Alternative Selection Best Practice 1 – Common Assumptions and Variables

Alternative selection requires choices to be made between competing initiatives. Such choices necessitate a common comparative basis on which the value of each initiative is judged. Key to achieving this state is the application of common market and organizational assumptions and variables from which each initiative’s value is calculated. Without this commonality, initiative owners would likely apply assumptions favoring their initiative’s value calculation and thus diminish the leadership team’s ability to compare individual initiative values.[wcm_restrict plans=”40813, 25542, 25653″]

Assumptions

Assumptions represent those qualitative marketplace conditions and organizational capabilities used in determining the value of competing initiatives. Examples include:

• Learning curves
• Technology advances
• Consumer demand/preferences

Although qualitative, assumptions may be express in numeric, equation, and limitation or bounding formats. Some assumptions represent logic test against which value calculations are challenged.

Variables

Variables are quantitative values applied to return on investment calculations. Examples include:

• Inflation and interest rates
• Market size
• Capacity

Variables are typically stated as numeric values.

Aligning Planning Assumptions and Variables

Achieving consistency in the application of planning assumptions and variables requires implementation of a three step process that includes assumption and variable determination, documentation and communication, and reinforcement. Performance of the process is typically led by the organization’s strategic planning group or project management office with input provided by the many other corporate functional organizations having relevant expertise in a given area.

Determination

Identifying and assigning values to planning assumptions and variables is a mixture of both art and science. First, a collection of relevant assumptions and variables to be used in the calculation of more than one initiative’s value are identified. Second, functional responsibility for each assumption and variable is assigned. Third, a value for each assumption and variable is determined by the responsible owner using information from credible internal and external sources and vetted by relevant stakeholders. Fourth, relevant marketplace and organizational conditions are monitored and assumptions and variables updated as appropriate.

Documentation and Communication

Broad organization use of common planning assumptions and variables necessitates implementation and maintenance of a catalog system. Within this catalog, each assumption and variable is documented as is its basis, date of creation or revision, and owner. The catalog should be easily accessible and searchable and its existence broadly communicated to all organization leaders and planners.

Reinforcement

Consistency of action will not occur in a vacuum and requires reinforcement of desired behaviors. As such, proposed initiatives should be reviewed for their use of standard assumptions and variables. This review should occur prior to the inclusion of an initiative in the alternative selection process and be performed by an independent group, typically the strategic planning group or project management office.[/wcm_restrict][wcm_nonmember plans=”40813, 25542, 25653″]

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