How to avoid risk without ignoring opportunity
Determining what is a real opportunity versus a speculative risk is a challenge. Over time, this becomes intuitive. In the meantime, following are a few questions to mull over:
1. What aren’t my competitors (especially my bigger competitors) doing this already?
2. Am I justifiably ahead of the curve or is there a flaw in the idea?
3. Am I evaluating the right numbers?
4. Am I in love with the opportunity so much that I am overly optimistic about the viability?
The first question is particularly important—especially if you consider the possibility that there are reasons competitors are not doing it, but it may yet work for your organization. These reasons may include:
1. You have unique expertise.
2. Success requires a strong industry reputation that you have, but your competitors do not.
3. You have researched and uncovered a niche market and are confident there is a need.
4. You have access to channel partners that competitors do not.
5. You have a patent, etc.
Learning from the failures of competitors can be very valuable. When a competitor takes a risk and fails, it’s unlikely that the same competitor is going to take the same risk again. This opens the door for you with a ready-made product/service that may just need a little tweaking. If you can figure out what went wrong and a way to remedy it, you can create a more marketable version with very little risk.
Although organizations need to make decisions and pivot quickly in order to be successful today, there needs to be a framework in place that allows them to do this safely.
In the past, organizations were either told to create and build on a sustainable advantage or experiment continuously and fail quickly (if necessary). It is a false choice. In The End of Competitive Advantage by Rita Gunther McGrath, she writes, “Organizations that get this right are shape shifters. You don’t see dramatic downsizings or restructurings, you don’t see people sticking with one role for long periods of time, and you don’t see confusion about the company’s evolutionary path. Instead, there is a consistent reevaluation of current activities with the understanding that some may need to give way to new ones.”
In other words, think in terms of high-speed low-risk evolution instead of high-risk revolution.
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