Assumption-based planning: Difference between revisions

Revision as of 05:54, 14 December 2013

Revision as of 05:55, 14 December 2013

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== Overview ==

ConventionalConventionall business planning works on the expectation that managers can extrapolate future results from past experience, but for new businesses and projects this way of planning is often not possible. Experience may be lacking or extrapolating from past experience may be misleading.<ref>Christensen, C., Kaufman, S., & Shih, W. 2008. Innovation killers: how financial tools destroy your capacity to do new things. Harvard Business Review, 86(1): 98-105, 137.</ref>

A solution to this problem is to make assumptions and attempt to predict future outcomes. 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 unimportant. Assumption-based planning identifies and tests the assumptions made in a business plan, the formulation of “hedging actions” and the construction of “what-if” scenarios.