Each person goes through the day making assumptions. We assume the sun will rise in the east; the light will turn on in the bathroom; the shower will have hot water; the car will start when we leave for work and our computer will connect to the internet. The number of assumptions we make every day as we walk through our lives must add up into the hundreds. We are blind to them because events unfolding in front of us do not challenge our assumptions but instead support them. Unknowingly to us most of our assumptions are strengthened every day.
Perhaps assumptions are mental habits or conditioning and serve a similar purpose to learning how to tie shoes. When we first learn to tie a shoe it requires considerable attention or intentionality. We think about each move and either verbally or mentally repeat the instructions. It is a very manual and slow process. As we learn to tie our shoes we create ‘moving memory’. The more we practice the less attention is required and the faster and smoother we become. After the memory is completely programmed within us there is no benefit to keep thinking about each movement. Movement without thought can be a good thing. Ask any athlete about thinking too much when playing a sport. Just let your body do what it does and it will perform well.
Assumptions are often referred to as something bad. Many times I have heard the phrase: “You know what happens when you assume something? Makes an ass out of u and me”. So what would our lives be like if we didn’t make any assumptions? What if we thought through every situation and condition before making a decision or taking a step? If making assumptions is a bad thing then it follows that not making assumptions is a good thing.
We have all had an experience where we made an assumption that led to an unexpected and negative incident. In those situations we vow to never assume anything again because it can sneak up and bite us. Is that vow realistic or even desirable?
Why do we make assumptions? To relieve ourselves of the active thinking about events that almost always occur based upon our experiences. We don’t waste our time thinking about whether the sun will rise. We don’t think about how our bodies will digest the food we have for lunch. We don’t think about many things going on around us.
So from one perspective assumptions are time savers. That is until the assumption does not work in our favor. It is similar to the noise the refrigerator makes when it is running – you don’t notice it until it stops. We don’t see our assumptions until things do not go according to plan. Then we look for what we missed and try to see how it could have gone differently. Quite often we discover an action we overlooked but did not recognize because we made an invalid assumption.
This is especially true in business. Decisions based upon invalid assumptions can lead to disastrous results but we are blind to the assumptions until the results are coming in. And then it can be too late.
Imagine the value of a list of common invalid business assumptions that lead to poor performance. By knowing the assumptions you can avoid making them. Stay blind and you are doomed to repeat them over and over again.
During the past four years my business partner and I have been compiling such a list and have found them to fall into four categories. For the sake of brevity I have only included one invalid assumption in each category along with a description of the assumption. I have three more invalid assumptions for each category listed in a lengthier document. If you wish a copy of that document contact me through this blog or directly reach me at firstname.lastname@example.org.
The first category of invalid business assumptions executives make are about the Goals they develop. These are important assumptions because the goals of a business establish the performance requirements for the entire enterprise. For instance if a corporate sales goal is to increase revenue by a certain dollar amount then the year will be considered successful only if the business performs at that level. Anything less is unsatifactory. Goals and performance requirements are the same thing.
· All Goals are Achievable.
o Just because you set a goal does not mean you can achieve it. Businesses are challenged to set “Big, Hairy, Audacious, Goals” (BHAGs) but if those goals are not achievable then setting and working on the goals is actually harmful. There is nothing wrong with setting stretch goals but they need to be attainable. If it is impossible for your business to grow a certain percentage with your existing Business Model – there are five discretely defined components to a Business Model – then you have to either change the goal or redesign your business to be able to achieve that goal. If you are not designed to achieve the goal then no matter how hard you work or push your people you will not reach the goal.
· Invalid Goal assumption 2
· Invalid Goal assumption 3
· Invalid Goal assumption 4
The second category of invalid business assumptions made by executives concern the Design of their business. There seems to be an intuitive understanding that businesses have a design because the term Business Model is used frequently by CEOs. A model is the physical manifestation of a design. When a product is prototyped the designer creates a set of blueprints (designs) that are used to build the model. The next time a CEO speaks about his/her business model ask him/her to show you the design. And since the CEO’s understanding of the business design is so vague it is easy to have invalid assumptions about it. Here is one.
· Improving Information will Improve the Design of the Business
o Many executives look to IT systems to solve their problems. With better information they will be positioned to make more intelligent and timely decisions. Executives need to remember that systems support organizations / organizations execute processes / processes create products or services / products or services are delivered to customers. Systems are the last thing executives should be looking to change! Will replacing the dashboard (information system) in your car change its performance capabilities? No. The root cause problem in your business is seldom the result of any IT system. The fault usually lies in the design of the business.
· Invalid Design assumption 2
· Invalid Design assumption 3
· Invalid Design assumption 4
The third category of invalid business assumptions deals with Strategies. This is an activity that nearly executive has engaged in and can relate to. It is the source of out-of-the-box thinking and it sets the direction of the corporation for years to come. Strategic planning is considered essential for the survival of every company because executives know that to be stagnant is to die. They have to change and the vehicle for change is thought to be strategies. And if this is indeed the vehicle (which we know it is not) then any invalid assumption in this group can be crippling. Here is the first invalid business assumption in this group:
· Strategies are Strategies
o Not all strategies are created equal. There are at least three types of strategies: design strategies, implementation strategies and execution strategies. The nature of each type of strategy is very different as well as their timing. Business executives often confuse a design strategy with the design of the business. They are two completely different ideas and need to be kept separate in order to reduce confusion. Know the difference between design and strategy.
· Invalid Strategy assumption 2
· Invalid Strategy assumption 3
· Invalid Strategy assumption 4
The fourth group of invalid business assumptions is about Performance. Performance is important for the health of the organization. If there is substandard performance from the customer’s perspective then sales will suffer and the business will fail. Customers are looking for companies that can offer the greatest Value Proposition. If there are performance issues as it relates to the return on investment then stockholders will opt to invest their monies in better performing businesses. Shareholders are looking to create personal wealth and companies that are not financially successful suffer in the market place and that has a negative impact on the company’s stock price. Actual Performance is very important in the long-term prospects of any company.
· Performance Problems are Always Execution Problems
o Business executives are aware of the impact that the quality of a design has on the performance of the product but they fail to apply that understanding to their business. 80% of the time the quality and relevance of the business design is at the root of performance problems. A poor design can never result in good performance. But since executives are unaware of business design they see execution as the culprit. Execution is particularly attractive to management since those problems are the fault of the employees while the quality of the design is management’s responsibility.
· Invalid Performance assumption 2
· Invalid Performance assumption 3
· Invalid Performance assumption 4
Knowing that you are operating under an invalid assumption may give you the chance to change your decision making. If you are making assumptions about things that you can control then you do have the option to make changes. If your assumptions are about large external events such as the economy, then you can not control the outcome but you can develop scenarios.
This is most of an email I sent to a colleague who was about to teach a class on Operations. This was my introduction to him of me and what I do.
“I have spent the past 23 years designing processes (12 years), designing departments (7 years) and designing businesses (4 years). If you don’t mind I will recount how that progression occurred. Initially I worked on determining the root cause of process performance problems (nice alliteration) and designing solutions. The effort was typically directed to one department. As the projects grew so did the breadth of the processes. It did not take long until I was working on processes that spanned departments which definitely increased the complexity. I did have great success and eventually was asked to step into the CIO role at La-Z-Boy (LZB). In that role I redesigned the IT department for the LZB division (3 years) and then created an entirely new IT department to service the all 14 divisions at LZB (4 years) plus the corporate office. Though my title was CIO my actual role was IT Department designer, leader and manager.
As a Vice President I did have control over those areas reporting directly to me and so I could design them to work the way I wished them to. IT, HR and Finance are all support functions and because each area is asked to participate in all projects you can see how important it is for them to work closely together. If you know anything about IT you will be aware of the challenge made to every CIO – Align IT with the business. Problem is businesses are not aligned with themselves and therefore there isn’t just one thing IT can align to. (I contend that there really is not something called “the business” but instead a collection of departments that share a common business name.)
Businesses need a way to have all of the parts working together. It does not benefit a company to let each department go off and try to optimize itself thinking it will have an optimized whole. It simply does not work that way. Optimizing all the parts does not optimize the whole. After leaving LZB four years ago I started documenting the design of the entire business to show relationships and how the parts needed to work together. It actually shows how to align the parts of a company – the holy grail of business.
You have some process work in your course. If you are a process designer you know that processes are invisible until each activity/component is documented. Documenting processes is actually documenting process designs. It is only when the entire process is visible that you can determine if a change is warranted and what the impact of that change will be. By documenting the process before making changes you minimize risks of unintended results. Also by documenting the process you can determine whether the process needs to be changed in order to achieve certain performance goals or if it is a matter of execution. Poor process performance is the result of either a poor design or the poor execution of the design. Until you document the process you can not know where the problem exists. More than 80% of the time it is design-related.
Now reread the last paragraph and substitute the word ‘process’ with the word ‘business’. The principles are exactly the same. Most executives (people in your class) do not understand that businesses have designs. They know products have designs and some will know processes have designs but few if any will know that the business has an actual design. And because they do not know designs exist in businesses they do not look at the design when they are having performance issues. They look at their employees (remember performance = design + execution) and if you can not see the design you go after execution. This is why so many projects in companies have such a low ROI and management is frustrated with their investments. They are not resolving the root cause.
I know this is a roundabout way of getting to one suggestion I would have with your course. And that is context. Context provides the appropriate background for any area of study. One pet peeve of mine is when people judge actions taken decades ago and use today’s mores as the backdrop. Without knowing what was going on in the past those judging do not have the right context to understand the actions that were taken. Without understanding the entire business your students may not fully grasp Operations. I do see that you speak about business and process design and I want to encourage you to show how things are connected, not separated. It really is not ‘business and operations’ any more that it was ‘the business and IT’. All of it is the business because “Everything is connected to everything”.
There is a particular sequence that leads up to the performance requirements for Operations.
o Strategic information such as the determination of the performance goals for the company. What are the revenue goals and profit goals? They drive everything.
o In addition you have to understand the competitive environment. Without knowing the competitive environment you are making plans in a vacuum. Returning to the idea of context, the competitive environment provides the context for designing the business for success.
Ø Market Model.
o Markets, customer segments, product groups, products and Value Propositions.
o Determine whether your Market Model can deliver on your revenue goals. If not you have to make adjustments to the Market Model design. You may increase your markets, sell to new customers, develop new products or redesign existing products. You may acquire an existing company which will broaden your Market Model.
o Part of the work in documenting the Market Model is determining customer expectations. This is critical because Market Model requirements are input into Operations (Process Model).
Ø Process Model.
o The Process Model contains all of the processes that the business performs. What I am referring to may be slightly different than how you think about it. Selling is a process. Marketing is a process. Assembling components is a process. Making components is a process. There are processes that focus on Creating Demand for a company’s products and services. There are processes created in order to Fulfill Demand for those products and services. I expect that in your course you equate Operations with Fulfill Demand processes. If I am correct in that assumption I would suggest that in the future you consider all processes as part of Operations. That is why Lean concepts work on the shop floor and in the office as well.
o The point I wish to make here is that the performance requirements for processes is not arbitrary. The market place will determine what is an acceptable price or acceptable lead time both of which are determined by the Process design (Operations). The market gives Operations the minimum requirements in order to be competitive.
I will stop here. I have probably worn out my welcome by now. You should know there are two more Models that are part of a business design: Organizational Model and Systems Model. If you wish to have an overview of them I would be glad to share it with you.
Everything I have written comes from my business partner and me. I can not direct you to a different source because we are the sources for these ideas. This is just the tip of our ice berg. I have much, much more I could discuss.
Let me know if you wish any clarification on the ideas I have presented. I will be glad to respond.”