Assumptions: The Foundation of Strategy
Every strategy is built on assumptions. The question isn’t whether we make them—it's whether we recognise them, test them in the real world, and ensure they hold true over time. This is the essence of why Peter Drucker’s Theory of the Business matters.
Let’s consider a familiar story: Kodak, a giant in the film industry, assumed the dominance of film photography would last forever. That single, unchecked assumption led to its downfall in the face of digital innovation. Could your organisation be clinging to its own “Kodak moment”?
When we don’t examine assumptions, we risk steering our organisations into irrelevance. So how do we ensure our strategy is built on solid ground?
The Danger of Unquestioned Assumptions
Imagine you’re crafting a new strategy. You might focus on chasing growth, tackling critical challenges, or aligning with your vision, mission, and values. While valid, these approaches often miss one crucial step: questioning the underlying assumptions that shape your organisation.
Without examining assumptions, strategies may address symptoms rather than root causes. And when the world changes—as it always does—untested assumptions can lead to costly missteps.
The Three Circles of the Theory of the Business
Peter Drucker’s Theory of the Business offers a powerful framework to uncover and validate assumptions. It consists of three interconnected circles:
Environment: What’s happening in the world around you—trends, technologies, competition, sustainability, and more.
Mission: Your organisation’s core purpose. Is it still relevant today? Should it evolve?
Strengths and Business Model: The capabilities and systems that enable you to achieve your mission. Are they still effective in the current environment?
For more, read the previous series on Theory of the Business.
Now, let’s apply these questions to your organisation:
10 years ago: What was your organisation built on? What assumptions shaped your strategy? What worked—and what didn’t?
Today: How have your assumptions evolved? Are your strengths aligned with today’s mission and environment?
Future (5–10 years): What major shifts are on the horizon? How will AI, sustainability, customer expectations, or competition reshape your industry? What assumptions will guide your strategy moving forward?
Your Next Steps: Testing Assumptions
To create a resilient strategy, you need to:
Identify the assumptions driving your organisation today.
Test these assumptions against real-world changes in technology, markets, and society.
Prioritise key assumptions and validate them through research, experimentation, and feedback.
Example: A retail business might assume that its customers prefer in-store shopping. But data may reveal a growing preference for hybrid models combining online and in-store experiences. By testing this assumption, the business can pivot before competitors do.
Unchecked assumptions are often the silent culprits behind organisational struggles. When the environment shifts, missions lose relevance, or business models falter, your Theory of the Business may no longer align with reality.
Why This Matters: The Cost of Inaction
Failing to revisit your Theory of the Business can leave you unprepared for seismic shifts in your industry. As Drucker famously said, "The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic."
How Can I Help?
I specialise in helping organisations rethink their strategy and business models. Whether you’re revisiting your Theory of the Business or looking to integrate cutting-edge solutions like AI, we provide tailored solutions to meet your needs.
Consulting Services: I’ll work with you to design a strategy that aligns with your organisation’s evolving mission and environment.
AI Opportunity Audit: At StratAigeist Explore how AI can revolutionise your business model and create new opportunities.
Upcoming Book – The Helix Blueprint: My forthcoming book dives deep into these principles, offering a road map for leveraging design thinking, AI, and iterative strategy to thrive in a changing world.
Start Your Journey Today
The next time you’re developing a strategy, ask yourself: What is the Theory of the Business—and does it hold true? If you’re ready to uncover your organisation’s hidden assumptions and build a future-proof strategy, we’re here to help.
Stay tuned for more insights in next week’s newsletter, where we’ll explore how emerging technologies like AI intersect with organisational assumptions.