Under What Assumptions Do You Operate That Are Not Accurate?

We believe this is a fundamental question that can make or break your strategy. As Mark Twain famously said, “It ain’t what you don’t know that gets you in trouble. It’s what you know that ain’t so.”

A brief review of strategic thinking and the approach to effective strategy notes that you start with assumptions. Assumptions about the future; the economy; your market; your competitors, etc. Assumptions that are invalid lead to failure.

What checks do you have in place regarding your assumptions? An article entitled Hubris in Leadership: A peril of unbridled intuition? delved into the issue.

“Leaders, CEOs and entrepreneurs by virtue of their position and power do not have as many ‘social correctives’ as do other employees: they are, in their relative isolation, especially vulnerable to hubris. Take Lehman Brothers under the leadership of Richard Fuld as one example of CEO hubris leading to extreme performance.

However, independent financial analyst Charles Peabody argued that Fuld, a 30-year veteran of the company, overlooked the potential effects of real estate loans and other toxic assets on the balance sheet with ‘the typical hubris that a long term CEO has: ‘‘I built this thing, and it’s got more value than the marketplace understands.’’

CEOs may be aware of the perils of hubris, but may be blind to it themselves; for example, enquired of a group of NASDAQ CEOs in a workshop ‘what was the thing that led to most executive failures?’ The unequivocal response was ‘hubris’. Ironically Richard Fuld himself commented prophetically to Euromoney magazine in 2005 that ‘I worry that we could get arrogant. If you get arrogant, you lose your way, and start making mistakes’.

It is also a tragedy for Mr. Fuld, in the classical Greek sense. He had devoted so much of his life and his personality into molding the bank, he could not accept its decline. If he had sold out earlier, Lehman might have survived but he was too proud. It was hubris, followed by nemesis.”

We have found that one of the benefits of an effective CEO Roundtable Group like Vistage, TAB and others is the ability to have peers call you on your assumptions. In addition, we believe there is a very effective method to help prevent assumption bias.

We recommend leaders spend 25% of their time meeting with your market: customers and prospects and listening to them. What is driving their business? What can you do to help? What else do they need? What are their concerns? And those are just a few of the things you can learn. This is qualitative and experiential. And it works.

In addition, you can gain a clear understanding of the size of your market. Measure whether you are growing faster than your market, and most importantly, listen for what you’re not doing.

This will always help you keep your Revenue Production System strategy properly aligned with your market, and help you from having invalid assumptions.

Neil & Mitch

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