18: One Wrong Assumption
The Hubble Telescope Principle: Why Your Assumptions Matter More Than Your Numbers
Thirty-five years ago, the Hubble Space Telescope was launched into orbit. Outside the distorting effect of Earth's atmosphere, Hubble has given us the ability to see deep into space, to the beginning of time even.
This remarkable instrument has performed almost flawlessly, proving that all the planning prior to launch was spot on. With one exception, every assumption made by the planning team was correct.
That one exception? A mirror ground to the wrong specifications. Cost of fixing it: over $50 million and a space shuttle mission.
Like planning a mission to space, your business forecasts and consequent plans rely on vital assumptions too. Get them right, and you see clearly into the future. Get one critical assumption wrong, and you're looking at an expensive rescue mission.
The Assumption Blindspot
I notice time and again in IBP/S&OP forums: we spend time debating forecast numbers and barely any time on the assumptions that created them. It's like arguing about the destination without discussing the route we're taking to get there.
Finance wants to know why the revenue projection is down 3%. Sales defends their forecast accuracy. Marketing stays quiet because nobody asked about their campaign timing.
Meanwhile, unseen in the spreadsheet is an assumption that market share will grow 3pp due to an aggressive marketing campaign despite this not having worked before. Or that market conditions will remain stable - while tariff negotiations are ongoing. Or that your key Middle East supplier lead times will remain the same, even though the geopolitical tensions around the Straits of Hormuz are mounting.
These are the mirrors ground to the wrong specifications. But you are launching the mission anyway.
What We're Really Talking About
Let's get clear on definitions:
Fact = Something known or proven to be true
Assumption = Something believed to be true or likely to happen, but without definitive proof
While facts typically relate to the past, our plans, by definition, exist in the future. And the future is built entirely on assumptions.
Think about it: When a sales director forecasts a 15% increase next quarter, what matters more - the percentage itself or the market conditions, competitive activities, and sales initiatives that make that number achievable?
Assumptions explain the how and why, whereas numbers merely tell us the what and how much.
Why This Matters
If assumptions always mattered, they're absolutely critical now. We've lived through global supply chain disruptions, dramatic shifts in customer behaviour, geopolitical instability, and market volatility that makes old assumptions look quaint.
The companies that navigate this chaos best aren't the ones with the most accurate forecasts - they are the ones who explicitly document their key underlying assumptions and adjust quickly when those assumptions prove incorrect.
As author Douglas Adams wisely noted, "The hardest assumption to challenge is the one you don't even know you are making." This speaks to the real danger in planning - not the assumptions we document and discuss, but the ones so deeply embedded in our thinking that we don't even recognise them as assumptions.
Making Assumptions Work in Your IBP Process
Here's how to harness the power of assumptions:
Categorise systematically - Organise assumptions into relevant buckets: product portfolio, demand, supply, people, and financial plans. This structure creates clarity and ensures comprehensive coverage.
Document and quantify - Assumptions should be specific, measurable statements. "Market growth expected" is useless; "Q3 market growth of 4.2% driven by new government infrastructure spending" gives everyone something concrete to work with.
Assign clear ownership - Every key assumption needs an owner responsible for tracking its validity and accuracy over time. When market conditions change, that owner raises the flag before it becomes a crisis.
Measure accuracy - Track which assumptions proved correct and which didn't - this becomes your planning intelligence for future cycles. The assumption that seemed reasonable in Q1 but proved wildly wrong by Q3? That's learning. Document it.
Assumptions as Your Early Warning System
Assumptions aren't just planning tools - they're your risk management radar.
By identifying and documenting key assumptions, you're essentially mapping your risk landscape. When an assumption starts looking shaky, you get early warning that your plan needs adjustment.
Start with the critical few - the assumptions that, if wrong, would dramatically change your business outcomes. These are your risk levers.
For example:
"Our primary supplier will maintain 95% on-time delivery"
"Customer demand for Product X will remain stable"
"Middle East supply lead times will remain at 120 days"
"USD:NZD exchange rate will be XX% for the next two quarters"
If any of these assumptions prove wrong, what's your Plan B? When you've done this thinking in advance, you're not scrambling - you're executing your contingency.
The Reality Check
I believe the quality of IBP meetings transforms radically by shifting focus from debating numbers to debating assumptions.
When a forecast misses the mark (as they inevitably do), conduct proper root cause analysis on which assumptions failed and why. This creates institutional learning rather than assigning blame.
This cross-functional collaboration around assumptions becomes the common ground where different departments align their expectations and plans. Marketing isn't just throwing numbers over the wall to Supply Chain - they're sharing the thinking behind those numbers.
Remember: Plans built on explicit, well-considered assumptions create resilience; those built on unexamined ones create vulnerability.
Taking Action
In your next IBP cycle, try these practical approaches:
Front-load assumptions in your agenda - Review key assumptions at the start of each meeting before diving into the numbers. This frames the entire discussion in proper context.
Document rigorously - Capture assumptions in writing where everyone can see and reference them. Verbal assumptions have a way of conveniently changing when results don't match expectations.
Use assumptions as a shield against arbitrary targets - When leadership pushes for stretch numbers without substantiation ("We need 10% growth, not 5%"), respond with: "What assumptions are you making that differ from ours? Let's discuss those specifically." This shifts the conversation from arbitrary targets to underlying business realities.
You'll find that when people understand and agree on assumptions, the numbers often take care of themselves.
The Hubble Telescope team got 99% of their assumptions right. That one wrong mirror cost them dearly, but they fixed it.
Your business planning won't get every assumption right either. The question is: are you documenting them explicitly enough to know when they're wrong? Are you tracking them rigorously enough to catch the problems early?
After all, assumptions aren't just the cornerstone of planning - they're the foundation upon which meaningful business conversations are built.
What critical assumptions is your business plan built on? Are they documented, owned, and actively monitored?
Want to discuss how to strengthen the role of assumptions in your S&OP or IBP process? Find me at www.planninglab.co.nz
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