Your Strategic Assumptions Can Make or Break You - Just Consider the Recent Demise of the A380

Sep 23, 2019 7:55:54 PM

Your Strategic Assumptions Can Make or Break You - Just Consider the Recent Demise of the A380

Airbus recently announced it would end production of the Airbus 380 - the double decker plane. 

 Why? 

Not enough demand. Meaning no sales despite what was internally forecasted and budgeted for.

a380 vs b787

Airbus made big decisions on the wrong strategic assumptions.

Airbus invested about $30 billion in the A380, betting that the hub-and-spoke model, in which passengers have layovers at top-tier airports to catch connecting flights, would continue. ( Investors Daily GILLIAN RICH 2/14/2019)

  •  Boeing 787 bet their customers (airlines) wanted greater cost efficiency ( the innovative carbon composite made the plane lighter and delivered on this need)and end-fliers wanted point-to-point flights.
  • A380 is a big plane in a small airport world - there are only about 12 (+ or -) airports that have the capability to handle the aircraft. 
  • *Suppliers for their engines – Rolls Royce, GE among others started to balk at the future as well.

Simplify all of this into one sentence – their strategic assumptions were incorrect and they did not “check along the way” if the world was unfolding as they had envisioned. You need to test your assumptions as sales data comes in – what’s working and not working and why?

What implications does this have on you? 

Two immediate actions that you can take so this does not happen to your company or at least you lessen the risk

1. Make Strategic Assumptions Visible – your company’s executives are today making decisions based on assumptions – if they are not aligned or visible or credible– you can have a wild-range of resources being marshalled in different directions. To solve this – it’s nothing more than a 1 page sheet you create – with external assumptions on one side and internal implication (or your response) on the other.

2. Double Check the Assumptions Going Into your Budgets – its budget cycle season for many companies now. As the top-down target gets meshed together with the bottom-up, on the ground, seasoned sales force view – rather than debating goals – make someone is asking and making visible the strategic assumptions that these numbers are predicated on.

 

At the end – strategic assumptions and implications are about envisioning the future Demand and Supply of your industry, and rightly, the capabilities, supply chain, technology and innovation choices your company needs to bet on.  

You have more control over your outcomes that you may think.

 

Learn more about effective decision making...

New Call-to-action

 

Tim Lewko

Written by Tim Lewko

Vancouver, BC, Canada | CEO Thinking Dimensions Global, London, UK

Tim works with CEOs and boards on their big decisions – those that involve product, market and future capability choices.

He has worked with CEOs and Senior Executives using a process rather than prescription approach to strategy over the last 20 years across North America, South America, Europe, Asia and India. His clients to date have achieved over 900 million USD in improved EBITDA .

He is also the author of the book ,Making Big Decisions Better: How to Set and Simplify Strategy https://www.amazon/dp/1472451082

SIGN UP TO OUR NEWSLETTER

Sign up for our newsletter and receive updates that will help your business to grow. Do not waste time, we're here for you.