Risky Biz
Have I ever told you about this paper I wrote in college? The topic we were supposed to discuss was something like "how technology negatively impacts modern society." I started writing the paper, got about two pages in, saved it, and went to bed. At the time I was working on a three year-old desk top that often had a mind of its own. When I opened the file in the morning, what I got was about half of what I wrote the day before with a whole lot of computer character gobbly gook scattered throughout. Being technologically illiterate, I had no idea what happened or how to fix it, and at first was quite peeved. But then I realized that technology was negatively impacting my life, so I left the paper as it was, added a quick conclusion, and two days later, handed it in (mostly because I was lazy). This was pretty risky. The professor was a pretty intense dude. But I decided that a few things were on my side. I was one of the few people who regularly contributed in discussions, always came to class, and had even had coffee with him on a couple occasions. I got the equivalent of an A+ and the professor used my paper as reference in his next lecture.
I did this sort of thing a lot in college, but I didn't do it ALL the time because I knew some professors wouldn't accept rules being broken. I had to manage the risk on a case by case basis. That's how I, at least temporarily, succeeded.
Managing high risk in business is also how good companies stay on top. Some companies avoid risk altogether; others blindly take on too much risk. But the really great companies see risk as growth opportunity and attack high risk with a smart game plan. This is what Adrian Slywotzky writes about in his new book, The Upside: The 7 Strategies for Turning Big Threats into Growth Breakthroughs.
Blockbuster is stupid. As they were relying on the huge sums of late fees that drove their business, Netflix was creating a model that was customer friendly and easy to use. They thought it would be risky to completely overhaul their business model while the competition was changing the industries business model altogether. Now they're struggling to catch up. This is an example of a company not seeing risk as a growth opportunity. Netflix offered them a model that the very easily could have adopted right away. It's what they ended up doing anyways, but way too late. They probably could have ponied up some dough and bought Netflix outright.
As Adrian says, your competitors can also be your greatest enablers of profit. Stop competing yourself to death! The key is to know when to compete and when to collaborate.
One of the companies featured in the book is music and entertainment retailer Tsutaya. When their customers all of the sudden shift their habits or preferences, the company doesn't fret like most companies do; they see it as a growth opportunity. Slywotzky's point is that companies should, "Shape and exploit risk, don't be shaped by it. Become a knowledge-intensive business and continually increase the knowledge gap between yourself and rivals." Tsutaya is able to shift with their customers because they are ready for risk; they have studied the market and all the possibilities. They are informed, and when they see customer behavior starting to change, they find the finish line before their rivals, and for that matter, even their customers.
Reading The Upside is a great way to find new ways to help your company grow and stay one step ahead of the other guys and gals by smartly approaching risk. Are you taking advantage of risk?
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