A SWOT analysis is merely a tool to help you bring lucidity to your decision-making.
Launching a business opportunity is like driving down a pot-hole laden mountain road with a cliff on one side and steep avalanche-prone outcrops on the other. If you drive too fast, you may hit a pot-hole and get a flat, hit a recently fallen rock, or skid off the cliff. Dramatic? Maybe. My point here is that you have to determine if the road ahead is safe, if your 4x4 is up to the challenge, and if you have given yourself enough time to get there. This is exactly what a SWOT analysis is all about.
In essence, a SWOT analysis helps drive decision making. You start by assessing the situation at hand, determine the opportunity or potential outcome, measure the risk, and then decide if the risk is worth investing your time and your limited resources. I say limited resources because—no matter how big you are—you can only dedicate so much time and effort into a project without disrupting regular business. Case in point: I recall a meeting with Guitar Center whereby the director was being offered a significant discount to carry DBX direct boxes. Using this as leverage, he wanted me to drop Radial prices to match. I explained that just like a Shure SM58, people do not buy products solely based on price, there are many factors at play. This can include durability, performance, endorsements, and perceived value. Folks buy Radial because they trust the brand. He would have none of it. Because I would not bend, he ordered boatloads of DBX direct boxes and reduced the selection of Radial direct boxes in the stores.
How does a SWOT analysis apply to an AV contractor? You may be asked by a general contractor to be sub-contracted for a major project ...
Guitar Center’s SWOT Perspective (hypothetical)
Strength: DBX is a well-known brand with deep pockets—it will automatically sell.
Weakness: Not known for direct boxes—no proven track record.
Opportunity: If sold at the same price, offers higher profits; if less expensive, GC will sell more.
Threat: What happens if it does not sell? They can be returned. DBX will take them back.
Author's Radial Perspective
Strength: No.1 pro DI Box brand, used by top artists around the globe.
Weakness: Not the cheapest on the market. Harman (DBX) has very deep pockets.
Opportunity: Steady as she goes! Solid, proven track-record with growth every year.
Threat: Harman (DBX) could spend millions on advertising to create sell-through.
Although the threat was real, I felt that the DBX direct box was too small a fish in the Harman portfolio and, therefore, they would not spend money marketing the brand. JBL and Crown took precedence and they already were selling a successful direct box under the BSS brand. DBX would cannibalize BSS DI box sales unless it was much cheaper. I can only assume that their idea was to bring out a product to compete with the sub-$100 low-end (entry level) market. Harman ran two or three DBX ads and then stopped. In other words, they were not prepared to invest the needed resources to create a shift in the market. I had already increased our ad presence as a hedge. They also underestimated Radial’s stickiness in the market. Major artists will not buy an unproven product to save $50 when they have hundreds of thousands invested in concert touring equipment and 20,000 fans in the seats. The proven dependability far outweighs the risk of using an unproven entity.
What actually happened? The DBX direct boxes simply sat on the shelves—they did not sell. Guitar Center returned them in droves. In other words, the buyer did not do a SWOT analysis to question the viability of the product and how the market would perceive it. In the buyer’s eyes, a direct box was not brand-driven, it was merely another black box. He did not do his homework and it backfired. At the same time, online dealer sales began to explode and, since Guitar Center no longer carried some of Radial’s flagship products, more pro-audio sales migrated away from their stores. They not only lost Radial DI box sales, but they opened the door to losing their customers to other dealers for good.
Breaking away from convention and taking risks is at the very heart of being an entrepreneur.
How does a SWOT analysis apply to an AV contractor? You may be asked by a general contractor to be sub-contracted for a major project, such as an airport. Your strengths include the technical expertise and trained staff. The weakness may be hidden in the weeds … for instance, you may not have the funds to source all of the required products in advance and stockpile them in your warehouse until you get word to deliver. Another pot-hole could be your lack of a relationship with a key product manufacturer whose specialty product is specified in the job, and you may end up paying more by buying it through a wholesaler. The opportunity could be that this airport will become a springboard for other big jobs. Yet, the threat may be lower margins due to your having to sub-contract your services. Unanticipated delays or costs could stretch your resources (people and customer service) and potentially upset regular customers. And most frustrating of all, the general contractor may decide not to pay you until he gets paid, and his payment delay may be due to unrelated matters.
Another example: Using a SWOT analysis before opening up a branch office can help the decision-making process. Are you bringing something new to the market (Strength)? Do you have the resources to fund a second operation and the connections to generate business in a relatively short order (Weakness)? Is it a growing community (Opportunity)? Are there well-established formidable competitors in the market that could eat your lunch (Threat)?
I know, there is a lot of "jabber" going on in the high-tech world about breaking things. Breaking away from convention and taking risks is at the very heart of being an entrepreneur. And if you have deep pockets, you can make mistakes that will not put your company at risk. I am a big believer in apportioning part of profits towards risk-taking. A SWOT analysis is merely a tool to help you bring lucidity to your decision-making. By taking the time to create a SWOT analysis, you could save yourself a whole bunch of heartache—or possibly even uncover a wonderful opportunity.
