Most organizations view their optimization goals in faster delivery, higher quality and so on. There’s nothing wrong with that, as long as they align with the most pressing strategic objectives for the enterprise, of course. The real problem usually lies in how organizations imagine achieving the improvement itself, due to what factors they think they will get there. If the optimization paradigm is flawed, an attempt at improving the outcomes may lead to the opposite results. One such example is the idea that throwing more people at a problem will get it solved faster and better, which we know is not the case. Scaling any effort is an incredibly delicate business, and is most often approached incorrectly.
Today we are going to talk about one fundamental enterprise parameter that is at the core of organizational optimization and yet completely missed by both the enterprises and the multitudes of transformation agents.
Assumptions Are a Central Aspect of Every Complex Enterprise Environment
Every complex system has inherent uncertainty associated with it. This uncertainty manifests itself as a lack of viable knowledge at the point of decision-making and the variability in term of outcomes. This is, however, very different from how most of the enterprise leaders imagine the environment they operate within. They totally succumb to what we referred to as the certainty bias in one of the previous articles. What that means is that they tend to replace uncertainty with… guess what…? That’s right: with certainty, surprisingly enough. It has a lot to do with how our brain operates. It seeks to escape “incoherence” caused by uncertain expectations, in the words of a Nobel prize laureate Daniel Kahneman. So, long story short: we humans don’t like uncertainty and we are trying to fill the gaps with some specific idea of the future. This was a vital feature throughout the evolution. Imagine the opposite when you encounter, for example, a saber tooth tiger in the woods, but instead of running away, you give this creature a benefit of doubt: what if the tiger has good intentions? And why think stereotypes anyway? Well… I’m writing this article because my ancestors had the “certainty bias”. Problem is that in the much more complex reality of modern enterprises, the logic we owe our survival to, suddenly fails us.
The whole problem here is that instead of explicitly formulating assumptions, which sounds like a logical way to deal with the lack of knowledge, we implicitly substitute them with wishful thinking. Unmanaged, those assumptions affect every area of enterprise life.
The Key Areas Where Assumptions Arise
- Business strategy. Strategy is always a gamble, but even more importantly: it’s the most expensive gamble there is. Should we move to the cloud? Should we expand to international markets? Should we sell this division of our enterprise? Will AI deliver on promise? Will we gain what we want from digitization?
- Customer value. How do most enterprises express what they think is customer value? That’s right, they call it “requirements”. Only that those are often just mere assumptions, a result of speculation of what the customer would appreciate to have. Is mobile signup actually needed? Will the customers be willing to switch to a new subscription model? Does the self-service portal incorporate most of the key scenarios for the end user? Will the customers care about social network integration functionality? Does it matter to them that the screens take 5 seconds to load instead of 0.5 seconds?
- Technology. That customer value requires the technology to properly work out, which may or may not be the case. Will the OS container support the necessary performance benchmarks when running on our current hardware infrastructure? Will writing this module in Python provide the necessary maintainability over time? Will this fuzzy match algorithm be fast enough to be run on our multi-million-record datasets?
- Implementation. Finally, all of it has to be brought in motion by people that belong to certain teams, follow (or not) certain process and so on. Will the other team provide the required interfaces as expected? Will our branches integrate smoothly? Did we catch most of the critical defects in this release? Do we have a sufficient skill set to implement this functionality? Will the team in India be available 6 weeks from now to work on the BI functionality?
This offers some idea as to where the assumptions arise and even though the list is not exhausting, understanding these key areas is important.
So, What’s the Damage from Unmanaged Assumptions?
Well, we can definitely argue about how the examples above affect enterprise outcomes and clearly they will affect the organization to a different extent. But there are some interesting ways in which unmanaged assumptions may (and often do) produce really devastating effect. The trick is in… time. How? Very simple: the cumulative affect of an assumption gets more significant with time because more and more things begin to depend on that assumption:
So, for example, if we believe that we should move to the cloud, our authentication process will be reflecting that, we will be building user collaboration functions based on the cloud platform capabilities, and so on. Those decisions impacted by the initial assumption, will in turn inform the immediate future decisions and so on, branching further out to more and more dependencies bound to that initial assumption. In reality however, we have a chain of assumptions, each one, significantly adding to the overall impact on the enterprise outcomes:
Every next assumption makes the curve “steeper”. Just think about this for a second: how long can be the assumption chain in a plan that spans multiple quarters? How big the impact?
Okay, Got It: Assumptions Are Important… Now What?
For starters, it is critical to understand that making assumptions is unavoidable. Trying to eliminate all uncertainty prior to making decisions is incredibly counterproductive. We have to assume certain things we don’t possess the full knowledge of at the moment. The real question however is: are we conscious about the assumptions we make? Or are we making them implicitly left and right without concerning ourselves with the consequences? Do we really have reasons to believe that our idea of the future is correct and that the future reality will inevitably unfold the way we’ve anticipated? Many of your existing enterprise processes, practices and constructs are designed in such a way as to spawn multitudes of unmanaged assumptions and amplify their negative impact. A few examples:
- Every team has a product owner who never talks to a real customer. Instead the product owner is occupied by reconciling scope trade-offs between competing priorities from different internal stakeholders. The whole backlog is just one huge assumption (in this case representing Area 2 in our classification above: “Customer Value” assumptions). Such an implementation of the role is a problem by design.
- Component teams spawn lots of implementation assumptions. Instead of containing all work, the work gets scattered across the organization. For every two teams that have a hard dependency on each other, it creates unnecessary assumptions that could have been avoided by organizing differently.
- Rigid enterprise planning process creates huge resistance to change and makes the organization stick at all cost to the initial assumptions, oftentimes despite new, emerging facts.
This will be it for now. It’s an incredibly deep topic and is a result of a huge miss by most organizations. In one of the next posts we will provide a systematic overview of various structural problems that create unmanaged assumptions and how to deal with them. But don’t make any assumptions about the next article, okay? Please say “yes”…
By Alex Yakyma, Org Mindset.