Managers many a number of crucial assumptions when they make strategic decisions or craft strategic plans. No strategy rests simply on a body of facts or evidence. Ambiguity and unpredictability about the future always reigns, and therefore, managers must build their plans based on certain assumptions. Of course, we often don't identify these assumptions explicitly. They remain hidden. Declaring your assumptions enables them to be discussed and debated. They can be tested and probed critically. Otherwise, managers may take certain assumptions for granted, treating them as truth, when they may actually be quite shaky. Several years, Mark Hollingworth wrote a good article for Ivey Business Journal, in which he explained the six primary benefits of including a statement of your assumptions any strategic plan:
- Inclusion facilitates the analysis of any organization’s business plan by a financial institution, venture capitalist or angel investor. The risk of making a bad investment will be reduced if the investors understand and share the strategic assumptions of the organization’s management team.
- Differences in points-of-view about strategic assumptions are the source of many of the conflicts that arise between investors and company management – and within a management team itself. Strategic assumptions represent the shared values, beliefs and vision of the management team. Demanding that they be included in a strategic plan will force management teams to hold the difficult internal conversations required and that allow them to uncover, challenge, and capture their shared assumptions.
- Knowing they need to exit a strategic planning process with a complete, shared set of strategic assumptions forces a management team to use a much more rigorous strategic planning process.
- Face-to-face, it is very difficult for most people to defend strategic assumptions which are ungrounded or that they do not believe or share.
- Developing and debating strategic assumptions with groups of employees is an excellent way to gain buy-in and commitment to the organization. Having to declare and justify the assumptions upon which a plan is built means that it is difficult for a CEO to impose his or her views. With increased levels of employee buy-in, there is a greater probability that the strategic plan will actually be implemented.
- By presenting strategic assumptions for rigorous debate and analysis, the probability is minimized that investors, employees, management and any other stakeholders will waste time, money and energy on trying to implement plans that have little chance of generating the promised results.