The business world is full of famous examples of organizations sticking with certain assumptions far too long.
IBM stayed with a mainframe focus in the 1980s while servers and PCs took over. Blockbuster clung onto retail outlets even though DVD movies could now be ordered online and mailed. And Nokia ignored the emergence of smartphones and remained completely focused on standard cell phones until it was too late.
Sometimes when a business is confronted by considerable challenges, a leader needs to question underpining assumptions and try out a new strategy.
During the America’s Cup yacht competition last fall in San Francisco Bay, the U.S. team was confounded by New Zealand’s initial lead. Both teams relied on exotic technology enabling their boats to attain speeds of 50 miles. New Zealand was tacking with an angle of almost 50 degrees. (When there’s wind, the only way to move forward is to sail at an angle to the oncoming gusts, going to the right then switching to the left in a process called tacking.)
Someone on the U.S. team finally questioned the Americans’ assumptions that using a 42 degree angle was best. In the fourth race, members of the U.S. team experimented with a new strategy, trying out a 55 degree angle. The U.S. team then won eight races in a row and defeated New Zealand 9 to 8. It was one of the most dramatic comebacks in the history of sports.
There’s a powerful lesson for leaders here: Namely, beware of assumptions. Here is what you should do regularly:
1. Isolate the key assumptions being made. It took Lou Gerstner, the former CEO of IBM, to do the extensive customer interviews needed to make a new way forward clear: IBM salespeople had assumed their job was to sell hardware instead of solving customers’ IT-related business problems.
2. Constantly probe the basis for your assumptions and question if your thinking is valid. Blockbuster did not do this and when offered in 2000 a chance to buy for $50 million the fast-growing Netflix (which rented DVD movies by mail), it rejected the offer and continued building thousands of additional stores.
3. Continually test new approaches. As possible new directions emerge, experiment appropriately so as to learn about their potential. Even when R&D staffers begged Nokia’s management to obtain customer-experience results for a smartphone with iPhone-lilke features they had developed in 2004 (three years before the iPhone was introduced), they were turned down. This closed-mindedness eventually led to Nokia’s demise.
Leaders need to realize that while it is easier to simply hold on to old assumptions, eventually that course of action can prove disastrous.