Wednesday, 22 September 2021

From Assumptions Through Disruptions to Validated Learning

The reference points for every budget year are:

Assumptions based on previous performance
Assumptions based on things that may influence the performance in the next year
Assumptions about costs
Assumptions about revenue
Assumptions about profit
Assumptions about passenger numbers
Assumptions about….

Too many assumptions lead to too many disruptions. We tend to make company plans look smoother and prettier, filled with desire to do things better. And then comes the time when these assumptions undergo the test of reality. This is the time when misfits become visible, leading to a bumpier road ahead and to less control over the outcomes expressed through cost, profit, and other performance metrics.

Majority of airlines miss this unique opportunity for learning. 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 the number of assumptions and flatten the road ahead?

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

• Start thinking afresh
• 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 technique for achieving more than just resilient performance in the age of uncertainty. Instead of bouncing back, we can consider bouncing forward. This is how improvement happens.