Taking Monumental Risks

Show Notes - Element 3 Taking Monumental Risks

Taking Monumental Risks seems like both the stereotype outsiders have about entrepreneurs as river boat gamblers and insiders have about taking calculated risks. I want to shake the view my colleagues have - here is the logic:

Most people have low tolerance for risk, except entrepreneurs. However, the risk/reward of being self-employed or building a business saps even our risk tolerance. Most business owners, once they have taken the plunge, begin to play it safe - or too safe.

Given the numbers we shared yesterday about in 2 years 1/3 of startups are profitable, 1/3 break even, and 1/3 are upside down, and after 4 years - 50% are gone, it is easy to understand.

Think of it this way, imagine you went a presentation I was giving on fast growth and there is 1,000 people in the audience. On your name tag is a red dot, and at the very beginning of the session I have everyone stand up, then ask everyone with blue dots to sit down and 1/3 take their seats. This represents startup failures after two years. Next I ask everyone with yellow dots to sit down leaving only 300 remaining - successes after four years. Finally I ask everyone that doesn't have a red dot to sit down leaving you as the only person in the room of 1000 standing. That is how many companies make it from start up to a billion in revenue.

Why?

• Vision Too Narrow - the don't want to grow (lifestyle entrepreneurs) or unable to believe it is possible
• Inability to Raise Capital - all the investments required to grow the firm cannot be a by-product of sales, some angel investors and/or venture capital will be required
• Ability to Handle High Levels of Risk and Uncertainty - just starting a business and persisting through the early years expends all of the risk tolerance

So let's deal with this paradox of Taking Monumental Risks, two issues to cover:

• Making the Competition Irrelevant - High Risk
  
• Changing the Odds - Risk Reduction
  

Making the Competition Irrelevant was covered in Tuesday and Wednesday shows, it is about Doing Business in a New Way and Attacking Low Cost and High Margin Opportunities. Implementing this strategy requires taking a Monumental Risk, the only option left is how to manage risk by Changing the Odds.

Changing the Odds

1. Raise the Bar - people always under estimate obstacles and over estimate the probability of success. Make those estimates and multiply by 3 - that is the reality of this under taking
2. Create a Core Team - bring together a focused, bright, multi-disciplined, and flexible group to build the future
3. Collaborative Development - team problem solving, decision making, execution on a collaborative platform
4. Collapse Deadlines - enforces a rule of not allowing "perfect" to hold "good enough" hostage by using deadlines
   
5. Double Betting - test multiple approaches to untrackable problems
6. Use Outside Subject Matter Experts - reach outside for new ideas and/or outsource non-core technology
7. Built on Existing Offer - don't make the first version of the new product/service/business entirely new, build off what you have and save the rest for the first upgrade

Summary - to be the one in a thousand requires a strategy that takes Monumental Risks, there is no other choice. Once the decision is made, you need to reduce the risks by the changing the odds by how you build, test, and roll-out the new.

You can access the MP3 @BlogTalkRadio, if you are not a listening - what are you thinking!