Analysis over assumption
We navigate our complex world by relying on assumptions about how things work, from the way a bicycle stays upright to why a baseball curves in mid-air. These beliefs help us function without being paralysed by analysis. But when was the last time we questioned whether what we “know” is actually true? At work, untested assumptions about market trends, customer preferences, and even basic organisation strategies regularly lead businesses astray. Just as the medical community once accepted bloodletting as a cure-all, businesses often cling to practices that seem self-evident, only to find out, sometimes too late, that reality doesn’t conform to their expectations.
Medicine has long grappled with unchallenged beliefs, from bloodletting to the assumption that stress caused stomach ulcers. While the former was abandoned in the nineteenth century, it wasn’t until the late last century that researchers identified a bacterial cause for ulcers, fundamentally changing the treatments. The scientific method, involving systematic observation and testing, has always driven progress in medicine. In contrast, business occasionally tries to adopt a similar approach, using data to guide decisions, but many business strategies still rely on assumptions that go untested, leading to decisions based on correlation rather than causation. A mindset of seeking to test assumptions is critical in a time when there are so many technologies threatening to disrupt virtually every business. Now, more than ever, leaders need to get across the technical detail.
Unfortunately, too many business books tout strategies that worked under specific circumstances, only for others to adopt them unsuccessfully in a different context. Jack Welch, CEO of General Electric from 1981 to 2001, was long regarded as the ultimate corporate leader, pushing GE to record profits and market dominance. In the books he wrote, and many of those written about him, Welch espoused his approaches to ruthlessly cut costs, force rank employees to weed out “underperformers,” and always prioritise shareholder value. His leadership saw GE’s stock soar. Yet the aftermath tells a different story revealing how focusing on short-term profit, relying on financial engineering, and relentless restructuring can leave even a powerhouse like GE vulnerable to shifting economies, markets and technology.
John Sculley, Apple CEO from 1983 to 1993, also believed he had the magic formula to grow businesses, first he had legendary success at PepsiCo through the “Pepsi Challenge”, Sculley then brought aggressive marketing acumen to Apple, where he oversaw the highly successful launch of the Macintosh and crafted Apple’s iconic “1984” Super Bowl ad. His success, of course, wasn’t due to his decisions on their own, either at Pepsi or at Apple and he failed to realise great marketing only works while you keep investing in visionary products.
Neither Welch nor Sculley were fans of analysis and reassessment. In his book “Winning”, Welch said “Forget the arduous, intellectualized number crunching and data grinding that gurus say you have to go through to get strategy right”. Similarly, Sculley shared in an interview, “You don’t need a lot of numbers to tell you what you already intuitively know.” But, without such an understanding they repeated their approaches based on false assumptions, ultimately leaving their companies weaker for it.
As I opened with, even things we think we know, like why a bicycle stays up and how a baseball curves in the air, turn out to be far from as certain as we assume. Most believe that a bicycle’s stability is due to the gyroscopic effect of the wheels combined with a built-in balancing “wobble” in the front wheel. It was as recently as 2011 that researchers cancelled out both effects and showed a bicycle could still stay upright, suggesting that, like business, there is much more at play. Similarly, most people believe a baseball curves in the air due to the spin creating a pressure difference and air resistance acting on the ball’s trajectory. However, research has shown the seam’s orientation, turbulence, and even small surface irregularities are just as important in defining the ball’s path.
Assuming we know how these everyday objects work doesn’t really matter unless we’re extrapolating to do new things like trying to build a faster racing bike or coaching a World Series pitcher. Not knowing how business really works is fine until, like Welch and Sculley, things change or we do something new.
Amazingly, there has been data available for decades to debunk many popular assumptions such as the belief in retail that products placed at eye level would sell more than those placed lower or higher on the shelves. “Eye level is buy level” was the mantra whereas numerous studies of behaviour and sales show shoppers tend to look slightly below eye level, which means items placed just lower can do better.
Similarly, companies from Starbucks to Unilever used to assume that customers would perceive value based on the visual size of the packaging, leading to inefficiencies in-store and, as shown by data that was available all along, frustrations by consumers. Today, belatedly, most companies have moved beyond the myth.
Whether it is marketing, pricing, corporate takeovers, or performance management, it is almost always possible to test the assumptions that underpin a business. While many books espouse approaches based on correlation alone, savvy leaders would do well to do their own research using books such as Doug Hubbard’s excellent “How to measure anything: Finding the Value of Intangibles in Business”.
Challenging assumptions is not just a matter of intellectual curiosity, it’s essential if you want business success to be more than just a dice roll. The cost of clinging to outdated assumptions is often missed opportunities and wasted resources, while the rewards of challenging the status quo include innovation and resilience. Those that dare to question their own assumptions can be much more comfortable in an increasingly uncertain world.