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Dec 8, 2006

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Business strategy based on false assumptions

The One Eyed Doe, Aesop's fables

When formulating theories and business plans, we are usually
fond of qualifying them by stating the assumptions we have made.
The commonly used assumption is the latin phrase “cēterīs pāribus”,
basically stating that our plans are based on “all other things being
equal.” Should there be a change in these variables or assumptions,
our projections would be different. The critical thing to remember is
that since our final output is premised on the assumptions we use,
these assumptions must be based on facts. They are not pulled out
of thin air and are not hearsay or rumors. In one presentation, we
had a new employee laying out the data which he had relied on and it
turned out that these came from a senior officer who recited to him
the figures based on his memory of past dealings. Of course these
figures were outdated and any business plan built on those data were
surely flawed.

Story:

The One-Eyed Doe

The One Eyed Doe

(Illus by Harrison Weir, John Tenniel, Ernest Griset)

A Doe had had the misfortune to lose one of her eyes, and could
not see any one approaching her on that side. So to avoid any
danger she always used to feed on a high cliff near the sea, with
her sound eye looking towards the land. By this means she
could see whenever the hunters approached her on land, and
often escaped by this means. But the hunters found out that she
was blind of one eye, and hiring a boat rowed under the cliff
where she used to feed and shot her from the sea. "Ah," cried
she with her dying voice,

"You cannot escape your fate."

Moral:

Trouble comes from the direction we least expect it.

Kidding me:

Don't let people exploit your weaknesses. Hide them. Perhaps
that is one reason why the visually handicapped tend to wear
dark glasses. Nobody will notice their handicap on a bright
sunny day. For the same reason, it will be strange for the
hearing impaired to wear earmuffs as it is simply too
noticeable.

Catch me if you can, clever doe

Quotable Quotes:

“I assume that markets are always wrong.”
... George Soros

“Do not assume more variables than necessary.”
... William of Ockham

“There is no way of knowing anymore whether the
information on which we base our own information
for distribution is true or false.” ... Joseph Heller

“The trouble with research is that it tells you what
people were thinking about yesterday, not tomorrow.
It's like driving a care using a rearview mirror.”
... Bernard Loomis

“Strategies that succeed are organic. They evolve.”
... Robert H. Waterman, Jr.

“It is change, continuing change, inevitable change,
that is the dominant factor in society today.”
... Isaac Asimov

[browse collection of quotes and quotations]

Lessons in life:

Those who follow the Iraq war controversy would have read
about the speech by President George Bush to the Congress in
his State of the Union Address asking for support to back his
plan to send more troops to Iraq. In a rare statement made
shortly after this speech, the Japanese Defense Minister Fumio
Kyuma echoed a criticism that was the subject of much debate
for years, that the U.S. invasion of Iraq was a mistake based on
a false assumption. The statement on the Japan Times Online
site on 25 Jan 2007 read, “President George W. Bush's decision
to invade Iraq 'based on an assumption that weapons of mass
destruction existed was a mistake,' Kyuma told a news
conference.” Similar reports had also appeared on many
newspapers and media sites.

What really went wrong for the Doe was that it made a wrong
assumption that the enemy must come from the land. Perhaps,
in those days, nobody heard of air raid or sea strike. In almost
every aspect of our lives, we have to rely on certain
assumptions. At home, we assume that our spouses will remain
faithful, and our maids are taking the best care of our children.
At work, we assume that our colleagues will not do nasty things
behind our back, and our bosses will always look after our
interests. When we craft our strategic plans for the company,
we rely on assumptions and statistics on consumer habits,
market trends, level of competition, political stability, etc.
Naturally, should the assumptions turn out to be inaccurate,
our lives and jobs can be totally wrecked. It is important
therefore to test and verify the key assumptions. Also, a good
business plan should incorporate contingencies to cater to
changes in these assumptions over time. This should extend
to your management style. Do not over-rely on any supposedly
loyal staff. Who knows, they may one day leave you despite the
rosy pay package you give, or embezzle your company funds.

Related Articles:

Focus on your proven strategy
Importance of planning
Trust Gut Instincts and Intuition

© Business Fables and Management Lessons

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4 comments:

Rose said...

Don't let people exploit your weaknesses. Wonderful advice. By the way your images are not showing.

bizwhiz said...

Hi Rose. Thanks for pointing it out. I agree that some of the images are also causing a slower download of the pages. I have therefore reduced the file size of all the images and changed them to the .jpg format. I do hope this solves the problem. Cheers!

SUBHASHIS said...

Wonderful articles . I created a link at http://ethicsandleadership.blogspot.com

Waste Collection said...

Great post! i like it , so interesting

A MATTER OF PERSPECTIVES

Perspective Perspective Perspective