Why Strategic Assumptions Matter More Than Metrics in Business Success

Have you ever planned a wedding?

Much like a business, it requires a strategy. Your strategy relies on assumptions — about the weather, the number of guests, their taste in music and food, the location, and more. These strategic assumptions guide every step of the planning process. Without them, achieving business success through a well-rounded strategy and execution plan would be nearly impossible.

So, why should business strategy be any different? Surprise... it's not.

Here's a contrarian perspective: even the most robust metrics can't save a strategy built on faulty beliefs.

Let's dive into why assumptions play a greater role in determining strategic success than metrics — and how mastering them can drive transformative growth. 

Strategy is a theory about how a company can win and outperform competitors. In business, victory means non-linear growth, which is a key aspect of strategic success. So, strategy is a theory about how to deliver non-linear growth.  

Like any theory, it rests on a mix of facts and assumptions, guiding our actions with both evidence and educated guesses.  

In practical terms, this idea of strategy as a theory is expressed as a formula:

Strategy = f(Policies, Measures, Resources) × Σ(Aₙ)

Here's how it works:

• f(Policies, Measures, Resources) – This part of the formula encompasses the core elements of a strategy: the guiding policy that sets direction, the measures that track progress (normally expressed with OKRs or KPIs), and the resources allocated to fuel action. Together, they provide the structure and clarity needed to pursue strategic initiatives.
• Σ(Aₙ) – No strategy is complete without assumptions. Each assumption (Aₙ) represents a hypothesis.  These can be around market conditions, competitors' or customers' behaviors, or internal capabilities that we believe will hold true.  The sum of these assumptions underscores that a strategy's strength depends heavily on the accuracy of its underlying beliefs.

Yes, alignment, proper communication, accurate reporting, and stakeholder engagement are all vital elements — especially to secure proper execution. If each area is carefully managed and everything goes according to plan, the result will likely be a financial outcome that matches market expectations.  

In other words, these structured actions – which are certainly important and whose proper application will derisk the execution of a strategy – are designed to ensure that a company operates as efficiently and predictably as the market demands.

But if the goal is to drive alpha — to outperform the market — then developing assumptions to append to a strategic predicament becomes critical.  In this formula, assumptions are multipliers, the levers that amplify strategic outcomes beyond the expected. 

Of course, the inherent risk in this approach is assumptions can be proven wrong. When that happens, these faulty assumptions can lead to value destruction instead of driving alpha. An assumption that doesn't hold is no longer a lever. It's a drag on the strategy, potentially steering resources and efforts in the wrong direction.

Therefore, while monitoring the progress of a given strategic initiative is essential, it's equally critical to continuously re-evaluate the validity — or identify the violation — of the underlying assumptions.

Let's say (hypothetically) that you're a sushi bar owner.

You start strategizing, and after a few rounds of brainstorming sessions, it seems like everything is clear. Your business should perform at least as well as the average sushi shop in a similar area. However, if you aim not just to meet market expectations but to exceed them — to truly drive alpha — you need to develop additional assumptions to identify unique opportunities or risks that aren't obvious on the surface.

For example, you might contemplate the following assumptions:

1. Customer taste preferences: You could assume that local customers prefer a unique twist on sushi, such as fusion flavors or vegan options.
2. Price sensitivity: You could assume that the demographic around South Kensington has a higher price tolerance, allowing for premium pricing without risking customer churn.
3. Pink rice: You could assume that pink rice will catch the attention of passersby and customers seeking something unique, potentially becoming a signature attraction for your shop.  You might also assume that you could attract regular sushi consumers and those seeking Instagram-worthy, aesthetically appealing food experiences.

These assumptions act as levers that amplify your strategy. If they hold true, they will enable your business to outperform typical expectations. On the other hand, if the assumption proves incorrect — if, for instance, customers prefer traditional sushi aesthetics or perceive pink rice as unappealing — it could lead to value destruction. Customers might overlook the novelty or even avoid it if they associate the pink color with artificial additives or unconventional tastes.

Therefore, when monitoring the business's progress with OKRs and/or KPIs or any other methodology, it's crucial to continuously (re-)validate these assumptions.  

You may notice that, despite promising OKR progress and impressive KPI data, those rosy and financially attractive numbers might mask subtle changes or assumption violations that have yet to surface. 

Assumptions are, in essence, our strategic hypotheses about what will hold true. If any of these assumptions quietly break down, today's positive metrics may not reflect sustainable success.

In July 2017, Intel — the undisputed leader in CPU production with a uniquely recognized brand—experienced a share price rally that nearly reached its all-time high, nearly matching the heights of the dot-com bubble's peak in early 2000. The company's business seemed rock solid: demand for Intel CPUs was at historic levels, the computer market was booming, and data centers were expanding at an unprecedented rate.

Financially, every indicator was bright green — dark green, even. Revenue growth was strong, profits were robust, and key performance metrics consistently exceeded expectations. Cash flow was steady and substantial, creating a seemingly unshakable financial foundation. Intel appeared to be firing on all cylinders, producing cutting-edge products and an enviable balance sheet.

Yet, despite these favorable conditions and market dominance, Intel faced hidden risks that weren't immediately visible in their KPIs or financials. Beneath the surface, subtle shifts and potential assumption violations lay in wait — market dynamics were evolving, new competitors were pushing innovative designs, and shifts in manufacturing trends hinted at risks that wouldn't fully manifest until later. 

Despite the dark green indicators, these overlooked changes would soon challenge the assumptions underlying Intel's strategy, reshaping its trajectory in ways that no OKRs or KPI at the time could capture.  

More specifically, the following assumptions were violated:

CPU-centric model would remain dominant

Another units (GPUs — graphic processing units) came into play, which were and still are perfect for complex workloads like training AI models or analysing massive datasets. NVIDIA led this shift, while Intel was confident that CPUs could meet market demand.

Mobile and low-power chips would not threaten Intel's core business

Mobile tech exploded, and companies like Qualcomm, Apple, and Samsung gained traction by licensing efficient ARM-based designs from ARM Holdings. These designs have low power consumption and strong performance, making them ideal for smartphones and other mobile devices.

Data centers would remain Intel's stronghold

AMD, a semiconductor company and Intel’s competitor surpassed Intel in data centers and even built strong partnerships with cloud giants like AWS and Microsoft Azure. AMD introduced energy-efficient, high-performance EPYC processors built on its innovative Zen architecture. These processors offered better cost performance and scalability compared to Intel’s processors.  

The competition would remain weak (specifically from AMD)

For years, AMD was lagging behind Intel. In 2017, AMD shattered this assumption by launching its Ryzen processors (powered by its Zen architecture), which delivered competitive performance, innovative features, and affordability.  

AMD extended beyond consumer CPUs to laptops, servers (EPYC), and high-performance computing (Threadripper). This strategic move allowed AMD to compete with Intel across all market segments.

Intel's inside branding would keep it relevant

Despite Intel’s strong branding, it couldn’t compensate for its delayed innovation and slow adaptation to market shifts. The company focused too heavily on past successes instead of proactively monitoring performance, challenging assumptions, and planning for necessary turnarounds.

Why were Intel’s assumptions were violated?

Intel's strategic errors were largely rooted in faulty assumptions about its continued dominance in core markets, technological trends, and the competitive landscape. They over-relied on past strengths (like CPUs) while underestimating the shifts in mobile computing, AI, and custom silicon development. These violations of key strategic assumptions hindered Intel's strategic success, allowing competitors like AMD and NVIDIA to surpass them in critical areas.

At around the same time, Nvidia was instead locking its strategy to the following assumptions:

Parallel processing is the future - NVIDIA doubled down investments in GPUs (Graphic Processing Units) to excel not just in gaming but also in high-performance computing

• AI and machine learning demand specialized hardware: Traditional CPUs lack speed, efficiency, and scalability. GPUs (like NVIDIA’s) and TPUs (Google’s Tensor Processing Units) can handle AI workloads with features tailored to parallel processing and data-intensive computations.  
• Data-centric industries will explode in growth: NVIDIA bets on the assumption that data-centric industries will have rapid growth and position their GPUs as essential for processing large data volumes. This strategy led to data centers and cloud providers widely adopting them for AI and deep learning.
• Software will be key to hardware success: rather than focusing only on hardware, NVIDIA assumed that developing a robust software ecosystem would be critical for the adoption and success of their products. Their CUDA platform, for example, allowed developers to tap into the power of NVIDIA GPUs for non-graphical tasks, which led to a massive increase in adoption across industries like healthcare, finance, and scientific research.

Since then, Nvidia's market capitalization has grown nearly 1,000-fold, while Intel's has remained largely unchanged.

Today, Intel and NVIDIA serve as powerful contrasts in the consequences of strategic assumptions, showing that even when metrics look favorable, the assumptions underpinning those metrics are critical. Intel's failure to revalidate its assumptions left it vulnerable to disruptive shifts. NVIDIA's clear, forward-looking assumptions on AI, parallel processing, and the value of software to hardware allowed it to seize emerging opportunities and redefine its industry. 

Strategy is not a set-and-forget endeavor.  

No matter how dominant, every organization must actively monitor its assumptions to ensure they align with a rapidly evolving reality. As seen in Intel's trajectory, a well-built strategy can still fail if its foundation — the assumptions guiding it — goes unchallenged and unverified.

At Quantive, we believe that strategy thrives when it's dynamic. We call it the Always-On Strategy. By continuously tracking progress through Goals and Progress reports and rigorously revisiting core assumptions, organizations can proactively adjust, adapt, and stay on the leading edge. This dual focus enables organizations to meet market expectations and drive alpha, ensuring that their strategy remains resilient and transformative in an ever-shifting world. 

Quantive StrategyAI is the first end-to-end strategy management software that helps you analyze your strategy and generate strategic hypotheses. Once you finalize them, you can analyze each assumption and decide which to focus on.

Here's how it's done:

Strategic hypothesis generation

Quantive StrategyAI enables leaders and teams to generate refined strategic assumptions in a centralized platform.

Example: Document customer preference insights or market trend forecasts and ask Quantive StrategyAI for feedback on how they fit into your current strategy and what tweaks you can make to update it. 

Real-time validation

Trust our intuitive dashboards and progress reports to validate assumptions and align your strategy with the Always-On Strategy Model, ensuring it stays on track.

Example: Receive alerts when underlying assumptions show signs of misalignment, helping you course-correct before small errors evolve into costly missteps.

Cross-functional collaboration

Strategic assumptions strengthen when your teams challenge and refine them collaboratively. Quantive StrategyAI provides a digital space (interactive whiteboards) and unified goal-setting tools to shift your teams' focus from input to outcomes.  

Example: Engage product, marketing, and sales teams to evaluate assumptions, align efforts, and refine strategies in real-time.

Dynamic strategy execution

The Always-On Strategy Model embedded in Quantive StrategyAI ensures that assumptions and metrics evolve with your business. You have constant feedback loops on your business performance, so you don't miss anything important.

Example: Use goal updates, executive dashboards, KPI tracking, and weekly check-ins to adjust assumptions fluidly as market conditions shift. This approach ensures your strategy remains both resilient and transformative.

With Quantive StrategyAI, assumptions aren't just guesses. You get the chance to actively manage and validate them continuously, ensuring sustained strategic success. This means fewer surprises, smarter pivots, and strategies that consistently outperform expectations.

Ready to challenge your strategic assumptions? Try Quantive StrategyAI for free and review your strategic approach.