The world is becoming more unpredictable and complex. This is due to pandemics, technological advancements, and current socio-political and economic instability. Let’s explore what we can learn from how innovators handle strategy in times of uncertainty.
Assumptions in innovation
When working on innovation projects, you will be confronted with more questions that you would have answers to. You might see new customers, want to implement new technologies or enter a new market.
Simply, assuming that a consumer wants or needs your products will result in spending a lot of time and money in developing a product that might not sell. Relying on the wrong assumptions could be fatal for your business. That is why in innovation, you should be very aware of your assumptions. Testing and validating assumptions is key to reducing risk and building confidence in your ideas. That is what assumption-based strategy is about.
What is an assumption-based strategy?
Dealing with both an increased number of questions you now have and an overwhelming amount of information requires a different approach to building a solid strategy. This is where assumptions play a key role. The goal of an assumption-based strategy is to identify opportunities and risks in the current strategy and make predictions that fuel the company's strategic decision-making and planning.
Assumptions and information overload.
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. And as assumptions can be a challenge to spot, we would like to share some examples.
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.
During a recent or previous period, we had a great increase in revenue, we believe that the demand will remain and continue to increase.
We can work with a global strategy approach for our customer segments.
We assume that the different international markets will continue to behave similarly as they are now.
A clear strategy is in place that everyone understands and is able to execute.
To execute a business plan, we assumed that a clear and well-defined strategy was 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 require 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.
Being aware of the assumptions you make, questioning and (in)validating them when necessary, will lead to a stronger strategy and future business results. However, the question then becomes: How do you apply that 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.
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 is your guy.
Interested to know where you stand with your strategy? Take our 5-minute test and get actionable advice and pro tips on your result.
