Assumption-Based Planning
#wiki/management *Assumption-based planning* in project management is a post-planning method that helps companies to deal with uncertainty. It is used to identify the most important assumptions in a company’s business plans , to test these assumptions, and to accommodate unexpected outcomes. Assumption-based planning methods include:
Critical assumption planning (CAP) by D. Dunham & Co.
Assumption-based planning by RAND : raises the visibility of make-or-break uncertainties common to new ventures by forcing managers to admit what they don’t know.
Discovery-Driven Planning by Rita Gunther McGrath and Ian C. MacMillan.
Types of assumption
The two classifications are not mutually exclusive; an assumption can be both explicit and primary.
Implicit and explicit assumptions
Explicit assumptions are fully revealed without vagueness, implication, or ambiguity—though in a plan, they often rely on implicit assumptions . Implicit assumptions are not expressed and may go undetected. If implicit assumptions are wrong, this can damage projects.
Examples of implicit assumptions:
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- Customers will buy our product because we think it’s a good product.
- Customers will buy our product because it’s technically superior.
- Customers will agree with our perception that the product is great.
- The product will sell itself
- Distributors are desperate to stock and service the product.
- We can develop the product on time and on budget.
- Competitors will respond rationally.
- We will be able to hold down prices while gaining share rapidly.
- We will have no trouble attracting the right staff.
- Customers run no risk in buying from us instead of continuing to buy from their past suppliers.
```
Process
The steps of assumption-based planning (ABP) are:
Identify assumptions: Collect all assumptions implicit, explicit, primary and derivative, out of the (business) plan.
Determine criticality: quantify assumptions as much as possible in order to determine which assumptions have the greatest (financial) impact.
Design tests: Design a test for every critical assumption. In a test design you state how to test the assumption and what proves the assumption wrong or right.
Schedule tests: Every critical assumption must be tested, but not all assumptions can be tested in the present. So future assumptions tests are scheduled in a test schedule. Some possible reasons to schedule a test in the future are a lack of information in the present or a dependency on the test outcomes of other tests.
Test assumptions: When an assumption is tested this results in a test outcome, which proves the assumption right or wrong.
Reassess plan: Based on the test outcomes and the test schedule one might decide to reassess the venture plan and update the business plan with the new insights gathered in the ABP process.
Plan re-testing: assumptions must be re-tested regularly if not constantly. There should be a retest schedule for every critical assumption.
Create or update the assumption plan: The assumption plan holds all data gathered during the ABP process.
Critical assumption planning
Critical assumption planning (CAP) is a service mark of D. Dunham & Co. It helps managers and entrepreneurs maximize business development learning at least cost. The continuous process consists of six steps:
- Knowledge Base Assessment
- Critical Assumption Planning
- Test Program Design
- Funding Request
- Test Implementation
- Venture Reassessment.
