Ask your team to quantify the most important assumptions that underlie your strategy as an exercise to build understanding and dialogue.
Accounting discipline teaches great accuracy in numbers, even when they are not important. 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 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. The deeper understanding of synergies also identified the key strategic indicator to track that would change this situation, namely the growth in multinational customers.
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.
