“Assumption” and “risk” often go hand-in-hand. It’s like yin and yang, or whether the glass is half full or half empty.
Salespeople are taught of the dangers of assuming something in business. To “assume” something, they’re told, makes an “ass” out of “u” and “me”.
By assuming a particular intent, outcome, situation or interaction you are creating an illusion for yourself that you regard as fact. As a result, you are creating a risk.
I talk with many business owners who think that they have a handle on their customers’ wants. Not from research – from talking to them, or from observing how changes in the industry and technology influences their buying behavior. But from what they would call their “gut instinct” and what I call “risky assumption”.
These companies rely on assumption to build their business. My customers liked when a made a red version of my widget – surely they’re going to love it if I make a blue one, right? Products or services get designed and launched. Expenditure is made – directly or indirectly – on marketing, promotion, human resources, service, support, distribution and so on. All based on assumption – on a hunch.
However, “assumption” on its own isn’t necessarily a bad thing, as long as it’s mitigated with identifying, assessing and managing the risks associated with it. You could even say that once you know the risks involved, the assumption stops being an assumption.
When I talk about risks, I see them coming in three flavors:
Risk Number One: “Knowledge, Preparation, Cause and Effect”
This is what many people would call “Risk Management” in the traditional sense. It’s the systematic research, definition and prioritization of known risks that have been assessed as having a detrimental impact to the project. This sort of risk is the stuff that you can prepare for – checking the likelihood of rain on the weekend that you’re planning a barbecue, for example. It’s having a Plan B – or series of Plan B’s. There’s an ISO standard (ISO 31000) that defines it as “the effect of uncertainty over objectives”, which I kind of like.
Risk Number Two: “Woah – What Just Happened There?”
This is a risk that you couldn’t have possibly foreseen – it appeared, like a bolt from the blue, out of nowhere. There’s great book called The Black Swan (nothing to do with that movie about ballet dancers) that’s all about these types of risks. It’s when you’ve spent a dumper-load of money to exhibit at a tradeshow only to have 9/11 happen a day into it (as happened to me).
Risk Number Three: “But I Didn’t Think It’d Be A Problem!”
This is the one that I’m on about. This is the risk that, actually, you did know about but you didn’t consider it as being a risk because you made an “assumption” along the way. “Hey, I’ve never had a flat tyre in the past five years, so why should I pack a spare on this 1,000 mile road trip that I’m about to make?”
The issue with Risk Number Three is that of underestimating the gravity and implication of a risk based upon an assumption that hasn’t been tested and researched. Why hasn’t it been tested? Because you don’t think that’s it’s that big of a deal to be looked into!
The business world is littered with companies – and entire industries – that have been decimated by their ignorance/assumptions. Kodak invented digital cameras, but sat on the technology for fear of losing revenue from their film-based products and services. Recently they had to sell their image sensor business because they’re strapped for cash. Sony should have made the iPod, but they didn’t. Look at the music or publishing industries today compared to a few years ago. All of them didn’t think that the risk they saw coming was going to be that big of a deal.
Before you start building the next color fax machine, CRT television, or incandescent light bulb, draw up a list of the key assumptions that you’re making.