Primary and Derivative Assumptions

Besides the distinction between implicit and explicit assumption the Crital Assumption Planning method distinguishes two other types of assumptions: primary and derivative assumptions.

Primary assumptions are assumptions about whom the customer is, what he or she wants, how dense the customer population is, what they need and what the customer sees as the alternatives to your product. The primary assumptions define the foundation of a company.

Derivative assumptions are derived from the primary assumptions. Take for example a sales forecast. The numbers in the forecast are based on assumptions about customer demand, the amount of clients a sales person can visit in a week, the availability of the product and so on. Other examples of derivative assumptions are: the revenue forecasts, cash flow outlook and the return on investment.

The hypothesis in CAP is that knowing your primary assumptions will help you to better test your assumptions. CAP furthermore states that lots of strong statements stated in a business plan can be split up into primary and derivative assumptions; see callout 2 for an example.

By searching for the primary roots of the derivative assumptions or statements, you can identify the critical issues of a plan more rationally and design a sound test plan to prepare yourself for the unexpected.