Strategy’s Magic Question

There is power in making bold assumptions

Published: Thursday, May 1, 2014 - 09:24

Your grand strategy seems airtight on paper. You’ve arrived at a winning aspiration. You’ve homed in on an open and attractive segment in which to play. You've identified the competitive advantages that will enable you to win in your chosen spaces. You’ve got the capabilities and systems to support your choices. But as the saying goes, no battle plan survives first contact with the enemy.

Generally, that’s because multiple assumptions have been folded into your strategy—unconscious leaps of faith you’ve made in your natural enthusiasm and optimistic outlook.

If not attended to—teased out, made transparent, and tested in the real world—these leaps may indeed become the very blind spots that will put to rest your best-laid plans.

That’s why we so often hear that making assumptions is a bad thing. (You know, the old quip: When you assume, you make an ass of u and me.) We don’t do a good job of assessing and addressing them.

But what we don’t know far outweighs what we do, so assumptions are unavoidable. It’s how you handle them and exploit them that makes for the true art of strategy in any realm: innovation, business models, whatever.

Here’s the thing: Your idea, solution, or strategy is just a collection of guesses until it’s tested. There is real power in making bold assumptions, because you can turn them into clear hypotheses, and then scientifically test them in a rapid, iterative way.

Done right, your eventual strategy will indeed survive first contact.

The key lies in your approach. In my experience, simply asking people to list their assumptions doesn’t work, for the simple reason that our assumptions are part of our mental models and biases—they’re so ingrained in our thinking and thus so hard to identify that it takes a tool to lend a bit of objectivity.

People tend to list “known” things for the sake of ease and to avoid the risk of looking uncertain. But an assumption by definition is something unknown. And that’s scary... we fear the unknown, so we are reticent to bring it up and make it public.

The best technique I’ve found to alchemically turn assumptions into gold is one that I learned from master strategist Roger Martin a few years ago. It amounts to a single but powerful question: What must be true?

This, as Roger says, is “the most important question in strategy.” He’s been using it for 20 years, ever since a disappointing consulting engagement in which the client went against Roger’s advice, with disastrous results. It was enough to make Roger reflect on his consultative approach.

Then, during a subsequent engagement in which he had a strong view of what the best strategic option was, he suddenly realized that it didn’t matter at all what he thought. He realized that what mattered was what his client thought, since they were the ones who were going to have to take action one way or the other, not Roger.

As Roger tells it: “At an impasse, an idea popped into my head. Rather than have them talk about what they thought was true about the various options, I would ask them to specify what would have to be true for the option on the table to be a fantastic choice. The result was magical. Clashing views turned into collaboration to really understand the logic of the options. Rather than having people attempt to convince others of the merits of options, the options themselves did the convincing (or failed to do so). In this moment, the best role of the consultant became clear to me: Don’t attempt to convince clients which choice is best; run a process that enables them to convince themselves.

“From there, I used the most important question in strategy—what would have to be true?—to build an entirely new methodology for thinking through choices. It became the heart of my consulting practice and is the only strategy process I use to this day.”

Here’s how it works.

For each of your strategic options, ask six key “What must be true” questions, in this order:

1. What must be true about the size and attractiveness of our target segments?
Example: The emerging 27.5-in. mountain bike tire segment will be big and profitable enough to support abandoning our current 26-in. line.

2. What must be true about what our end users value?
Example: A mountain bike performance and handling sweet spot exists for a 27.5-in. bike that will attract bikers away from both smaller 26-in. and bigger 29-in. sizes.

3. What must be true about what our channels value?
Example: Cycling retailers will be attracted to the concept of an all-new kind of mountain bike that would spur cyclists to shift from traditional frames and tires, thus committing floor space to drive sales growth and higher margins.

4. What must be true about our capabilities vs. our competitors’?
Example: We can produce a 27.5-in. mountain bike superior to both 26-in. and 29-in. bikes. We can leverage our partnerships with component manufacturers to convince them to produce 27.5-in. specific parts.

5. What must be true about our costs vs. our competitors’?
Example: We can product a 27.5-in. bike that will sell without a price premium to existing top-of-the-line players, including our own lines.

6. What must be true about how our competitors will react to our strategy?
Example: Competing bicycle frame makers will hesitate to abandon their 26-in. lines, not risk the investment in 27.5 in., and wait to see market reaction, giving us first-mover advantage and an innovative edge for at least two years.

You now have six “best guesses.” Each of those guesses are in reality hypotheses, which you can now test by getting out of the building, into the field, and into learning mode.

The next time you face a strategic choice, forego immediate action. Think through the “what must be true” questions. Test your assumptions. Understanding that you can’t know everything, don’t let the clear leaps of faith remain just that. Turn best guesses into educated guesses. Then, rock your strategy.

My bet is you’ll win the game, if not change it completely.

That’s the power and magic of an assumption. It sheds light on the unknown. It lets you learn.

Let the magic begin!

First published April 16, 2014, on Edit Innovation.

About The Author

Matthew E. May

Matthew E. May counsels executives and teams through custom designed facilitation, coaching, and training using four basic ingredients: strategy, ideation, experimentation, and lean. He’s been counseling for 30 years, a third of it as a full-time advisor to Toyota. He is the author of four books, the latest The Laws of Subtraction (McGraw-Hill, 2013), and is working on his fifth book. His work has been appeared in The New York Times, The Wall Street Journal, Harvard Business Review, and many other publications. May holds an MBA from The Wharton School and a bachelor’s degree from Johns Hopkins University.