20 Often-Fatal Assumptions

I am often asked by corporations to give some illustrations of assumptions that have caused  more trouble than they had any right to in the development of new business plans.  Here, for your edification and amusement, are twenty of the ones that have popped up frequently and which have often led otherwise sensible new ventures astray:

 

1. Other divisions in the company will be glad to help
2. All we need is 5% market share!
3. The firm will surely support the best strategy for our unit
4. We will have no trouble attracting the right people to work on the project
5. Competitors will roll over and play dead - or hey, maybe they won't notice your taking market share away from them
6. Competitors are too...dumb, insignificant, small, unproven, badly capitalized or un-interesting...to worry about
7. We can use the same key performance indicators in new markets that we use in existing markets (ditto for funding strategies, planning processes, reward systems...)
8. Customers will buy it because it has these neat features!
9. Customers won't feel that buying from us is risky
10. Customers won't mind switching suppliers and will be happy to take on whatever work is involved
11. We can create a compelling first-mover advantage (corollary:  we have to spend a lot to get in first and obtain significant market share so that we can protect our position)
12. We can develop what we need on time and on budget
13. It will sell itself!
14. We will be able to hold our prices and gain market share
15. There is no real competition for what we offer
16. Joint venture and alliance partners, and our own suppliers, share our objectives
17. We won't need to engage in training for suppliers, distributors or customers
18. The technically superior product will triumph
19. We can create new markets where there is no competition, quickly
20. Our projections will be accurate

Have a look at your business plans for a new project and see if any of these little bombshells are lurking there - forewarned is forearmed!

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• Posted Rita McGrath on July 12, 2010

The London Olympics - One for the “flops file?”

One of my relatives, a UK-based small business owner, has argued for some time that the London Olympics would come to represent a ballooning cost burden for taxpayers and the reality of just what it will take to host the Games sets in.  “Add two zeroes to those estimates” he argued when the city won the initial bid.

Well, it sure is starting to look as though the events are going to be a lot more expensive than was originally planned.  According to one article I found on the topic, the costs admitted to so far look something like this:

2005: £2.4 billion later revised upward to £3.3 billion

2007: £9.3 billion, including a contingency fund of £2.7billion.

2009: £12.9 billion

Indeed, another highly critical article calls the financing story an “Olympic Sized Overspend”. 

It’s a familiar pattern—initial optimistic projections fail to survive contact with reality.  By the time more accurate information comes in, the spending decisions are made.  Some pundits have even suggested that the UK could be looking at a £20 billion price tag before the final reckoning has been done. 

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• Posted Rita McGrath on February 08, 2010

One from the flops file - Mattel’s all but forgotten “Flavas”

As part of my work on understanding how companies compete in dynamic markets, I run across a fair number of flops. Some are well intentioned, and others are just poorly thought through. I was reminded of this not long ago when reading a Wall Street Journal article on Mattel's attempts to give its venerable "Barbie" franchise a face-lift. The company is introducing a new "fashionista" Barbie, but we can expect heated competition from two other companies introducing respectively the "Liv" doll and the "Moxie Girl" doll. The battle for market share is not childs' play - Mattel won a lawsuit against the company that introduced the popular "Bratz" dolls and emotions run high in the rivalry.
So where do the flops come in? I wonder whether Mattel has put much energy into understanding why their previous attempts to compete with Bratz using the Barbie franchise and their considerable marketing muscle were so disappointing. The particular flop that comes to mind is a remarkably Bratz-like doll called the Flavas. Mattel came under wild criticism for being tone-deaf to cultural and social objections to the dolls' supposedly hip vibe. Instead, observers felt they were insulting. And for staid old Mattel, introducing a doll with a jingle that asked people to "tell me what's your flavor" seemed rather...um...risque, particularly considering the target age of the intended market. In a sign, perhaps of how it has come to grips with more modern expectations, Mattel is even issuing commercials for the "fashionista" Barbie with a sound track that utilizes the "Barbie Girl" song penned a decade ago that Mattel initially tried to annihilate with a lawsuit. Curious as to how it works? You can judge for yourself by checking out the video. "Life in plastic, it's fantastic" we are told. So, will the fashionista Barbie manage to win the hearts and minds of ever-so-sophisticated girls before they grow out of dolls altogether? Let the holiday shopping season begin!

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• Posted Rita McGrath on November 18, 2009

Why smart projects so often go wrong - SAP and Business ByDesign

In class, I’ve been using German software giant SAP’s foray into Software as a Service as a ‘living case’ example of a company venturing into highly unknown territory.  Without knowing more than what is available in the public domain, participants usually conclude from the analysis that the software maker’s ambitions for the project are highly ambitious, if not impractical.

Just today, then I ran across a most interesting blog on the topic of what went wrong with SAP and Business ByDesign, which they pulled from the market this year for a total do-over.  In reading it, I continue to be amazed at how the same mistakes keep being made with large, ambitious projects designed to take companies into unknown territory.

This one started out wrong, with the company initially designing the technology for one type of application, but then ending up using it in another.  A similar problem happened with Nokia’s N-Gage phone—instead of designing a phone specifically for gaming, they tried to adopt one of their existing technology platforms, with disappointing results. 

Secondly, the scope of the program was huge.  Rather than trying to operationalize a limited set of functions, the software was designed to be a full business suite.  We often see this with companies who think their existing capabilities will let them tackle a whole new challenge in its entirety, rather than breaking things up into more manageable pieces.  Big flops often result.

The project also suffered from a lack of internal cooperation, as existing business units feared (perhaps rightly) that if it succeeded, it would cannibalize their very profitable positions. 

So, it’s back to the drawing board for SAP and another entry in my growing “flops” file for Rita.

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• Posted Rita McGrath on October 21, 2009

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