What Would Have to Be True for Your Strategy to Work?
What Would Have to Be True for Your Strategy to Work?
Leadership teams scrutinise budgets, debate priorities and agree targets. The assumptions underpinning those decisions often receive less attention, particularly when experience has given people good reason to trust them.
Before committing resources, it is worth asking: what would have to be true for this strategy to work?
We explored this question with the head office team of a global automaker, considering continued support for a lower-cost urban car model in its next global investment cycle.
The operational case was attractive. The geography producing the model benefited from favourable infrastructure, logistics and labour conditions. But an efficient place to build a car is only valuable if enough people want to buy it.
The investment case can be understood through two core assumptions: that enough urban consumers would want and be able to afford this type of car, and that the manufacturer could supply it profitably over the next investment cycle.
Each required examination. A growing urban population might suggest a larger market, but said little about consumers’ ability or desire to own a car. Pressure on household budgets could encourage buyers to choose a cheaper model, or postpone buying altogether.
Favourable production conditions could support profitability, but their value would depend on costs and the prices competitors could offer.
Building scenarios helped uncover the dependencies behind the strategy. Demographics and inflation became relevant through their effects on the conditions required to sustain demand. The question was whether those conditions would support another cycle of investment.
At Mindofafox, much of the value of scenarios lies in working through questions like these. Building them requires leaders to explain their expectations and examine how different forces might interact. A team can then identify assumptions that remain hidden when discussion centres on forecasts and targets.
The resulting scenarios provide a framework for testing strategic choices. The process of constructing them improves the reasoning behind those choices. In the automaker’s case, it connected the advantages of producing the vehicle with the less certain conditions required to keep selling it.
This scrutiny matters particularly when a product has performed well. Past success gives continued investment a persuasive advocate. Yet the conditions that justified the previous commitment may not survive the next one.
A business cannot question every assumption indefinitely. The task is to identify those whose failure would materially alter the decision, and establish what evidence would warrant reconsideration.
We use scenario flags to carry that discipline beyond the strategy meeting. For a lower-cost urban car, relevant signals might include loan rejection rates among target buyers, sales of lower-cost urban cars relative to other vehicle categories, or competitors’ launch prices for comparable models. Less obvious, more periphery flags may include: the age at which urban residents obtain their first driving licence, and parking provision in new urban housing developments.
The specific flags should follow from the assumptions identified during scenario building, with various people responsible for monitoring them and thresholds which may trigger reviews of the investment.
The decision may still be to support the model. A reversal is no measure of whether the exercise was worthwhile. A stronger investment case, with its dependencies understood and monitored, is a useful result.
Before approving the next strategy, ask which assumption carries the greatest weight. Then ask how recently anyone examined it.
