Management and Assumptions

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, test these assumptions and think of hedging actions and what-if scenarios. Conventional business planning methods operate on the premise that managers can extrapolate future results from a well-understood base of information from the past. However, for new businesses and projects this way of planning often does not comply. Most of the time there is no past-knowledge and if there’s any past knowledge available, predicting the future out of it is nearly impossible. The dilemma is that corporate planning techniques often presume more knowledge than exists, leading to grave errors in managing innovation projects [1]. The managers’ solution to this problem is to make assumptions; their best try to predict the future. Some of the assumptions made during the planning process are very likely to come true; the outcome of others is very much uncertain, though not less important. Assumption based planning is about the identification and testing of the assumptions made in a business plan, the formulation of “hedging actions” and the construction of “what-if” scenario’s. In short, this means that uncertainties are identified, a test is designed to make things clear and while waiting for the uncertainty to become certain you think of what (not) to do if the original prediction proves to be false. The point of assumption based planning is therefore not to demand the highest degree of accuracy for all assumptions made in a business plan, but to build a reasonable model to assess the order and magnitude of the challenges a new project or company will face. There are a couple of different assumption based planning methods available, among others: Critical assumption planning (CAP) by D. Dunham & Co : Aims to help managers and entrepreneurs to maximize business