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Planning: From Assumptions Through Disruptions to Validated Learning

Jun13



How good are our company plans? What kind of assumptions do we make and what happens when they meet reality?

The reference points for every budget year are:
· Assumptions derived from past performance
· Assumptions about things that may impact our company performance in the coming year
· Assumptions about costs
· Assumptions about revenue
· Assumptions about profit
· Assumptions about passenger numbers
· Assumptions about….
 
Too many assumptions lead to too many disruptions.
 
We tend to make company plans look smoother and prettier, with the desire to do things better. And then comes the time when these assumptions undergo the test of reality. This is when misfits become visible, leading to a bumpier road ahead and less control over the outcomes expressed through cost, profit, and other performance metrics.
 
The majority of airlines miss this unique opportunity for learning. The paths of lean airlines with simpler business models are less bumpy. They have easier access to reality, enabling them to learn what works for them and what doesn't.
 
Traditional airlines, however, are heavier, trapped in once successful but now hard-to-control business models accompanied by rising complexities. This makes them more susceptible to unexpected losses caused by even the smallest challenges.
 
Can we reduce the number of assumptions and flatten the road ahead?
 
Yes, we can if we embrace the practice of validated learning and:
 
· Start thinking afresh
· Become open to learning on the go
· Start testing assumptions in an organised way, focusing on the biggest deviations from the flat lines
 
Validated learning is an invaluable technique, especially in the age of uncertainty. Instead of bouncing back, we can consider bouncing forward.

This is how improvement happens.

By Jasenka Rapajic

Keywords: Business Strategy, Innovation, Management

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