Making Faulty Assumptions, Part II
Issue 108, May 11, 2023
Last week we explored how making bad assumptions can derail a business model and debilitate a team. Operational assessment and readiness can fall victim overnight based on assumptions that are out of alignment with shared purpose and market orientation. As we have stated, often the infrastructure can be so dysfunctional that bringing new strategies to life and achieving new goals simply isn’t possible. Here are a few signs that indicate a lack of readiness for change:
- Silos or silos within silos mentality with little to no cross functional collaboration throughout the organization.
- Pervasive resistance to experimentation with a preference to do it the way it always has been done.
- Lack of critical thinking to challenge the status quo and identify upstream and downstream challenges.
- Tendency to report on efforts with inadequate outcome reporting with little to no analysis.
- Avoidance of accountability and bad news.
- Ongoing data discrepancies and a lack of cross functional KPIs.
- Leaders are ill informed which translates to a lack of decisiveness.
- Board-level leaders are more focused on tactics and operations than strategies.
- Ongoing, multiple years of decline or stagnant growth in subscribers, members, customers, and revenue.
- Inability to articulate a value proposition(s) for one or different market segments.
- Inadequate market research on subscriber, member or customer needs and their relative satisfaction with the organization’s ability to meet their needs and wants.
And we add to this, the common practice of making assumptions that are neither fact-based nor compatible with the capacity and capability of stakeholders, particularly the workforce that is charged with delivering on every goal.
First of all, organizational readiness is crucial for any successful transformation, pivot, or even a market shift. But when organizations prioritize operational efficiency, many fail to recognize the need for organizational readiness at all operational levels and understanding of staff competencies. As we have cited, a lack of readiness can be caused by operational silos, resistance to experimentation, inadequate outcome reporting, avoidance of accountability, lack of critical thinking (too many assumptions) and systemic data discrepancies.
The human factor is typically what compromises readiness. The workforce needs a set of measurable and relevant goals based on realistic expectations that align with their skills sets, capacities, and capabilities. And organizations need to objectively understand their customers to ensure their products and services are what their customers need and want. Which leads us back to assumptions and their potential role in organizational un-readiness.
The Eight Most Common Business Assumptions
- Profitability: A business will be profitable or will generate more revenue than expenses.
- Customer Demand: There is sufficient customer demand for a product or service, and that customers will continue to purchase it over time.
- Competition: There will be competition in the marketplace and the organization will need to compete with other organizations to succeed.
- Economic Conditions: The economy will remain stable, or it will improve over time, allowing the organization to grow.
- Consumer Behavior: Customers will behave in predictable and consistent ways and their purchasing habits can always be analyzed and predicted.
- Technology: Technology will continue to evolve, and organizations will need to stay up to date with new developments to remain competitive.
- Workforce: The organization will be able to attract and retain skilled employees, and that the employees will be motivated to work hard and be productive.
- Regulatory Environment: The regulatory environment will remain stable. and the organization will be able to comply with any relevant regulations and laws.
At face value, each of these business assumptions seem to be a matter of common sense. But they may or may not reflect reality or the complexity of market conditions and organizational culture.
Here’s another assumption. We live and work in a time when everyone is waiting for the recessionary shoe to drop despite a variety of data points indicating the economy, so far, is holding up. There is also concern that with three recent bank failures a banking crisis is imminent. We typically look at everything in the moment with an eye on a potential future. So, when we make assumptions in isolation, it is basically a matter of personal perception, not a collective or fact-based reality.
Why Do We Make Assumptions?
We are lazy. We like shortcuts. We are in love with our own ideas. We don’t know how to think critically. We don’t understand how to use data analytically. We don’t know how to listen. You can add your own reasons to our short list of the most common rationalizations. And here are further thoughts:
- We like to simplify complex situations and problems by making assumptions. We believe that if we make assumptions, we can focus on the bigger picture.
- When we have limited or incomplete information, we justify it by filling in the gaps with assumptions.
- We are under the assumption that we can predict the future by relying on the past. As we have warned so many times, the past is the past and market conditions have changed to the extent that it is unrealistic to use past measures as benchmarks for the future – particularly in our digital marketplace.
Assumptions in business can lead to poor results because they are based on incomplete or inaccurate information. Anyone who overlooks critical details and determining factors is inviting disaster. Speed can also be a factor. If there is a lack of time to conduct the necessary research or audit the workforce for its vulnerabilities, assumptions can be easily justified (although a possible death knell). Even with so much access to AI-driven tools to vet and validate market decisions, assumptions become the costly default for many leaders.
It’s fair to add that if organizations run on assumptions, there is a high probability that they do not have effective communications and collaboration within the organization. The financial loss of assumptions can be high, so the cost of training in critical thinking and change management is well worth it.
The most insidious explanation for assumptions is personal beliefs and bias. A few top ones: Some employees are unsuited for certain roles because they are too old, or too young. Next gens are selfish and entitled. Tech solutions are silver bullets and are solutions for easy fixes. AI will eliminate my job (that one could be true, but more likely it will make the job easier). Confirmation bias is my failsafe for making decisions. Copying what my peer organizations are doing will make us more competitive.
Here is a concise and rational roadmap for challenging assumptions:
- Identify the assumptions: what are they and what’s the root reason they are trusted and taken for granted?
- Question the assumptions: are they true and what other perspectives are worth considering?
- Test the assumptions: the tried-and-true scientific method is a handy and reliable tool to verify or refute the assumptions.
- Consider the consequences: what are the best and worst cases of your assumptions; what are the risks and upsides; what could happen if they aren’t true?
We always stand by the superior power of systems thinking and using holistic problem solving to challenge assumptions and collective mind-think. Yes, data and analytics are key to making fact-based decisions. But that quant approach should be matched with the human element of soliciting feedback from a diverse and inclusive group of stakeholders.
At 2040 we help clients deconstruct strategies and operational systems that are based on assumptions. Although the “wisdom of crowds” may sound like a cliché, it is one of the most critical reality checks in any organization. The outliers and iconoclasts in an organization can be useful in challenging assumptions. And having (or consulting with) capable foresight experts can change the comfort level of any organization and help it face assumptions that may be presenting readiness and effectiveness.
We’ll leave you with one existential thought: embrace uncertainty. Use critical thinking and intuition to conduct ongoing evaluation and reevaluation to evolve, iterate and transform.
Get “The Truth about Transformation”
The 2040 construct to change and transformation. What’s the biggest reason organizations fail? They don’t honor, respect, and acknowledge the human factor. We have compiled a playbook for organizations of all sizes to consider all the elements that comprise change and we have included some provocative case studies that illustrate how transformation can quickly derail.