The Power and Pitfalls of Assumptions

“In preparing for battle, I have always found that plans are useless, but planning is indispensable.”

Dwight D. Eisenhower

Eisenhower's quote above is as true for today’s business plans as it is for today’s military strategies. When you are facing hundreds, even thousands, of thinking adversaries, or in the case of the business world, innumerous constantly changing variables (customers, vendors, employees, owners, Board Members, competitors, market changes, world economic changes, etc. etc. etc.), the situation upon which your plan was based is bound to change continuously, making your plan outdated the minute the ink dries. I say outdated, not useless or irrelevant, because if your plan was formulated using a sound planning process, it is a good basis to start with and then deviate from, and more importantly, it clearly identifies the intelligence (information that is analyzed and refined to be used by decision-makers) and the assumptions upon which it was based.

The planning process starts with gathering information and analyzing the organization’s current reality. Fundamentally, you need to know where you are (sales, profit, customers, vendors, competitors, market conditions, etc.) before clearly defining where you want to go and how you will get there. When the available information falls short or is time sensitive (meaning the information is only good for the current reality), we must make assumptions about the future for which we are planning. Now, we all know the old saying about assumptions, but in this case, our assumptions are necessary, even critical, to the planning process. For example, to develop a plan for organic growth of your company—let’s say an additional sales branch in a new location, we need to make some assumptions about the local market conditions, customer base, industry trends, etc., for a specific amount of time in the future. These assumptions are based on what we know about the current conditions and what we think will happen in the future based on all available information (i.e., intelligence). You certainly would not consider adding a new sales branch or contemplate any organic growth if the conditions were not thought to be favorable and “assumed” to be so for a reasonable amount of time. The challenge is identifying what must be assumed to continue planning and making sure that those assumptions are valid based on current intelligence.

The facts and assumptions upon which the plan is based must be captured and cataloged in some detail. We need to know what effect these assumptions were thought to have had on the outcome of the plan. Then, and this is the critical step missed by many organizations, we need to continuously validate those assumptions by comparing them with the actual situation on the ground as we execute our plans. Any deviations between the actual circumstances and our original assumptions must then be tested or ‘war gamed’ against our plan to determine required changes to our strategy and operational plans. In other words, the planning process must be a continuous feedback loop of planning, action, observation, decision, and reaction to gain and maintain effectiveness.

There is both power and peril in the assumptions we make during any planning process. The secret is knowing what was assumed, why it was assumed, how that specific assumption was to affect the execution of our plan, and then continuously validating those assumptions and making the appropriate changes to the plan, thereby driving your organization to success.