Counterfactual Thinking During Strategy Design: 7 Questions to Build a Better Strategy

Why Counterfactual Thinking During Strategy Design Is Critical
We know from hundreds of strategic planning retreats that bold strategic ambitions require leaders to make consequential choices about an uncertain future.

• Which customers should we prioritize?
• Where should we make our big strategic bets?
• What capabilities will differentiate us?
• What should we stop doing?

Project postmortem analysis tells us that strategic decisions are often built upon implicit and explicit assumptions that are mistaken as facts. Counterfactual thinking during strategy design helps leaders:

• Unearth
• Discuss
• Challenge

— those assumptions before committing significant resources to strategy execution.

Counterfactual thinking asks a deceptively powerful question:  What would need to be different for our strategic choices to be wrong?

Counterfactual Thinking During Strategy Design Challenges Assumptions

Every strategy is built on assumptions about marketplace realities, cultural norms, and organizational capabilities. Those assumptions matter because they shape the strategic choices leaders make about where to play, how to win, and what capabilities are required for success.

Our organizational alignment research reinforces a deceptively simple truth: good assumptions create the foundation for good strategies; flawed assumptions create the foundation for flawed strategies. Even the most compelling strategic plan can fail when the beliefs underneath it do not reflect reality.

For example, a recent client looking to create the strategic clarity required to drive high growth assumed that:

• Customers will continue paying a premium for superior service.
• Competitors cannot easily replicate our differentiation.
• Artificial intelligence will augment rather than disrupt our offering.
• The organization can hire and build required capabilities quickly enough to meet high growth targets.
• Market demand will continue to grow.

Instead of simply asking whether those assumptions seem reasonable, counterfactual thinking during strategy design asks leaders to imagine credible conditions under which they would not be true.

Action learning leadership development participants know that distinction matters.  Asking different — and often more challenging — questions enabled the executive team to uncover cultural and capability barriers to growth that people had initially been hesitant to discuss. And they are not alone.

Research on confirmation bias shows that people naturally seek, interpret, and give greater weight to information that reinforces what they already believe. In a classic Stanford study, researchers Charles Lord, Lee Ross, and Mark Lepper found that when people were presented with mixed evidence, they tended to interpret the same information as supporting their existing positions.

Even high performing leadership teams are susceptible to the same dynamic. Once leaders have invested significant time, energy, and credibility in a preferred strategic direction, they can unconsciously ask questions that validate their assumptions rather than challenge them. The right questions disrupt that pattern — exposing hidden assumptions, surfacing uncomfortable realities, and creating space for better strategic choices.

Counterfactual Thinking During Strategy Design Creates Better Strategic Choices
Imagine an executive team believes its competitive advantage comes from delivering highly customized solutions.

A traditional strategic question might be:

• How can we expand our customized solutions to drive more revenue?

The problem is that the question already assumes customization is the right path forward. Counterfactual thinking challenges the assumption itself:

• What if customers increasingly value speed, simplicity, and lower costs more than customization?

That one question changes the strategic conversation. Instead of simply optimizing the current strategy, leaders must examine whether the underlying assumptions still hold. What customer evidence proves that customization creates meaningful value? Which customer segments value it most? What would have to be true for a more standardized offering to outperform the current model?

The objective is not pessimism or second-guessing. It is strategic rigor — deliberately testing what leaders believe to be true before committing resources, reputations, and organizational energy to a course of action.

Consider a recent board discussion about how much to charge a partner for access to a valuable sales territory. The conversation initially centered on what the company wanted to charge and how much value the territory represented to them.

The breakthrough came when leaders reversed the perspective and asked:

• If we were the partner, what would we be willing to pay — and why?

That counterfactual question reframed the discussion. Leaders began examining the economics, risks, incentives, and potential upside from the partner’s point of view. Instead of simply negotiating for the highest possible price, they started designing a structure that created compelling value for both parties.

That is the power of counterfactual thinking during strategy design. It moves leaders beyond defending the strategy they already have toward discovering the strategic choices that make the most sense.

Counterfactual Thinking During Strategy Design Helps Prevent Overconfidence
Counterfactual thinking is closely related to the concept of a premortem developed by psychologist Gary Klein. Instead of asking whether a plan might fail, participants imagine that failure has already occurred and identify plausible causes.

Research published by Deborah Mitchell, J. Edward Russo, and Nancy Pennington found that imagining an event had already occurred increased people’s ability to correctly identify reasons for future outcomes by about 30%.

Applied to strategy design, leaders might ask:

• “It is three years from now, and our strategy has failed badly. What happened?”

That framing can expose vulnerabilities that conventional strategic discussions overlook.

7 Counterfactual Questions to Stress-Test Your Strategy
Before finalizing your strategy, ask some questions like:

1. What must be true for our strategy to succeed?
2. Which assumptions have the weakest supporting evidence?
3. What if our most important assumption is wrong?
4. What could competitors do that would undermine our advantage?
5. What customer behavior would make our strategy obsolete?
6. What technological, economic, or regulatory shift could change the game?
7. What evidence would tell us that we need to change course?

The strongest strategy teams do not use these questions to endlessly debate possibilities. They use them to identify critical assumptions, strategic vulnerabilities, early warning indicators, and intelligent contingencies.

The Bottom Line
Counterfactual thinking during strategy design helps leaders move from asking “Why will our strategy work?” to the more demanding question of “Under what conditions will our strategy work — and what would cause those conditions to change?” That shift can expose hidden assumptions, reduce confirmation bias, improve strategic choices, and create greater organizational resilience. Great strategies should not merely sound compelling in the boardroom. They should survive rigorous challenges from customers, competitors, changing market conditions, and leaders willing to question their own thinking before reality does it for them.

To learn how to challenge assumptions, avoid strategic blind spots, and make better strategic choices, download Should You Facilitate Your Own Strategy Retreat? 3 Warning Signs You Shouldn’t

by Tristam Brown: CEO

Tristam Brown is an executive business consultant and organizational development expert with more than three decades of experience helping organizations accelerate performance, build high-impact teams, and turn strategy into execution. As CEO of LSA Global, he works with leaders to get and stay aligned™ through research-backed strategy, culture, and talent solutions that produce measurable, business-critical results. See full bio.