This week, our theme is "Getting Ready For Almost Anything: Opportunities and Risks". I really struggle with these terms in relation to business models. I am never really sure what that means specifically, as all endeavors come with opportunities and risks, they are just a facet of life, nothing unique to the entrepreneurship. All people should be attune to the many opportunities life presents and the inherent risks often found in them. Opportunities and risks (O&R) are a natural part of life, and thus businesses are not immune to them. But how one manages and reacts to O&R is what will translate into ultimate business success or failure. Moreover, reactions to O&R are highly socio-personal, and thus an entrepreneur's attitude can be the game- changer. The following discussion will analyze O&R separately in this regard.
Opportunities, in business, are almost always about differentiation- you have some opportunity to set yourself apart from the pack. Maybe that is in hiring the hottest computer science talent on the block or getting an exclusive shipping partnership with FedEx. Or maybe you have found a new niche market to corner, or can file for a patent on a technological breakthrough. Whatever the opportunity is, in business, it is usually "an opportunity" because your competition does not or has not also had it. Thus entrepreneurs should always be keeping an eye on the actions of their competition. Big moves from competitors often signal the opportunities that have been presented to them, and being able to read and interpret these moves like tea leaves can reveal the opportunities you need to differentiate your business in turn.
"Risk" however has become almost synonymous with "failure" in business circles. Hushed voices whisper around water coolers, "Well, it was a very risky move" or "He just didn't want to risk it". Risk is often not interpreted as such until after the resulting failure, and in retrospect, the decision we thought was a "sure thing" was clearly fraught with danger. Thus, entrepreneurs need to be forward thinking, and when presented with an opportunity, need to take a moment's pause to consider, "What is the risk here?" Moreover, preparing contingency plans can help reduce that initial risk. If you are presented with an opportunity, before you decide on the next step to take, ask yourself, "If I do this and it doesn't work out, then what will I do?" Knowing what you plan to do in the crisis moment will greatly reduce your risk of making a "triage decision" (a sudden desperate rescue move that rarely pans out), and ease the stress associated with hectic transitions.
Furthermore, tolerance for risk is highly personal. Some people are very risk-averse, like myself, and rarely take advantage of big opportunities unless we can "see no down side", while others are willing to jump in blindly and deal with the consequences later. Knowing how you personally react to risky scenarios will help you better understand your own business model and decision reasoning, but will also help you be more aware of how your business actions are interconnected. Risk is really a network of small decisions, not big milestone choices. We often perceive risk this way as it only gets our attention when something is very risky, whereas the small things we do every day are far more likely to shape our overall outcomes. This can be explained with a simple analogy of driving a car. Everyone knows not to drive a car after drinking alcohol- this behavior is risky and we focus a lot of community energy on reducing this risk. But a study by Progressive Insurance (an automotive insurance firm) found that "52% of reported crashes occurred 5 miles or less from home, and a whopping 77% occurred 15 miles or less from home." (https://www.progressive.com/newsroom/article/2002/may/fivemiles/). Thus our daily decision, sometimes multiple times a day, to put our seat belt on EVERY TIME we get in the car is far more risky in terms of potential outcomes than we normally perceive. Entrepreneurs who understand the differences between real and perceived risk, and their personal reactions to it, will stand a much better chance of "out maneuvering" their competition.
In closing I will reference a book from Tom Panaggio, a serial entrepreneur and former race car driver called, " The Risk Advantage: Embracing the Entrepreneur's Unexpected Edge" (http://www.amazon.com/The-Risk-Advantage-Entrepreneurs-Unexpected/dp/1938416449). In it he describes that entrepreneurs "embrace two essential risks to every opportunity – decision and change. First, they decide on a direction to jump, and then they make adjustments and innovations to keep going and growing.". This reiterates that opportunities and risks are inherent in our everyday business activities and small decisions- it is not only these large, breakthrough moments as we often perceive. Entrepreneurs are best served when they are acutely aware of these "micro-opportunities" and can exploit them with minimal risk at the expense of their competition.
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