Assumption-based strategy in times of uncertainty.

The world is experiencing an acceleration of volatility, uncertainty, complexity, and ambiguity (VUCA). Accelerated by the COVID-19 pandemic, technological advancements, and the current political and economic instability. Let’s take a look what we can learn from how innovators deal with uncertainty.

Assumptions in innovation

When working on innovation, you have to deal with many unknowns. You might not know your customers yet, use new technologies, or entering a whole new market.

Assuming that a consumer wants your products results in spending a lot of time and money in developing a product that no one might be interested in. Relying on the wrong assumptions could be fatal for your business. That is why in innovation, you are very aware of your assumptions. Testing and validating these assumptions is key to reducing risk and building confidence in your ideas step by step. That is what assumption-based strategy is about.

What is assumption-based strategy?

Dealing with both an increased level of uncertainty and an overwhelming amount of information, requires a different approach on strategy. One that helps you to navigate this uncertainty and weed through the noise. This is where assumptions play a key role. The goal of assumption-based strategy is to identify opportunities and risks in the current strategy and make predictions about the future that fuels the company's strategic decision-making and planning.

Another factor driving complexity is today's information-rich environment. We are easily overwhelmed and distracted by the sheer amount of information that is available. This is particularly true in fields such as business, finance, and technology, where new information is constantly being generated. Dealing with all this data can be a challenging task, but it is essential to make informed decisions and stay ahead of the competition. 

Spotting critical assumptions in your strategy allows you to weed through the noise and focus on the things that are most important to your business. Assumptions can be everywhere in your strategy, from areas like market trends, consumer behavior, market growth, and the performance of competitors.

Spotting critical assumptions in your strategy allows you to weed through the noise.

And focus on the things that are most important to your business.

Examples of risky assumptions for your business.

  • The economy will continue to grow after Covid-19.

    Despite a slowdown in recent years during Covid, we believe that the economy will continue to grow based on pre-Covid.

  • Our customer segments will continue to buy.

    We had a great increase of revenue during Covid, we believe that the demand will remain and continue to grow.

  • Our online value proposition will continue to grow.

    We had a strong increase of demand during Covid, we believe that the demand will remain and continue to grow

  • We can work with a global strategy approach for our customer segments.

    We assume that the different international markets and B2C/B2B will respond similarly after Covid-19

  • A clear strategy is in place that everyone understands and is able to execute.

    In order to execute a business plan, it is assumed that a clear and well-defined strategy is in place. This strategy should outline the goals and objectives of the business, and the steps that need to be taken to achieve them. 

  • We have a strong team in place that can execute the strategy.

    Strategy and business execution requires a strong team to manage the various tasks and responsibilities involved in implementing a strategy. The team should be composed of individuals with the necessary skills and experience to execute the plan successfully. 

  • The strategy plan is flexible.

    Execution requires that a plan is flexible enough to adapt to change or uncertainty. Business conditions and marketplaces can shift quickly and frequently. The plan should allow for adjustments. 

Be aware of the assumptions you make, question and (in)validate them when necessary, as incorrect assumptions can lead to faulty conclusions and decisions.

How to apply assumption-based strategy?

Assumption-based strategy refers to the process of developing and implementing a strategic plan based on a set of assumptions about the years to come.

1.     Identify critical assumptions.
In a VUCA world, it is important to identify the key assumptions that are driving strategic decisions. These may include assumptions about the economic environment, the competitive landscape, or the organization's capabilities.

2.     Test the assumptions.
Once key assumptions have been identified, they should be tested to ensure that they are valid. This may involve conducting research, gathering specific data, or seeking input from stakeholders. Be critical and honest. Even if you can’t fully test your assumption, it allows you to be aware of the risks.

3.     Develop contingency plans.
Develop contingency plans to address potential risks or opportunities. This may include developing alternative strategies, identifying potential partners or allies.

4.     Monitor and adapt.
With the fast-paced nature of a VUCA world, it is important to constantly monitor your environment and adapt strategies as necessary. This may involve re-testing assumptions, adjusting contingency plans, or pursuing new opportunities.

5.     Communicate and align

Especially in times of uncertainty, it is important for all stakeholders to be aligned and understand the assumptions that are driving strategic decisions. This includes clear and effective communication with employees, customers, and other stakeholders.

Achieve your goals.

Assumptions are a necessary tool for strategy and innovation. They give us the courage to take risks and explore new opportunities, especially in a VUCA world where complexity and uncertainty are prevalent. Assumptions are essential for making sense of our surroundings, identifying key factors that affect outcomes and making strategic decisions. Embrace assumptions, be aware of them, challenge them, and use them to your advantage in your strategy process to achieve your goals and shape your destiny.

Could use a little help with that? Reach out to Patrick, he's your guy.

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Patrick van der Pijl
Patrick van der Pijl