Assumptions are a Necessary Part of the Planning Process

Assumptions are temporary estimates about some probable future event or development over which you have no particular control. When you make an investment in a stock, you assume it is going to give you a positive return. Maybe you based that assumption on the historical track record of that stock. Maybe you based that assumption on a reliable tipster. Either way you are making an assumption about the future.

Some assumptions are as easy as assuming the sun will rise in the morning and others are as complex as predicting the economic outlook for the next ten years. If it is so difficult to make accurate assumptions, why even bother? Because assumptions are necessary for a good plan, and better assumptions make a better plan.

You have to make assumptions of future trends in order to prepare for those trends now. Because the marketplace changes so rapidly, some companies choose not to make any assumptions and maintain the status quo, each year refreshing the same game plan over and over without making any significant changes. This doesn’t solve their problems and leaves them exposed for a number of negative possibilities.

Assumptions built on experience, awareness and research are the guide for actions and strategic initiatives. For example, if access to capital is becoming quite restrictive, how will that impact your growth and expansion plans over the next 18 months? How should you shift your actions today to prepare for those assumptions becoming a reality?

Wishful thinking is different from assumptions. A CEO can be so excited about the new store he is building that he is convinced everyone in the area will stop shopping at their familiar stores and only shop at his beautiful new store. When confronted with the response by the competition who are vigorously working harder to retain their customers, only then does he realize he was thinking more along the lines of wishful thinking that a proper assumption of the situation.

Drill down into the details when making assumptions. Proper assumptions are based on solid facts. The deeper you get into the details, your instinct and historical information will form a clearer assumption of future activities.

Define Your Strategic Competency

A strategic competency is rarely if ever a single thing. It is usually a mix of three elements:

Skills: A skill is any manual or mental activities that result from talent, training or practice.

Process: A process is any manual or mental systematic series of actions that are directed toward some end. Include any significant "know-how" resident in your organization.

Knowledge: Knowledge includes any information, data, or understanding of facts or principles resident in your company.

A strategic competency must be strategic in nature. For example, if you are the best at how to hold an employee birthday celebration, it doesn’t have much strategic value, because such celebrations are not going to directly improve your relationship to your customers or your competition.

A strategic competency is something that can be used over a long period of time, and it is usually knowledge based. It is something that should elevate you above the industry norms and provide an advantage in the marketplace.

A strategic competency must pass four specific tests:

Is it a combination of skills, process and knowledge?
Does it differentiate the organization from the competition?
Does it create strong value for the customer?
Is it difficult to copy?

If you don’t get a resounding "yes" to each of these questions, you should be skeptical that you have a strategic competency.

Why Do You Sell What You Sell?

When I ask this question of my clients and their executives, I see a few blank stares. I get a moment of two of silence and then I hear generic justifications. I don’t want justifications, I want you to look at your product and service line and one by one explain why these items are being offered to your customers.

This exercise should cause other questions to be raised. Such as:

When did we start offering this and why?

How does this product or service fit with our future direction?

Is this a profitable product or actually a drain of resources?

How well do we sell this?

How well can our front line staff explain the features and benefits?

What percentage of our customers actually use this product or service?

Do we want more customers using this product?

If yes, how do we make that happen? If no, why are we still offering it?

Sometimes in the evolution of a company, products should be dropped and new ones added. I see many companies holding on to products because back in 1982 it was a hit and some of the board members or managers remember those days. That product may no longer apply to the markets you are currently going after.

There is no advantage to offering everything. Strategically, it is much better to offer fewer products and services you do extremely well than to divide your efforts too thinly across areas with minimal return.

One client doing this exercise realized of the 80 products and services they were offering, only about 35 really were of benefit to enough customers that made them justifiable to keep.

Streamlining your products and services not only help your focus, but makes it easier for your front-line employees to be better acquainted with what you are offering so they can more comfortably sell it to help those who need them.

It's All about the Research

Think about the strategic planning brainstorming sessions you have with your management team, maybe even including the board or other managers. The facilitator poses the question: "Where do you want to be in 5 years?" For the next hour everyone offers their gut feelings and the ideas get written on the flipcharts. After a break the team comes back and as a group decides what the future should look like.

This is all by gut feel with no empirical data to support these conclusions, which is why most companies are fearful of taking bold steps. They don't trust the process, and frankly, they shouldn't.

Let's say for example you wanted to invest $100,000 of your retirement funds, and you decided to make this decision without any research or expert input. You just decided one day watching television you liked the ads for Burger King and you felt in your gut that with the new ads, their stock will rise and you would be making a good investment. How sound a decision is that? How comfortable are you with that decision-making process when $100,000 of your own money is on the line?

Strategic planning maps out the process of how an organization can go from Point A to Point B. Simply a gut feel on a Saturday morning at a retreat center just isn’t enough information to be planning that navigation to the next point.

When using the Fast Forward process everyone involved in the planning must do their share of research on the specifics they have been assigned before the actual planning steps happen. Good information gathering makes for better choices, and better choices make for a smoother ride through difficult transitions. Companies failing to properly research the necessary information are gambling with their future and their customers. Today is a completely different era than even only two years ago. Now is the time to focus like never before.