Balancing Risk vs Reward

“The biggest risk is not taking any risk... In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks” Mark Zuckerberg?

Mark Zuckerberg’s quote is a very apt way of starting today’s Virtual Coach conversation. In business, every decision requires a trade-off between risk and reward. Whether launching a new product, entering a new market, or investing in technology, balancing these elements is crucial to achieving long-term success. Many of the world’s top brands were borne out of some heavy risk-taking which, although surely nail-biting for the Founders at the time, have led to numerous rewards. ?

An article in Forbes published in 2022 cites, “Managing and navigating failure is integral to starting a new business venture..... Yet, nearly half (42.6%) of entrepreneurs fear failure, despite evidence that business owners should be comfortable with failure and learn from the experience”. ?

Reducing the Fear?

How can we reduce the fear associated with taking risks and learn to embrace this process more fully??

1. Understand the Stakes: high-risk ventures, such as entering untested markets, promise potentially high rewards but could result in catastrophic losses if they go wrong. Lower risk ventures may deliver steadier returns, but usually on a much smaller scale. If we understand the stakes and align them with our business goals, this will aid our decision-making.?
2. Data Driven Decision-Making: information makes decisions a little easier. Conducting market research, analysing trends and using tools such as SWOT and PESTLE analysis provides us with data that informs decision making and helps us to balance risk vs reward?
3. Diversify to Mitigate Risk: the age-old phrase, “don’t put all your eggs in one basket” rings true here. By exploring multiple revenue streams or phasing roll-outs for products, we are able to spread our risks and ensure that failure in one area does not jeopardise the whole business.?
4. Embrace Strategic Flexibility: we all acknowledge that the business environment can change rapidly and sometimes quite unexpectedly, and these changes are often out of our control. To mitigate risk, be prepared to flex strategy and pivot in response to market changes.?

High-Profile Risk-Takers?

The theory is all very well, but it is made more believable when we study some of the high-profile business leaders who have built their brands after taking some calculated risks:?

Jeff Bezos (Amazon)??

Jeff Bezos left a stable and lucrative job on Wall Street to launch Amazon in 1994. At the time, the internet was still in its infancy, and the idea of an online bookstore seemed risky and unconventional. However, Bezos saw the long-term potential of e-commerce and focused on scaling Amazon into a platform that revolutionised retail – a calculated risk that paid off.?

Elon Musk (Tesla, SpaceX and more)?

We have all heard of Musk’s various business ventures, but have we stopped to consider that the brands he is most synonymous with – Tesla and SpaceX – are industries that it was once thought were impossible to disrupt? He has been widely acknowledged as ‘pushing the boundaries of innovation’, which inevitably involves multiple risks, and has reaped the rewards.?

Sara Blakely (Spanx)?

With no prior experience in the fashion industry, but having identified a gap in the market for a revolutionary shapewear product, Sarah Blakely risked her small savings pot of $5,000 to research and develop her hosiery idea. She personally pitched her product to hosiery manufacturers and retailers, got the product patented and trademarked, and oversaw Spanx’s rise to a multi-million-dollar business.?

Lesser-Known Risk-Takers?

Sometimes it is difficult to relate to the stories of the well-known billionaires as they seem so far removed from our daily lives. For this reason, we want to highlight a couple of lesser-known risk-takers too:?

Chris Barton and Philip Inghelbrecht (Shazam)?

Chris Barton and?Philip Inghelbrecht?took a huge risk by co-founding Shazam, the music-identification app, in 1999, long before smartphones or app stores existed. The technology required advanced audio recognition software, and there was little certainty about consumer adoption. Despite these challenges, Shazam innovated in line with technological advances and became a globally recognised app that was ultimately acquired by Apple for a reported $400 million in 2018.?

Hamdi Ulukaya (Chobani)?

Hamdi Ulukaya, a Turkish immigrant to the U.S., took a major risk when he purchased a shuttered yogurt factory in New York in 2005 using a small business loan. At the time, he had no experience in the dairy industry. Ulukaya focused on producing high-quality Greek yogurt, a product that was relatively niche in the U.S. His risk paid off - Chobani became a billion-dollar brand and revolutionised the yogurt industry.?

Tristan Walker (Bevel)?

Tristan Walker identified a gap in the market for grooming products designed for men of colour, particularly those with coarse and curly hair. He founded Walker & Company in 2013 and launched Bevel, a shaving system tailored to these needs. While the venture was a bold move in an already crowded industry, Bevel gained a strong following and was acquired by Procter & Gamble in 2018.?

All of these stories highlight the power of calculated risks, persistence and innovation. Whilst all the people cited above have faced uncertainty, challenges and doubt, their vision, determination and willingness to take risks sets them apart. ?

What is your vision for 2025? What risks are you weighing up?

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