Strategic Assumptions – a Prerequisite to Great Strategies: 10 Tips

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Strategic plans almost always assume certain things to be true about the future. For example, when one company plans to acquire another, its leaders may assume they can achieve synergies to drive down costs. They might assume they are buying their way into a high-growth market or blocking a competitor’s moves. Or they could assume any combination of the above.

Unfortunately, many strategic plans include assumptions that don’t mean much. And some plans just skip the idea altogether. Lousy or absent assumptions cause problems, such as:

  • Strategy is harder to get right the first time. Discussion and debate works best when our premises are crisp and defensible. Clear premises enable clear thinking. In strategic planning, assumptions are our premises, and it’s hard to think clearly without good ones.
  • Strategy is harder to correct quickly. Strategy should be corrected immediately when its underlying assumptions don’t play out. But that’s tough to do that when you don’t know what your assumptions are.

For strong strategy – and quick course correction – you need clear, and useful strategic assumptions. Here are ten tips on how to make sure you get exactly that.

1. Keep Your Head Out of the Sand

As kids, both of us (Wendi & Bill) were lectured that, “To assume makes an ‘ass’ of ‘u’ and ‘me.’” That was always in reference to an assumption that hadn’t been discussed until it didn’t pan out. “But, Mom, I assumed somebody would give me a ride home!” That’s when the lecture began.

Many strategic plans have the same problem, their important assumptions being unexpressed or obscured. If mentioned at all, they are banal, such as “There will continue to be competition.” They might as well say, “There will continue to be air.” They declare the obvious without contributing anything useful or meaningful.

Consequently, pivotal assumptions go unstated. We call this flaw the “head-in-the- sand” problem: obliviousness to what one is actually assuming. This is the most pernicious problem we see with assumptions and strategic plans. It is the inability or unwillingness to actually state what you are assuming.

2. Stay above Hubris

Hubris is another common problem. Too many plans arrogantly assume away important barriers, pitfalls, and problems. For example, when we blithely assume that a complex, technical project will come in on time and on budget, we are presuming god-like powers not normally associated with reality. When we assume that a strong competitor will be cowed by our advances rather than goaded by them, we are living on a different planet.

The point of strategic assumptions is not to sweep away problems, but rather to articulate a likely reality. Chest-thumping strategic goals are fine, but chest-thumping assumptions are dangerous. They project an optimistic future or capability without provisions for achieving them.

Louis Armstrong wanted “A Kiss to Build a Dream On” (wonderful song); a strategic assumption is a guess to build a strategy on, so it had better be a pretty good guess.

3. Really Question Your Assumptions

Although it helps to be a pragmatic optimist when writing strategic goals, we suggest you play the pragmatic skeptic when writing assumptions.

The assumption-writer asks annoying questions such as, “Will the adversary truly respond the way we think he will?” “Has this ever worked in the past?” “On what basis do we think funding will continue to be available?” “How good are we, usually, at implementing big ideas?” “Why do we think our competitors’ technology will not advance sufficiently for them to gain the advantage?” “Do our constituents really want the same things they need?”

To write good assumptions, temporarily divorce yourself from your enthusiasm for the plan, platform, personality, or future. Launch a cascade of cranky questions. Call in diverse and dispassionate experts who have no vested interests in your situation and ask them periodically to “red team” your plans with critical questioning of your unstated premises. Get them to explicitly articulate your assumptions about what your own organization is capable of – and then question those assumptions. Get them to do the same with assumptions about your external environment, such as adversaries, allies, technology, legislation, and so on.

4. Think of Categories Before You Think of Assumptions

Before you and your team (and red team) brainstorm assumptions, you will find it immensely helpful to first brainstorm categories of assumptions. Cognitive psychological research (and our experience) indicates that people will generate about twice as many useful ideas if they have categories in which to fit their ideas. So, for example, an assumptions brainstorm for a commuter airline might start by identifying possible assumption categories such as:

  • Legislation & regulation
  • Interest rates
  • Fuel costs
  • Quality and cost of non-face-to-face meeting technology
  • Labor markets
  • Miscellaneous (none of the above, but relevant)

After categories have been identified, then most people will have an easier time generating assumptions. And remember always to include a “none of the above” category; the list is meant to be an aid to thinking, not a constraint.

5. Close the Assumption-Strategy Loop

In theory, you should start by generating a nice, clean set of assumptions before crafting strategic goals. After all, good assumptions enable solid strategic goals. But the truth is, the whole process is a messy, iterative loop that can start anywhere you like. Feel free to start with glorious strategic goals, and then question the assumptions that supported those goals. Or, start with assumptions and build strategic goals on that foundation. In either case, circle back and forth from one to the other a few times before you settle on assumptions and strategic goals. This is like the good judgment loop we discussed a few posts ago.

6. Keep Your Plan Relevant

Good implementers continually ask, “How are we doing against our plan?” But great implementers also ask, “Is our plan still relevant?” A powerful way to address relevance is with your assumptions. If your assumptions have not held true, or have been incomplete, then it’s time to re-tailor the plan. Even before your results tell you that your plan is off the mark, occasional review of your assumptions serves as an early warning system before bad results start rolling in, and informing you that something needs changing. Here are the kinds of questions to ask:

  • “Our plan assumed that corn would stay below $6 per bushel. Has it?”
  • “Our plan assumed that our competitors would lower their price at least 10 percent within six months of our entry to the market. Did they?”
  • “Our plan assumed that our two Tennessee plants could consolidate without a reduction in monthly output after six months. Did they?”

If you have tied strategies to assumptions, then you’ll have a considerable advantage in knowing what to change when assumptions have to change.

7. Make Them Crystal-Darn Clear

Of course, just knowing your assumptions will put you ahead of the pack, both as a planner and as an implementer. But knowing exactly what you mean by each assumption will put you even farther ahead. We’ve written elsewhere about the importance of clear and measurable strategic goals. Well, the same goes for assumptions.

Precision and specificity are essential because assumptions such as, “The market for widgets will continue to grow” aren’t terribly useful. Such unfocused assumptions can create confusion and disagreement. Worse, broad, fuzzy assumptions tend to be ignored, and disconnected from strategic adjustments. Much better are specific assumptions such as, “The market for widgets will continue to grow at least 3% per quarter,” which can be monitored as a straightforward and unambiguous task.

8. Connect Assumptions to Strategies

There is another requisite for the correction loop to work: the relationship of a strategic goal to one or more assumptions should be absolutely explicit. Otherwise it’s too difficult to change your strategy, even if you spot discrepancies as your assumptions unfold. Too often, there is no clear relationship between the strategies in a strategic plan and the assumptions on which they are based. The relationship between assumptions and strategies need not be only one assumption to one strategy. Those relationships can also be many-to-one or one-to-many.

9. Make Contingency Plans

If assumptions are measurable, they serve as effective tripwires for contingency plans. For example, your strategic plan might state, “If assumptions x, y, and z hold true, we’ll stick with course A. But if any two of them prove incorrect, we’ll switch to course B.” In other words, you don’t need to wait until an assumption is disproven to create a replacement strategy.

Furthermore, your contingency plan needn’t always be a fallback plan. If assumptions turn out to be too conservative or pessimistic, it may be useful to also have a “seize-the-opportunity” plan.

10. Hedge Your Bets

“Hedging” is one way to prepare for the eventuality of incorrect assumptions. A hedge is a relatively small investment, up front, to mitigate the impact of incorrect assumptions. A hedge might include the purchase of equipment that might never be needed (like a seat belt), training you probably will never need (like CPR instruction), or the right to use or lease something that might never be part of your future.

For example, in a municipality where it hardly ever snows, a savvy mayor might insist on purchasing a single snow plow or, better, snow plow attachments for existing trucks – and annual maintenance and training on the (probably idle) equipment.

Or one portion of a strategic plan might rest on the assumption that, “Public support for our work will continue to grow at its present pace for at least three more years.” But here is the “hedge”: “We will identify three specialists in handling crisis public relations, have their 24-hour contact information, and meet with at least one of them.”

In Summary

Well-considered assumptions make your plan smart and relevant. They give you a logical foundation and an ongoing grounding in reality. And, like many things in life that are both simple and hard, your payoff for careful attention to assumptions will many times exceed your investment.

Published: June 28, 2015


18 Comments

  1. Admiral,
    I love your example. The radical re-examination of assumptions opens so many doors! Incidentally, that was the topic of one of our earlier articles, which was on the topic of innovation (http://www.elg.net/we-can-all-play-in-the-innovation-sandbox/)

  2. Wayne, thanks so much. We’d agree, those ARE assumptions for any leader to question!

  3. John,
    Col. Boyd would be proud — nice, tight summary of a critical perspective for any strategist — thank YOU!

  4. John Peterson

    Bill & Wendi,

    Even before assumptions, before context, is the prerequisite realization that the future is determined by the character of those that really shape the tipping points.

    Next comes the collections of observations…

    Understanding of how you and those others (including the realization that each is a prisoner of his/her own cognitive structure and of their own “system” constraints) are interpreting/ going to interpret the observations…

    Identifying the multitude of options for responses and counter responses…

    Determining a series of actions and potential follow-up actions bounded by capabilities and resources that are most favorable to their own “system”…

    Defining you direction and translating that into operational context…

    Implementing, monitoring, following-up and re-iterating…

    (Thank you John Boyd…)

  5. I’m presently heavily involved in a program working with Australian Naval officers and NCO’s around a paradigm shift in leadership. We use the HS Circumplex to conduct 360 degree feedback and blend this with the differences between orders and influence. It’s so well regarded it’s become a promotion prerequisite at all levels.

    A few tips I’d like to add are;

    – don’t Assume that

    everyone is like you,
    People aren’t afraid of you,
    People won’t tell you want to hear,
    Look at behaviour in isolation without considering hidden -values, attitudes, and beliefs,
    What you order will be done when you turn your back,
    Think we all think linearly, and
    The services can be isolated from society.

    Wayne

  6. RDML Shelanski

    Wendi and Bill,
    Thanks for including me on these tips. All too often we in the Navy blow by the assumptions in minutes to get to the plan by digging up what was used before without any examination. Your tip #3 is one I have used successfully. I remember in college I was fascinated with Non-Euclidinan Geometry. Here was an entire system of math created by assuming the complete opposite of the accepted Geometric theorems. It presents a whole new universe of options. So when the assumptions seems obvious, I try to look at it from a different completely different perspective to see if it still holds up. At the very least it gets my staff thinking. Again thanks. I will be using your tips as we start our upcoming planning.

  7. Carson, I love your division of “assumptions” — very useful to use these categories after a team articulates their “assumptions” to see which are predictions vs. aspirations, etc. Thanks !

  8. Asking the team in which way any (relevant) assumption is going to impact their organisation and documenting answers might help in getting specific stated assumptions and easy to check over time

  9. Thanks very much, Mike.

    Incidentally, the examples you cite are terrific.

    Thanks!

  10. I appreciate your crystal-clarity.

    A components supplier to the aircraft industry needs to go beyond the assumption that peace might break out to a more specific assumption about future defense spending; the teaching hospital needs do more than assume the road implementing health reform will be rocky and get all the way to the view that they’ll need to provide treatment at some specific percent of Medicare five years out.

    Goals don’t drive strategy; assumptions do. I like your elevation of them to the place where they belong.

  11. Ron, that sounds good to us. For one thing, strategic plans that cascade several layers into an organization can have quite a few assumptions attached. Might be a good idea to flag the ones that are most iffy, and then give them (and the strategies built on them) special scrutiny during the review process.
    Thanks!

  12. Ronald Schlegel

    Maybe you can’t take the “guess work” out of assumptions but maybe a quantifiable system of scoring relevance. Predictions = 100 pts…….. Delusions = 10 points. Strategic initiatives with low scores get significant scrutiny during quarterly reviews and those with high scores – progress is tracked. Agility is great only when applied early and often down the road with the sharpest turns.

    Ron

  13. Merc, working with you in the Navy was some of the most enjoyable work we’ve ever done. Thanks for the kind words on the article. We’ve got TWO books under way, now (“sleep is for wimps,” as one fighter pilot we know likes to say). And, we very much look forward to future collaborations!!

  14. Star, we haven’t talked much in this forum about “strategic thinking,” at least not yet. But you’re giving a good example of it. Straight line projections and other simplistic projections based on the past are certainly NOT strategic thinking. Yet we do want our thinking to be informed by the past. Very good point.

  15. Carson, we love your taxonomy! It would be interesting to do take inventory of brainstormed assumptions and sort them by your categories. Might indeed lead to clearer thinking. Thanks!

  16. Bill, Wendi,

    Reading your tips on strategic assumptions made me yearn for the days of when we “re-shaped the world” together! Loved the tips . . . they reminded me that while your discussion of assumptions is not unique, the importance you place on them and your clear and direct linkage of them to strategic goals, certainly is. Also, really liked the examples you used to illustrate the tips. Tip number 2 reminded me of some military programmers and their assumptions about both potential enemy capabilities and our ability to deliver new weapons systems on time and on budget.

    Am also looking forward to reading your book, and hopefully, to being able to collaborate again in the future.

    Merc

  17. Great list!
    I would add an assumption about what previously has gone before.
    Something like, past results and plans don’t predict future result, yet may help.

    The point being – it’s important to acknowledge the past plans, what worked, what didn’t, and lessons learned.
    And in planning for the future – know which to use and which to throw out.

  18. Carson Eoyang

    Thought provoking ideas. My quick reactions—decision makers/planners should be careful about differentiating from among the following:

    Assumptions: high confidence, (bordering on certainty) beliefs in facts, states of the world, behavior of others, etc.

    Predictions: Forecasts of what will happen in the future, confidence may range from certainty to speculation

    Expectations: Extrapolations from recent experience, history, information, intelligence

    Aspirations: Hopes and ambitions largely based on emotions and ambitions

    Delusions: Misconceptions of reality, present and future, derived from arrogance, fear, anxiety, impatience, sloth, etc. often supported by selective perception of data/evidence that reinforces the delusion and ignorance of contrary indications.

    We often confuse the above cognitions, usually unconsciously, and confound our rationality with our emotions. We’re only human after all, but we can be a bit more careful in our planning by recognizing these temptations and consider when we are engaging in wishful thinking versus rational analysis.

    My two cents.

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