Dr. Pero Mićić

There are several reasons for bankruptcy. You have come to the right place if you want to future-proof your business.

Reasons for bankruptcy: Changes as drivers

Nokia had the future assumption that customers want many different cell phone models and always with a keyboard. VW, Mercedes, BMW, General Motors and virtually all other traditional car manufacturers had the future assumption that electric powertrains would not be marketable for decades, if ever. An assumption that today even threatens their very existence.

How can something like this happen even to the world market leaders?

But also restaurant owners, retailers and gym operators had the future assumption that of course guests and customers could come to them at any time.  A pandemic, as a surprise disruption of their future assumptions, was not on their radar.

In the next few years, there will be so many changes in the markets that it is highly dangerous to have your assumptions about the future only in your gut.

All your strategic decisions are based on future assumptions. Future assumptions need to be treated critically, logically and rationally. Instead, wishful thinking and emotional denial prevail.

The issue sound theoretical, but what could be more practical than the fundament of your economic existence?

Avoiding reasons for bankruptcy – through an early warning system

Yes, no one can predict the future. But there is an early warning system you can use to safeguard your company. I’ll show you how.

You will fail with your business if you misjudge the future of your market. Obviously, actually. You overestimate the demand, you recognize disruptive technologies or dangerous new competitors too late, then you can’t change course fast enough and are swept out of the market.

You are betting your company on the how good your future assumptions are about the behavior of your customers, about new competitors, about technologies or regulations.

And that’s why companies fail in the first place because of wrong assumptions about the future. That is the cause of downfall. It is the wrong future assumptions that lead to revenue problems and liquidity problems. Only then does your business become troublesome and the daily effort unbearable. If the future assumptions are bad, no matter how ingenious your strategies are and how great your resources are. You run a high risk of failure.

Most people are not aware of this problem or drastically underestimate it. Or people think the problem can’t be solved. But it can.

First of all, what are assumptions about the future? And do you have any at all?

Every person and every company has assumptions about the future. What do you mean? You don’t?

Hmm, did you build or rent an office? How long is your contract? Have you purchased any machinery? How long do you intend to use them? Have you invested in a product? When is the break even? Have you hired employees? With permanent contracts? Voilà, you are betting on the future. So yes, you too have assumptions about the future. You have several bets on the future going on. You cannot not have assumptions about the future.

And if the market then develops differently than you have assumed, you stand there with the wrong products, the wrong investments and unappropriately qualified employees. You will then be very good at what nobody needs anymore.

Future assumptions are your beliefs about what will change in your market and what will stay the same.

Your future assumptions are the cornerstones and pillars of your business and job’s existence. Or, in other words, they are the strings on which your business hangs.

With every strategic decision, you are committing to the long term. Most of them you can’t easily, quickly and cheaply undo. So you have assumptions about the future.

If you hop on the wrong train, you can’t just quickly reverse your decision. If you decide to climb a mountain that doesn’t match your abilities, you can’t just jump from one mountain to another on the way. You would first have to go back down, through the valley of crisis. Meanwhile, your competitor has an unassailable lead because his assumptions were better.

Please be aware of this. EVERYTHING, your entire company, is based on assumptions about the future! You bet the existence of your company on the correctness of your future assumptions. Logical actually.

So far, so good.

One of the most important reasons for bankruptcy? A mishandling of future assumptions!

How do most companies deal with their future assumptions? Carelessly! The following problems and dangers exist in practice.

1. You are not aware of a large part of your future assumptions. Therefore you are flying blind. How can I claim something like that brazenly without knowing you? Well, in thirty years I have seen more than a thousand companies and their strategies from the inside. If at all, future assumptions are only treated in passing, even though everything, really everything, is based on them.

Do you have an overview of your future assumptions? No? Then it’s high time.

2. The importance of future assumptions for success in career and business is largely unknown, ignored or grossly underestimated.

If you think that future assumptions are unimportant or if you believe that you just have to let the future come to you, you will not critically examine your future assumptions and therefore take far too high risks.

3. Many believe that nothing can be done about the problem of wrong estimations of the future.

You cannot predict the future, but you can carefully and permanently check the correctness of your future assumptions in the here and now. This is not fortune telling, but a very practical and existentially important early warning system TODAY.

4. Your future assumptions are emotionally colored and therefore tend to be wrong.

Not what is written on the slides are the real future assumptions of your company. But the deep-seated beliefs in your emotional limbic system. And that of your executives.

After all, if future assumptions are so much about life and death, about success and failure of your company, then future assumptions should be worked out and tested very critically, analytically and logically, shouldn’t they?

But in fact, if we look at the many tragic cases, this is almost never the case. Rather, there is a lot of wishful thinking at work.

Because the brain does not WANT to see change. It would prefer everything to stay the way it is. It ignores the signals of change.

And so we have a big problem. The quality of your future assumptions determines the quality of your future. And at the same time, your assumptions about the future are largely unconscious and then even colored emotionally. And that is conceivably dangerous.

But it is also your chance. By handling your assumptions about the future more professionally, you can safeguard your company and make it more robust against surprises than your competitors.

How can you better protect your company against surprises now? How do you create an early warning system for yourself?

As I said, it’s not about predicting the future. It’s about making your company more future-proof. By recognizing early on when your assumptions about the future are no longer correct. So that you have more time to adjust your direction and strategy.

Professional handling of your future assumptions

1. Identify your existing assumptions about the future.

Simply derive your assumptions retrospectively from your strategic decisions.

You’re developing a new product, so you assume there will be a long-term need for it. You closed a location, so you assume declining market potential. You decide to enter a new line of business, so you have a future assumption that the market will really exist. You build a new office building, so you assume that many employees will be needed at that location. You are investing in a new technology, so you assume that it will not soon be made obsolete by another.

Write down the assumptions about the future that underlie each of your decisions that you have committed to for several years.

2. Ask your colleagues and employees about their future assumptions.

But don’t tell them what your future assumptions are.

I’m pretty sure that if you look at your team’s assumptions, you’ll look at a veritable mess of thoughts. Anyway, that’s pretty much always the case when a team really talks about future assumptions for the first time.

Everyone thinks something different is important, calls it different, estimates it differently.

Please realize that the existence of your company is based on this chaos of assessments of the future, on these assumptions about the future. It decides whether you are successful, whether you will just survive or whether your company will fail.

Our clients are shocked every time they experience this.

And this is exactly what should happen to your team. The shock will be big enough that you’ll pay more attention to your assumptions about the future from now on.

3. Play a business wargame

Put yourself in the shoes of your competitors, competitors you know today and competitors you can imagine in the future.

Attack your company, try to steal orders and customers from your company through smart strategies and disruptive technologies.

In doing so, you are putting your assumptions to a severe test.

I published a guide to your business wargame some time ago, I link to it in the show notes.

4. Build yourself a radar system.

Give each member of your team the task of keeping an eye on one of your future assumptions.

Have him or her find out where there is early information about whether the assumption is still soundly based or is faltering.

Ask for information from your employees in team meetings and in between. This keeps their attention.

In this way, everyone in the team becomes a kind of sensor and constantly checks future assumptions without effort.

With these four steps, you can make your company a good deal more future-proof.

Later, you can expand your radar system. With scenarios and with a trend system. You can use our trend system for this free of charge. There is an article and a video about the trend-system to which I put a link in the description.

If it’s too tedious for you to make your future assumptions more solid on your own, we’re happy to do it together with you. We’ve been doing this sort of thing for 30 years.

Develop your robust, intelligent and motivating future strategy for your company in small simple steps.

Link: Video crash course THE FUTURE OF YOUR BUSINESS
How to rethink the future of your business. 7 videos in 70 minutes.

Have a bright future!