Do you ask your team to estimate your unquantifiable assumptions?

Especially in this fast changing world, your strategy will be based on unquantifiable assumptions; rather than giving up, ask your team to estimate your unquantifiable assumptions to build understanding and dialogue.

Accounting discipline teaches great accuracy in numbers, even when they are not important.

“Not everything that counts can be counted, and not everything that can be counted counts.”

William Bruce Cameron

Strategic thinking requires inaccurate estimates to be made of numbers that are of critical importance.

The key numbers in strategy tend to be the hardest to quantify. “What market share will we be able to capture and defend if we enter this new market? What is the value of synergies between our business units?”

Great understanding and insight can come from attempting a rough estimate of the most critical questions to support management judgement. For example, we attempted to answer what value cross-border synergies could bring to different business units in different countries. This required quantifying everything quantifiable, then putting a broad range on all the ‘soft’ benefits possible.

The answer was that the international network could contribute about 5% of profit to business units, with a range of 0 to 10%. This very rough estimate was enough for strategic decision-making – any strategy based on capturing global synergies was likely to fail to deliver the numbers, and we had not even started to assess the organisational cost of coordination. The deeper understanding of synergies also identified the key strategic indicator to track that would change this situation, namely the growth in multinational customers.

The estimate is a great starting point, and the value of it only escalates as you track your strategy’s performance against these estimates and get an early read if you are going in the right direction.

Ask your team the most important questions, and challenge them to quantify the answers. Even if they come back with a wide range, the attempt alone will create understanding and a richer dialogue.