Manage your core business assumptions and secure your company's long-term success

What have you come to accept about your customers, products and competitors? What assumptions has your company consecrated as gospel? How confident are you in the assumptions you are making about core dimensions of your business, such as:

• The price sensitivity of your customers
• Your partners’ biggest priorities & challenges
• The macro forces - e.g., technology - that are having the greatest influence on your industry

Which of your existing assumptions are most ripe for "busting"?

Let's warm up with a little target practice. In the cross-hairs today: Laundromats
Let's make "assumption busting" a little more concrete by looking at one of my favorite examples of an industry with assumptions ripe for busting, the glamorous world of Laundromats. I currently live across the street from one of the thousands of fluorescent-bathed Laundromats that dot the streets of New York City. I've had the pleasure of living in New York most of my life, and have sampled a myriad of the City's laundry establishments. While they all tend to look a little different - the age of the machines, the color of the walls, the out-of-order sign hanging above the change machine - they all share one thing in common. They are some of the most unpleasant spaces to spend time in, only slightly edging out the Post Office and the DMV.

So what exactly is going on here? Is the aesthetic appeal of Laundromats simply a reflection of the economics of the business model - i.e., fluorescent lighting & lime-colored paint are all that Laundromats can afford given their thin profit margins? Tell Howard Schultz, the founder of Starbucks that and I'm sure it would make him chuckle. Starbucks showed the world, or at least the US, that masses of people were not only willing to spend more than $1 on a cup of coffee, they were willing to spend 5x that amount given the right atmosphere and the proper balance of sugar & caffeine. Starbucks busted the lid (no pun intended) off long-held assumptions regarding the range of possible coffee behaviors of US consumers, and completely redefined the market.

It's not about the bottom line
The bottom line on Laundromats is simple - it's not about the bottom line. Laundromats are unpleasant places not because they cannot afford to look nicer, but because their owners have come to assume, whether explicitly or implicitly, that customers are satisfied with the existing price/value paradigm. And, given the dearth of available alternatives, it’s reasonable to conclude that customers are in fact (relatively) satisfied.

Were Laundromat operators to BUST existing assumptions regarding the role that a Laundromatcould play in people’s lives, and, for example, make Laundromats more hospitable places to spend time, operators could open doors to whole new revenue streams. These new revenue streams could more than cover the cost of Laundromat “beautification”. Much as Starbucks transformed the drinking of coffee into an experience which enticed people to linger around and purchase additional goods (e.g., desserts, CDs, coffee-related "gear"), Laundromats are perfect places to follow such a strategy given that their patrons are captive to their dirty socks for an hour or longer at a time.


How do I locate busting opportunities within my industry?

Let’s set our opportunities within the Laundromat business aside and discuss how you can locate the assumption-busting opportunities within your industry. Busting is a 2-step process, and like many approaches that can uncover large opportunities, it requires your time, your focus and some of your best thinking.

Step 1

In step 1 you want to codify - i.e. put down on paper - all of the critical assumptions under which your company currently operates. By critical, I mean those assumptions that are core drivers of your company’s growth & sustenance .

An easy way to determine whether an assumption is critical to your business is to ask, "If this assumption proved to be wrong, how much would my business suffer?" If you assess the potential impact to be excessive - e.g., you could lose your most important customers, miss out on explosive growth opportunities, be made extremely vulnerable to competitors, or be put out of business altogether - then the assumption is a critical one.

Categories under which critical assumptions typically fall include assumptions regarding products, prospects & customers, competitors, the industry, organizational structure & competencies, partners & suppliers, technology, and the macro environment. (Below I have provided examples of some common types of critical assumptions)

Completing step 1 often serves as a major eye-opener. Businesspeople frequently find it challenging to identify even a few of their most critical assumptions. Often this is because over time a company’s critical assumptions have become so ingrained within the company’s DNA that they have become all but invisible to most employees¹. Organizations that find themselves in such circumstances place themselves at great risk to external "surprises" – or what I like to refer to as things organizations would have seen coming had they actively monitored their critical assumptions!

Step 2

After you have identified your critical assumptions, you’re ready to move onto step 2. The goal of step 2 is to identify assumption-busting opportunities. This is accomplished by analyzing & pressure testing each of your assumptions from step 1; asking simple, yet provocative, questions such as:

• Is this assumption still valid, or is it ripe for busting? How would I find out? Does my business have processes that allow for efficient, low-risk validation of this assumption? (I.e., can we easily test whether this assumption has busting-potential?) If we learn that the assumption is ripe for busting, what does it imply for our business strategy, our products, our marketing, our organizational structure, etc.? What activities or projects should we start/stop/increase/reduce?
• How can I effectively monitor this assumption on an ongoing basis? Does my business have the flexibility to respond quickly & effectively to changes to this assumption?
• If we learn that this assumption is still valid are there any activities or projects that we should start/stop/increase/reduce?
  

Enough reading. It’s BUSTING time!

Busting is best started by practicing the process within your "personal lab". Your first objective is to become comfortable with the two steps of busting and adept at surfacing your critical assumptions. Begin by doing exercises in which you focus upon a single category (e.g., Products) and try to identify a few critical assumptions within it. Take each assumption you've identified through the battery of questions listed in step 2 above. Now imagine a scenario in which you determine that the assumption is invalid, i.e., ripe for busting. What could it imply for your business? What actions might you consider taking? Write down all of your thoughts.

When you’re done, move onto another category (e.g., Technology) and run through the exercise again. Run through this exercise for each category over the course of a week or two, and see what you come up with. As you become more comfortable with this exercise you can start to bring busting-based thinking into your organization, leading the effort to push for the deep, strategic thinking that is in dangerously short supply in our modern corporations.

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1 - This seems to be more common within large organizations and organizations where people change roles on a frequent basis. I believe this is because in such organizations, the designers of the original business strategies have either left or moved into different parts of the company, taking with them the assumptions that underpinned the strategies they developed. What is left behind is a set of activities, processes, and reporting procedures to be carried out by new employees, often with little explanation regarding their rationale.

CoNtEXT iS KiNg

All good marketing requires a rich understanding of context - environmental and personal.

We are always embedded in a context. The time of day; the weather; the people we are with or not with; our location - at home, at the doctor, in a store, at work; our present goals, objectives and activities; our current emotional states & energy levels... to name only a few dimensions...

When I am standing on a packed subway platform during my Monday morning commute to work, with coffee in my left hand and organizer in my right hand, I'm in an entirely different context than when I'm in upstate New York in the fall, walking through the woods with my lovely wife & our charming French Bulldog.

While I remain "Doug" in both situations, my environment and my state of mind could not be more different. While my values, beliefs & views of the world might remain relatively fixed in both situations, my needs, objectives, mental filters, and basic physiology likely diverge greatly.

In a nutshell, good marketing requires a deep, rich understanding of context. People's needs, objectives & mental filters are dramatically influenced & shaped by their environments. Given this basic tenet, marketers need to align their strategies with the environments in which their target (and existing) customers find themselves.

To give a basic example, if your main customer acquisition channel is direct snail mail, you need to develop your mailer with an understanding of the context/environment in which your mailers are likely to be viewed.

While research can help you identify the most common contexts in which people open up their mail, for the sake of this example let's say assume it's in the evening just after coming home from work. Let's also assume that people look through their mail in one sitting, and thus will view your mailer as part of quickly sifting through a stack of other mail, most of which will be quickly identified as "junk mail". Let's take our premise one step further and assume that the process of sifting through mail is a frustrating one as people try to "separate the wheat from the chaff".

So that's the context you need to keep in mind as you develop your mailer. All of the decisions that you make about the mailer (envelope, copy, design, cadence, pieces, sizes & shapes, colors, etc.) should be made keeping in mind this context, which should heavily influence your decisions.

to be continued...

Designing a Strategy - how should I view the world?

One of the most challenging aspects of setting a strategy at any level (whether the product level, BU, or company) is cultivating a rich, well-articulated view of the "world" -- from the super macro (what I call the astronaut view of earth) all the way down to the super micro (aka, the ground-level view).

I'm afraid that often times this development of a "point of view" (POV)--a crucial first step in the design of any strategy-- is ignored. Often instead one's "point of view" remains an unexpressed, implicit, almost pre-conscious construct which can influence "the plan" whether the individual is aware of it or not.

However, even more frequently the case, the individual never formulates a POV. Instead, he or she develops a "strategy" that is simply a composite of projects & tactics which in totality are expected to meet or exceed the financial growth targets established by senior management.