Strategic Assumptions

by Nathan on August 10, 2011

Undergirding any sort of strategy – whether in business, politics, or war – are assumptions.  Assumptions are calculated expectations, beliefs, or even hopes of present or future conditions.  Assumptions influence the strategy-making process by setting the various parameters, or limitations, of the means and ends of the strategy.  They are necessary because they limit the strategy’s scope, which otherwise could be infinite, and they ultimately make the strategy much more realistic, manageable, and attainable.

As an example of assumptions, let’s say your ends (or goal) are to catch a mouse, and your means (tactics or way of meeting your goal) are a mousetrap and peanut butter. Your assumptions are, among other things, that the mousetrap is an adequate means of catching the mouse, and that the peanut butter will lure the mouse.  A lack of assumptions in your quest to catch this mouse could, for instance, make your means a shotgun, which would completely destroy your house in the process of catching him (like in a Tom and Jerry episode).

(Source: Google Images)

It is vital for an effective strategy to properly identify the correct assumptions.  The Allies rightly assumed, in their ‘Europe first’ strategy of the Second World War, that concentrating resources on defeating Nazi Germany first, before Imperial Japan, would ensure that Great Britain and the Soviet Union would not be defeated. And than once Germany was defeated, Japan would fall shortly thereafter.  It was correctly assumed, among other things, that Germany was the center of gravity, or linchpin, of the Axis Powers.  Their defeat would cause an irreversible ripple in the course of war.

(Source: Google Images)

On the other hand, the South based much of its strategy in the American Civil War on what was popularly known as the King Cotton assumption.  The South assumed that Great Britain and France’s dependency on Southern cotton for their respective textile industries would force them to recognize and aid the Confederacy against the North.  They would recognize the legitimacy of the Confederacy as an independent nation or face intense pressure on their economies. This assumption, however, was flawed because those foreign powers were even more economically dependent on the North, especially for essential foodstuffs such as Midwestern wheat. And not to mention the public of those countries abhorred slavery, Britain abolishing it in 1807 and France in 1794.  Great Britain and France, in fact, had much more to lose by going against the North.

Krispy Kreme in the early 2000s, after tremendous success with its initial expansion in the late 1990s and much public craze for their delicious doughnuts, wanted to breach into the enormous New England market (second only to California), which was dominated by Dunkin Donuts.  They assumed that because their doughnuts were rating higher on taste surveys, not to mention all the recent hype surrounding the company, they would easily make a strong position in that market.  In fact, analyzing New England’s area and population, one of their senior vice presidents, in a March 2003 article, said “We think Medford [a city just outside of Boston] could have a chance to set a new record for first-week sales.” However, this assumption overlooked New Englanders’ strong preference for Dunkin’s coffee and, perhaps more importantly, their fierce loyalty to an establishment that was founded in Quincy, Massachussetts. Consequently, their share price went from a high of just under $50 at its peak in mid-2003 to around $5 a year and a half later, with some analysts citing store closures as one of the biggest reasons for the collapse of share price.

When crafting a strategy for reaching whatever goal you have in mind for yourself or your organization, it is necessary to conduct a thorough and comprehensive analysis of the assumptions underlying your ends and your means.  Ask questions like: What is this goal contingent on?  Why do we believe XYZ will happen?  What are possible unforeseen problems that will stem from this strategy?  By asking yourself these questions, and honestly evaluating the answers, you will have set a much firmer foundation upon which to build your strategy.

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