Assumptions

I study engineering at university, and I’ve discovered that engineers are really good at making assumptions. If I was to write down the one key skill of an engineer, then I’d say that was it.

In traditional engineering, we might make assumptions about the type of fluid that we’re dealing with, or the composition of a material. Businesses make assumptions too, but they’re about their customers, and their competitors, and all sorts of other things. But unfortunately, they’re not always as successful as engineers.

The reason is really simple - business assumptions might be valid when they’re conceived, but over time they can become very, very wrong.

A good example is Polaroid Corporation. Their entire business was founded on two main assumptions:

1. That selling film was essential for them to be profitable.
2. That people valued an instant colour print.

In the 1980s this might have been true, but they carried these assumptions with them into the 1990s, a time when digital cameras exploded in popularity. The net result? Polaroid went bankrupt in 2001.

But where engineering and business diverge further is in the difficulty of changing an assumption. An engineer can pick up a pencil, and make a quick change. A business leader can’t. This is because assumptions become embedded in the corporate culture, which makes them very difficult to change.

I think there’s a few lessons to be learnt from this:

1. Remember what your assumptions are, and why you made them - are they still true today?
2. Don’t let assumptions become too embedded in the corporate culture, otherwise it could compromise the organisation’s ability to respond to change.
3. Consider your assumptions when making an investment decision. If the assumption is wrong, will the company we jeopardised?