Learning Theories

Tag: business

  • SWOT Analysis Tool

    Summary: SWOT is an acronym that stands for strengths, weaknesses, opportunities and threats. A SWOT analysis is a tool or technique that can be used in business, design or personal settings to evaluate a project or company and to create constructive goals and strategies.

    Originators: George Albert Smith Jr., Kenneth Andrews, Albert S. Humphrey (1927-2005)

    Keywords: decision making, goals, strengths, weaknesses, opportunities, threats, strategy tool, management, business, external issues, internal issues, growth, performance

    Overview

    The exact origin of SWOT Analysis has been debated.[i] Some people believe that it originated in the 1950s at Harvard Business School and was the work of professors George Albert Smith Jr and Kenneth Andrews. Others believe it was created by Albert S. Humphrey in the 1960s during his time at the Stanford Research Institute. Regardless of its origins, SWOT analysis has become quite popular, and may be one of the most widely used management decision-making tools among business managers.

    SWOT Analysis gathers data about internal issues within a company or project  – strengths and weakness – and external issues outside of the company or project – opportunities and threats. It then analyzes this data to inform future goals, decisions, and strategies. The ultimate goal of SWOT analysis is to achieve a more successful outcome; for a company, the goal may be to improve performance and enhance growth.

    Application of SWOT Analysis

    One of the most appealing feature of SWOT analysis is its universal applicability. SWOT analysis can hypothetically be used by any type of organization as a decision-making tool. It can also be used by individuals for similar purposes. Consider the following examples.

    EdTech designers – As a project is created, SWOT analysis can identify factors that lead to the eventual success of the project, while also considering risks and areas that need improvement.

    Small and medium companies – SWOT analysis of small and medium companies can consist of formulating, implementing, and evaluating strategies that lead to improvements in productivity, performance, and successful operation of the company.[ii]

    Farming and agricultural development – Researchers have shown the use of SWOT Analysis in the context of farming and agricultural development in Iran.[iii]

    Private schools – SWOT analysis was used in an attempt to improve two different private schools. The researchers stated that the analysis benefited one of the schools by allowing it to “advance in the face of growing challenges thereby leading to its stability and increased productivity.”[iv]

    Nursing policy – Researchers have used SWOT analysis to consider the nursing policies of multiple European countries. Their analysis allowed them to identify factors that prevented collaboration between countries.[v]

    You can download a printable SWOT Analysis Template below (in Word and PDF formats).

    References

    [i] Madsen, D. O. (n.d.). SWOT analysis: A management fashion perspective. Retrieved from https://www.researchgate.net/profile/Dag_Madsen/publication/299278178_SWOT_Analysis_A_Management_Fashion_Perspective/links/56f05fee08ae70bdd6c94a74/SWOT-Analysis-A-Management-Fashion-Perspective.pdf

    [ii] Houben, G., Lenie, K., & Vanhoof, K. (1999). A knowledge-based SWOT –analysis system as an instrument for strategic planning in small and medium sized enterprises. Decision Support Systems, 26, 125-135.

    [iii] Ommani, A. R. (2011). Strengths, weaknesses, opportunities and threats (SWOT) anlysis for farming businesses management: Case of wheat farmers of Shadervan District, Shoushtar Township, Iran. African Journal of Business Management, 5(22), 9448-9454.

    [iv]Ifediora, C. O., Idoko, O. R., & Nzekwe, J. (2014). Organizations stability and productivity: The role of SWOT anlysis an acronym for strength, weakness, opportunities and threat. Internatinal Journal of Innovative and Applied Research, 2(9), 23-32.

    [v] Uhrenfeldt, L., Lakanmaa, R., & Basto, M. L. (2014). Collaboration: A SWOT anlysis of the process of conducting a review of nursing workforce plilicies in five European countries. Journal of Nursing Management, 22(4), 485-498.

  • Social Proof

    Summary: Social proof describes a psychological phenomenon in which people mirror the actions and opinions of others. In other words, people’s decisions are often impacted by the preferences and modeling of individuals or groups around them.

    Keywords: informational social influence, marketing, group norms, standards of behavior, testimonials, crowds, social modeling, sales, business, conformity, group conformity, social media

    Originator: Muzafer Sheraf (1906-1988)

     

    Social proof was first described in scientific research by a psychologist named Muzafer Sheraf. Sheraf was interested in the impact of groups on individual decision making. In relation to this interest, he completed a famous experiment on group conformity in 1936.[i]

    In this study, Sheraf asked participants to observe a blinking light. A blinking light in a dark room often appears to move, even when it remains still. Based on this common perception, Sheraf asked participants to indicate how many inches they thought the blinking light moved. Sheraf first asked participants to guess an answer when they were alone. Then, he asked them the same question again while they were surrounded by a group of other participants. Sheraf found that participants changed their initial answers once they moved to the group setting. Across the board, people changed their number to closer reflect what other group members had guessed.

    The concept of social proof came out of studies such as this one. Researchers consistently observe a tendency for individuals to move towards group conformity. Individuals often change their behaviors, opinions, and decisions to match the people around them.

     

    Using Social Proof to Influence People

    Social proof is commonly used in marketing and social media to influence people to buy products. Listed below are a variety of different types of social proof that are used in the context of marketing.[ii]

    Social proof uses the influence of social media friends. For example, a business might indicate how many of a person’s Facebook friends “liked” a particular product they sell. People are more influenced to buy something when they know that their friends like the product.

    • Social proof uses the influence of celebrities. Research shows that people are more likely to buy a product when it is endorsed by a familiar and well-liked celebrity.
    • Social proof uses the influence of professional certifications and testimonials. Experts in an area may be called upon to endorse a product or provide a testimonial of how they have enjoyed a product.
    • Social proof uses the influence of crowds. Sometimes businesses indicate the number of people who have bought a product. When people know that a product or service is popular, they are more likely to want to buy it.

     

    Social Proof and Personal Decisions

    Social proof is a great marketing strategy and an effective means of influencing people to make certain choices. However, individuals should consider if social proof is always the best way to make decisions.

    Quite notably, Sharif’s original study indicated that people were not aware of the extent to which they were impacted by the group. When participants where asked if they thought they were influenced by the group, most of them believed they had not been influenced. However, it was clear from the results of the study that people were wrong to believe this.

    Negative forms of social proof can lead to bad decision making and giving into peer pressure. A prime example of this is college students who abuse alcohol and drugs.[iii] Research has drawn connections between social proof and this common dangerous behavior in college students. On a college campus, so many people engage in substance abuse that this behavior is observed to be the norm. Incoming students are apt to conform with the group and begin abusing substances just like the older students around them.

    It is not always wrong to make decisions based on social proof. However, Sharif’s study provides an important caution that people should develop self-awareness surrounding this topic, so they can know when their decisions are being influenced by the people around them.

     

    References

    [i] Sherif, M. (1936). The psychology of social norms. Oxford, England: Harper.

    [ii] Talib, Y. Y. A. & Saat, R. M. (2017). Social proof in social media shopping: An experimental design research. SHS Web of Conferences, 34

    [iii] Cullum, J., O’Grady, M., Armeli, S., & Tennen, H. (2012). Change and stability in active and passive social influence dynamics during natural drinking events: A longitudinal measurement-burst study. Journal of Social and Clinical Psychology, 31(1), 51-80.

  • Pareto Principle

    Summary: The Pareto Principle describes how in a variety of situations, 80% of a product or phenomenon’s output often comes from only 20% of the available input. For example, a business may receive 80% of its income from the sale of only 20% of the products available in their inventory.

    Originators: Vilfredo Pareto (1848-1923), Dr. Joseph, M. Juran (1904-2008)

    Keywords: 20/80 principle, 20/80 law, 20/80 rule, productivity, business, prioritizing, Pareto’s principle of unequal distribution, distribution, wealth distribution, input, output, products, profit

    The concepts behind the Pareto Principle were described by Vilfredo Pareto in the late 19th century. Pareto observed the wealth distribution in his home country of Italy and noticed that 80% of all the wealth was held by 20% of Italy’s richest people.

    In the 1940s, Dr. Joseph Juran was studying Pareto’s work and realized that this 80/20 rule could also be applied to the area of quality control. When looking at defects in products, he observed that most of these defects were being caused by a small number of problems in the production process. He called this principle Pareto’s Rule in honor of its founder.[i]

    Over time, people have described how this 80/20 law can be applied to a variety of areas related to economics, productivity, marketing, cost estimating, and healthcare.

    Real Life Examples

    A number of real life examples describe how a smaller percent of a situation’s effects lead to a much greater percent of that situation’s results.

    In 2002, Microsoft announced that 80% of errors that occur in their system are caused by 20% of all bugs found in their system.[ii]

    The American distribution of wealth holds closely to the 80/20 rule. In 2012, 20% of Americans held 89% of all wealth in America.[iii]

    Pareto’s principle has been noted in relation to healthcare, as a small percentage of patients use the majority of healthcare resources.[iv]

    Prioritization and Increasing Productivity

    Pareto’s principle continues to help people by showing best ways to prioritize resources. Noticing unequal patterns of distribution and acting on this knowledge is a great way to improve businesses and personal productivity. Those who observe this principle are able to prioritize in ways that lead to increased quality, productivity, and profit.

    For example, in some businesses, 20% of employees complete 80% of the work. Employers may notice workers who are high producers and consider providing a raise or promotion. Contrarily, they might notice low producers and seek to determine what is leading to low levels of output.

    In some businesses, 80% of sales come from a mere 20% of products. Some products are much more popular than others. Businesses may take notice of what qualities these popular products hold and seek to produce similar products that appeal in the same way.

    If 80% of views on a blog come from 20% of the articles, this is a helpful way to determine best types of articles in the future. Or, if a person completes 80% of their best work in 20% of their working time, this is a great way to consider what conditions lead to greatest productivity.

    Pareto’s principle helps people notice patterns and act on them to improve the ways they go about work and production. It helps people decide how to best use resources to make a profit.

    References

    [i] The Economist. (2009). Joseph Juran. Retrieved from http://www.economist.com/node/13881008

    [ii] Rooney, P. (2002). Microsoft’s CEO: 80-20 rule applies to bugs, not just features.

    [iii] Wolff, E. N. (2012). The Asset Price Meltdown and the Wealth of the Middle Class. New York: New York University.

    [iv] The High Concentration of U.S. Health Care Expenditures: Research in Action, Issue 19. June 2006. Agency for Healthcare Research and Quality, Rockville, MD. Retrieved from http://archive.ahrq.gov/research/findings/factsheets/costs/expriach/index.html