT acronym prompts organizations to assess their current internal operating capacity in the following four areas:
- Strengths – In assessing strengths, you’ll want to consider your organization’s internal financial resources, physical resources, human resources, and current operations and processes.
- Weaknesses – In assessing weaknesses, you’ll evaluate the same internal areas as for strengths, but instead identify what isn’t working or is under-resourced. For example, organizations often delay technology investments until it becomes a crisis.
- Opportunities – Whereas strengths and weaknesses focus exclusively internally, opportunities and threats also consider outside factors. For example, this could include community needs or pending policy changes.
- Threats – While each organization will identify specific threats in their sector or community, one perennial threat organizations should consider is cybersecurity.
When conducting a SWOT analysis, the Harvard Business Review advises that instead of using one- or two-word descriptions for each category, you should: “Explicitly spell out the situation with a detailed phrase or a sentence.” This approach can help you move from simply making a list to developing an analysis.
Funding for Good also recommends organizations use an outside facilitator for SWOT analysis sessions so leaders and other participants can focus on strategy rather than facilitation. Indeed, one of the most valuable aspects of a SWOT analysis is prompting leaders to think strategically. As a Forbes piece on strategic leadership explains:
external understanding, internal awareness, and an evaluation of the congruence of possible new moves is just one way to think strategically. But following a disciplined process…will begin to shape the mind of a strategic leader.
To prompt this strategic thinking, the facilitator for your SWOT session should prepare targeted questions with a focus on identifying, understanding, and evaluating your organization’s current state. The Harvard Business Review also suggests coupling your SWOT with a more thorough environmental scan, which we’ll cover next.
Read more: Questions to ask when choosing a facilitator
Using an Environmental Scan
There are multiple options for external environmental scans that allow organizations to address current realities at either a macro or micro level. Each is designed to allow decision-makers to gather data about their current environment, evaluate the potential impact of both positive and negative environmental factors, and make strategic decisions to guide their organization’s growth.
A PESTLE analysis allows organizations to assess macro-level external factors. The acronym and some traditional focus questions are as follows:
- Political: Determine how the current direction of national or, if relevant, global politics and policy may influence business development and growth.
- Economic: Consider broad economic trends like interest rates, inflation, taxes, stock market, overall economic growth, and other economic metrics. Also include how these or other factors may influence outside investment in your organization.
- Social: Identify socio-cultural factors and trends that may affect your work. This could include areas like consumer behavior, cultural attitudes, demographic shifts, or unmet community needs.
- Technology: Data infrastructure and security is becoming increasingly important for all organizations, and is changing rapidly. When considering technology, evaluate hardware, software, communications tools, and cybersecurity. Is your equipment and technology up to date? Do your staff have the tools they need to do their jobs efficiently, including in times of system strain, or are you incurring “technical debt”?
- Legal: Consider new laws and regulations that might impact your operations. For example, for nonprofits this could include changes in charitable giving deductions or policy changes that affect the program areas you work on.
- Environmental (or Ethical): Identify the environmental factors that may influence your operations, such as geographic location, weather, or climate change. Some versions of the PESTLE analysis also include ethical considerations, particularly in areas like accounting, management, marketing, partnerships, and social responsibility.
As you conduct a PESTLE analysis, you’ll want to begin to think through which aspects constitute opportunities and threats, and where they may intersect with internal strengths and weaknesses. Fordham University also recommends examining “both quantitative and qualitative changes” as part of your PESTLE.
Another environmental scanning approach is the STEEPLE analysis, which offers a deep dive into external macro-environmental factors. Areas of analysis in STEEPLE include:
STEEPLE takes the PESTLE one step further by considering both environmental and ethical factors. Like the PESTLE, according to Forbes, one of the benefits of the STEEPLE is that it “gets people thinking not only about how STEEPLE factors will play into organizational success but also what impact the organization is having or will have in those areas.”
The SKEPTIC assessment is also similar to the PESTLE approach and addresses socio-demographics, competition, environment/economics, political/regulatory, technology, industries, and customers.
Coupling Environmental Scans and SWOT Analysis with Strategic Planning
One key for conducting environmental scans and SWOT analysis is ensuring that the results translate into strategy. As the Harvard Business Review explains:
By looking at the external conditions, in conjunction with internal attributes, a set of clear-cut and supported recommendations can be generated. And this should be your goal: Using an analytical tool to help you identify a wide range of possible actionable outcomes.
When used as part of a strategic planning process, environmental scans and SWOT analysis encourage leaders to dig beneath the surface of everyday work and challenge assumptions. Often, we see leaders invigorated by both the challenges and opportunities they discover. The process jumpstarts creative thinking and innovation that continues through into strategic planning.