Strategic Assumptions

In strategic planning, managers analyze the company's external and internal environments, as well as its goals, and then select appropriate strategies. However, selections of appropriate strategies stem from assumptions, or unquestioned beliefs, that the managers make about their environments, rates of change, and relevant stakeholders. Strategic assumptions affect the processes of generating ideas, arriving at consensus, making decisions, formulating plans, influencing colleagues, and charting progress. Conflicting strategic assumptions may also disrupt teamwork and effectual organization. Consequently, strategic assumptions can perpetuate decision-making biases and lead to poor decisions.

To enhance the quality of strategic decisions, some companies have instituted processes such as strategic assumption analysis. Strategic assumption analysis allows the decision makers to step back, to question assumptions, and to rethink hypotheses.

For example if a company's brainstorming session leads to two opposing strategies or positions, the analysis begins when each side states its position. Lynn Oppenheim and Barbara Langham have discussed how a [Page 524]pharmaceutical company's research and development (R&D) team could debate a strategy for allocating its research budget. One side wants to pursue promising leads in antifungals, whereas the other side feels that, given the budgetary constraints, antibacterials would provide more profits.

Next, each side lists all assumptions underlying its position. Then members step back to examine their beliefs—the ideas and information that led to their present positions. For example, the antifungal side might explain that the company has the world's best scientists in the field and that consumers find current antifungals on the market hard to administer. The other side might argue that the company's antibacterial research group consistently makes better use of investment dollars, and given the huge market for antibacterials, the company stands to make a substantial profit.

Once the sides make their assumptions explicit, the leader breaks the team into groups of three to five, making sure each group has representatives of both sides of the dispute. This action separates alliances, and members feel less compelled to represent their departments or interests. Each subgroup then analyzes the assumptions according to truth and importance. They should ask, for each assumption, How certain are we that this is true? and, How important is this assumption to the outcome?

The ensuing dialog usually gives team members insights into their colleagues' thoughts: Hearing the underpinnings of the other side's assumptions allows one to rethink problems. Suppose the antifungal side realizes that market size indeed should play a dominant role in the decision, and the market for an antibacterial would dwarf that of even a very good antifungal. At the same time, the antibacterial side might realize that an innovation in antifungals could lead to breakthroughs in ancillary applications and have great impact.

When each group feels it has sufficiently analyzed all relevant strategic assumptions, the team reconvenes to review findings. By focusing on the assumptions the team targets the problem. By analyzing the truth and relevance of assumptions, members can identify the precise areas of disagreement and resolution becomes possible.