When it comes down to it, is your business and strategy based on knowledge or assumptions? It's important to remember the difference.

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Hope is not a strategy. So wrote the now legendary Permanent Secretary in the Prime Minister's Office to his colleagues when the corona crisis hit.

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Of course, very few companies consciously base their strategy on hope - after all. Often hope creeps in without managers even realizing it. In fact, it's even worse.

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But why does it happen - and what can you do about it?

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Part of the answer lies in a rather banal realization: business leaders are people too. And humans are "programmed" to look for patterns and connections.

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ALSO READ: SDGs: Bullshit bingo or building blocks?

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As biologist Anders Kofoed writes in his thought-provoking book "The Meaning of Life", this ability may have been crucial to our survival as our species evolved on the savannah. It was clever that we associated a scuffle in the grass with danger. The problem is that this ability also leads us astray. For example, rain dancing has been an integral part of many cultures for centuries. Today, we know that it probably has a limited effect on the formation of low pressure.

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Misdirection occurs when we forget the difference between coincidence and causation. That is, when we forget to ask ourselves what really drives change, development and progress for our organizations - and what we just think works because it looks like it does.

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It happens every day - to all of us. Today, the rain dance makes us smile a little. But how many marketing departments can explain the exact causal link between a bus advertisement and increased sales of hair shampoo?

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I'm still surprised how often I come across companies that base their strategy on everything from IT systems to marketing campaigns, without being able to provide a deeper, data-based, logical explanation of why it will actually help or how it will lead to the desired business goals.

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Warning: You won't be popular

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The biggest risk of strategies based on hopes and assumptions is not the potential waste of resources. Although that can be bad enough. The real danger is that as a business leader, you only realize that your assumptions are wrong when it's too late. If the rain dance doesn't work when the drought hits - you're screwed.

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READ ALSO: Hello top manager: Give the middle manager a fair chance

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That's why you need to catch "assumption sickness" in peacetime - before action is urgently needed. There are many things you can do, but first and foremost you need to create a culture in your company where you dare to ask each other fundamental questions before launching new projects or making major strategic decisions: "Do we know this or do we think this? How do we know it? Do we have data to back it up?"

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Warning: You won't become popular by asking for causal relationships. Soon others around you will probably think it complicates everything. You may also find that things move too slowly when assumptions have to be replaced with knowledge before you can move forward. But the more frustration it causes, the more it's a sign that it's necessary. And the sooner you get started, the more likely you are to replace the rain dance with an irrigation system.

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This column is published on Jyllands-Posten's Finance and in Jyllands-Posten, Business on November 3, 2022.

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