Tuesday, November 08, 2005

Here’s a Risk Brew for You

Strategy guru Gary Hamel has noted that strategy is “easy” only if you copy someone else’s, but as he would agree, that’s potentially the riskiest strategy of all. Imitators play catch up. Yet despite all our affection for talking about innovation and entrepreneurship, we are often helplessly risk-averse, even when we’re dissatisfied with the status quo. We fear the negative consequences of risk, even as we ignore the even more negative consequences of staying the course.

Is it that we lack courage? Sometimes. But even though courage is necessary, it’s not enough. To our detriment, we can courageously pursue a risky but stupid path. Classic author Evelyn Waugh once noted that “one cannot judge the value of an opinion simply by the amount of courage that is required in holding it.”

I’ve learned that innovative leaders prudently cut their risk by combining courage with preparation. Dallas Mavericks owner Mark Cuban, for example, says he consciously used this mix of courage and preparation in successfully launching high tech companies like MicroSolutions, Broadcast.com, and HDNet. In the Silicon Valley, the successful entrepreneurial start-ups that I’ve seen over the years were launched by leaders who were courageous enough to pursue an unchartered path and prudent enough to develop an operationally disciplined, financially-solid game plan to cut unnecessary risk in execution.

The operative phrase above is “cutting unnecessary risk”. There’s no way to cut all risk if you’re breaking new ground in products, service, marketing or distribution. What all this means, says Ralph Shrader, CEO of consultancy Booz,-Allen & Hamilton, is that “leaders need to become comfortable with imperfect data” when making decisions about which markets to enter, which projects to support, which suppliers to enlist, which acquisitions to make, which assets to unload, and so on. Why? Because “time was, when faced with a decision, the chief executive officer and board of directors could set up a task force to look at the options for a matter of months. Today, failure to decide and act quickly can pre-empt options altogether.”

It’s even more subtle than that. Air Force Colonel “Hoot” Gibson notes that you might think that you’re in great shape if you operate in a zone of rosy 100% certainty. But leaving aside the fact that in life there’s no such zone, the reality is that if you believe you’re in a 100% certain zone, you’re probably in a perilous zone of routine and complacency. Says Gibson: “90% is inside most peoples’ comfort level, and 80% doesn’t induce much sweat.” That means that the closer you try to operate in a near-100% certainty zone, the less breakthrough action you’ll be motivated to take. It sounds odd, but rapid response, imagination, and entrepreneurial initiative happen when leaders sweat a bit as they deliberately go beyond their comfort level.

In short, you’ll never have all the data you need. Excellent management is a rolling process of intelligence and action: fast, conscientious intelligence-gathering followed by disciplined tries, experiments, pilots, project interventions, betas, and the like, all of which provide yet more data for the next round of action.

I want to add one more ingredient to the cocktail: love. Even before he mixes his shot of preparation and courage, Mark Cuban starts the potion this way: “First, I ask myself if this is something that I would enjoy doing. Find something you love to do.” He’s right. If you love what you do, you’re more likely to make it successful, and if you fail, then as Cuban says, “at least you love going to work.”

So there’s your risk brew: courage, preparation, beyond-comfort sweat, discipline and love. Are you willing to imbibe?


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