One of the most well-known ways to apply all of the information you’ve consumed to fuel your commercial awareness is through a SWOT and PESTLE analysis. This article provides an overview of what the SWOT and PESTLE pairing is and how to use it. It also aims to cover why it shouldn’t be the only thing you rely on when evaluating the merits of a hypothetical business decision or scenario.
What is it?
Whether at an interview, during your studies or when you’re in practice, you’ll almost certainly need to introduce a commercial element to your answers as a lawyer. This is perhaps most prevalent if you want to work within the realms of commercial law and less so in, say, family law. However, while how your approach to commerciality (or perhaps ‘thinking beyond the remits of your letter of the law knowledge’ to be more accommodating to the latter types of practice) might be different depending on where you’re working, it is still important to account for your client’s legal problems in the wider context of their problem.
SWOT and PESTLE analyses aim to account for this element of commerciality/supplementary model of thinking necessary beyond whether something is ‘legally’ possible. They both aim to generate key questions and insights to consider before going ahead with a certain business decision. As I covered in my previous article in demonstrating commercial awareness, good lawyers will nearly always conduct a two-part test before advising clients:
In short, the SWOT acronym can be broken down as follows (I’ve included an assessment of Facebook in brackets to give you an example of what factors a SWOT analysis might cover):
‘Strengths’ and ‘Weaknesses’ relate to an internal assessment of the company or party being analysed. For example, relevant factors might include:
On the other hand, ‘Opportunities’ and ‘Strengths’ consider the external environment. Relevant external factors may include:
As for PESTLE, its acronym breaks down as follows (again, with some Facebook examples in brackets to help):
Limitations of SWOT and PESTLE
While heavily popularised, SWOT and PESTLE are far from perfect as an approach and model of thinking to solely rely on when analysing legal problems. There are several potential problems that can arise if it is used unquestioningly.
They’re prone to your own biases and presumptions
When trying to analyse or predict a given scenario, it's quite easy to fall victim to seeing a problem how we’d like it to look versus how it actually looks. SWOT and PESTLE are no different. It can be quite easy to finish your analysis with a long list of ‘Strengths’ and ‘Opportunities’ and a much shorter list of ‘Weaknesses’ and ‘Threats’. Doing so leads to misleading (and potentially costly) statements, such as: “Well, we only need to worry about getting our proposal approved by regulators and we’re good to go!”
It’s important to attribute some form of weight to each of your written points when conducting your research. They’re not always as simple as they first seem and they’re certainly not all created equal in terms of their significance. You shouldn’t take the face-value view that a list of ‘Weaknesses’ that’s a third the size of your ‘Strengths’ means there’s comparatively ‘not much to worry about’. It takes only one of those weaknesses to be unaccounted for, or to be pushed to the forefront of your problems by an unforeseen event (any ideas?) to cause significant disruption down the line.
They’re glossed over
If you’re going to conduct a SWOT or PESTLE analysis, then you must take it seriously. Avoid skipping over areas you might believe are insignificant or too difficult and instead invest more time in those areas. Ensure there’s a high level of detail in the analysis and evidence is used wherever possible – preferably quantitative over qualitative to try and remove personal bias.
They’re not always that clear
Drawing a clear distinction between whether something is a ‘Threat’ or an ‘Opportunity’, for example, can be quite difficult. Consider the following example:
“Global warming will lead to greater taxes on environmentally unhealthy practices, such as relying on fossil fuels.” = Threat
“Greater levels of taxation on non-renewable sources of energy will greatly incentivise the development and use of renewable energy, potentially through grants and tax reliefs.” = Opportunity
As the above illustrates, news and business developments are much more complex than their initial headline. There are often a multitude of stakeholders, factors and trends occurring at any one time, for any given story. SWOT and PESTLE are inherently simple forms of analysis and as such can lead to oversimplified decision making. It’s important to keep in mind the limitations of your own methods before attempting to deliver a bona fide, authoritative piece of advice.
SWOT and PESTLE are useful and the above will hopefully serve well as a guide for using these techniques in future. However, do so with the above cautions in mind and remember to keep track of how you come to any conclusions along the way.