When Risk / Reward is in Your Favor

By David Capece, Managing Partner, with exerpts from Seth Godin’s Blog

Entrepreneurs, and especially pioneers, often travel unknown roads.  During the journey, we face opportunities and challenges in pursuit of meaningful rewards.  During good times, the rewards take center stage, and we are often tempted to take on more risk.  During the lean years, risks become the central talking point, and we become scared of taking any risk.

A recent article by Seth Godin points out that not all risks are created equal.  Instead of shunning all risks, consider the pros and cons (upside and downside), and take on risk at a pace that is appropriate for your organization.  While we appreciate a financially conservative and responsible approach, if you are thinking creatively, there will likely be some smart calculated risks that you can take to move forward.

Since football season is right around the corner, lets consider various approaches to offense.  The most conservative style of football typically employs a run offense which protects the ball and makes progress a few yards at a time.  While many teams have thrived by featuring the run, they still need to pass.  In this style of offense, you might want a savvy quarterback who is reliable in making smart plays and knows what it takes to get a first down.  Even in the most conservative offense, you need to do more than just run the same basic plays. Great offenses typically have a multi-dimensional attack that can hit you with the run or pass, and are good at converting on risks.  While great offenses run the risk of interception, overall they are able to reap significant gains relative to the risks that they take.

Notice how in each scenario we talk about being savvy and converting on risks.  As your first step, you need to get the right leaders in place.  Then empower them to lead the charge in taking on small risks first.  As you reap rewards, you can pursue further risks to transform your business.  At each step, be sure to consider many options and choose the best risk / reward opportunities.

Exerpt from Seth Godin’s Blog

It’s easy to to adopt the policy of avoiding risk at all costs, that whenever possible, the products you launch or the engagements you have should be flawless and without downside.

Here’s the problem: in most endeavors, a small increase in risk can double the reward. It’s the second doubling of reward that brings serious risk with it. But the first leap is relatively painless.

[See Seth Godin's risk / reward chart]:  Going from point A to point B might feel scary, but rationally, it’s not. Doubling reward again from B to C, though, brings significant incremental risk. It’s this second doubling that gets you through the Dip, that leads to a breakthrough, that makes you remarkable.

But I’m not even talking about that. I’m just hoping you’ll warm up by making the tiny leap of avoiding all risk. Riskless is hardly worth your effort.

Photo by Mono Bustos from Stock.Xchng

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