Tuesday, 27 January 2015

Assumptions, Disruptions, and Validated Learning

The reference points for every budget plan are:

Assumptions based on records from previous year(s)
Assumptions based on records from previous season(s)
Assumptions based on factors that may influence the performance in the next year
Assumptions about costs
Assumption about revenue
Assumptions about profit
Assumptions about passenger numbers
Assumptions about weather
Assumptions about….

Too many assumptions lead to too many disruptions. We tend to make plans that look as smooth as possible, showing our aspirations and commitment to expand and do things better. And we are always surprised when our plans don't pass the test of reality operationally and financially. This is the time when wrong assumptions become visible, leading to bumpier road ahead with less control over the outcomes expressed through cost, profit, and other performance metrics including punctuality targets.
The majority of airlines miss this unique opportunity for learning on the go. 

The road of 'lean' airlines with simple business models is less bumpy as they can have an easier access to reality and learn about what works and what doesn't work for them. 
Traditional airlines, however, are more heavy - trapped in once successful but now hard to control business model accompanied with rising complexities. This makes them more and more susceptible to unexpected losses caused by even the smallest challenge.

Can we reduce number of assumptions and flatten the road ahead?

Yes we can, if we embrace the practice of validated learning and 

  • start thinking outside of boxed practices
  • become open to learning on the go, not only from the past 
  • start testing assumptions in an organised way, focusing on biggest diversions from flat lines created during the planning processes 

Validated learning is an invaluable tool for achieving resilient performance in the age of uncertainty - something that no business school or business course can teach us.