Let Go of Something and You Might Get More of Something Else: A Practical Guide to Risk-Reward

“Without risk, there is no growth.”

My dad sprang this on me when I was in high school. As a lifelong educator and administrator, he was full of lots of little nuggets like this for my brothers and me while we were growing up. Not that we always listened to him -- especially as teenagers -- but he sure was right about this one.

Distinctly challenging times like these bring risk-reward front and center to much of what we do. Sometimes it’s by our choice, sometimes not. Either way, it’s about letting go of something in order to try and gain more of something else.

Leaders and innovators who initiate risk-reward actions put themselves out there just by deciding to take the risks in the first place, as there may be no blueprint or past performances to rely on. Conversely, when conditions are thrust upon them that are not of their choice, they must rise above and be strong enough to navigate their teams through the rough water so as to survive. Indeed, it’s a paramount leadership decision to know when and how to let go of something for the prospects of a greater gain.

Lessons from two world-renowned brands

Let’s look at this proposition through the lens of two iconic brands that at first glance don’t have a lot in common: the Beatles and Coca-Cola. In very contrasting ways, both world renowned brands offer lessons of achieving substantial risk-reward success. One route was voluntary, the other was by necessity. Both routes can be applied to other businesses and industries, including yours.

The Beatles accomplished something very few enterprises in any industry can do successfully. They willingly moved away from a formula that created a hugely successful world phenomenon known as “Beatlemania” and subsequently progressed into a significantly different style of their own making. In doing so, instead of losing their early fans who loved their original style, they actually grew their popularity -- and gained even greater success in the process.

How did the Lads from Liverpool accomplish this? They were bold, brash and confident in their musical abilities. They didn’t follow any Top-40 formula. After their initial slew of hit records scorched the charts and established them as worldwide icons, the Beatles decided to risk their early sound in favor of evolving into more sophisticated music. Band members John Lennon, Paul McCartney, George Harrison and Ringo Starr bravely wrote and recorded terrific new music that bore very little (if any) resemblance to their initial work. It was a pretty risky move in its day, cutting across the grain of the time-honored axiom: “Don’t screw with the formula.”

The Fab Four wasn’t interested in being stuck in their musical past. As Lennon famously said on a TV interview, “I didn’t want to be singing ‘She Loves You’ when I’m thirty.”?

The Beatles gave their fans a new musical experience with each successive album, constantly taking artistic chances and thus challenging their own status quo. They didn’t wait for the music industry to change them. They got out in front and changed the industry. ?The band’s risk-reward gamble paid off handsomely. Regarded to this day as the most influential band of all time, the Beatles still reign as the best-selling musical act in history, more than 50 years after they disbanded.

Most people are risk-averse – Time for true leaders to step in

While the Beatles willfully brought about their own measure of risk, it was quite a different story for the rest of us when Covid-19 turned our planet upside-down. We didn’t get a choice -- risk suddenly enveloped much of what was around us. Since early 2020, we’ve all had to let go of certain things in the way we live, work and cope. And the waves of change keep coming, pushing the need for innovation and risk-taking.

As we’ll see here from Coca-Cola, out of crises true leaders and serious innovators evolve. They know that in order to survive in tough times or create positive change you need to take risks, as painful as that sometimes may be. And that magnifies the idea that leadership is not a title or a rank. It’s more a way of thinking, operating and grasping emotional intelligence. True leaders are in very short supply because risk is clearly not for everyone. A recent study by the University of Chicago reveals that as many as 99% of people are risk averse.

“Have a Coke and a Smile!”

Remember that line? It was once Coca-Cola’s marketing slogan. But there weren’t a lot of smiles around the company when Covid-19 hit. We can learn a valuable lesson from the beverage giant in how embracing huge risks seriously tested -- and also revealed -- true leadership amid the pandemic. A recent business channel interview of CEO James Quincey offers an intriguing look into the elements of risk-reward, change and innovation:

“The biggest risk was riding that pandemic moment of the lockdowns, the second quarter of 2020,” explained Quincey. “We started to focus on ‘OK, this crisis is going to end. And when this crisis ends, do we want to be known for just managing through the crisis, or do we want to be known for having emerged stronger and being ready to have much more growth when the crisis ends?’”

Subsequently, Coca-Cola made the tough decision to drop one-half of its portfolio (“the weakest half”, as Quincy called it). Yes, you read that correctly -- fifty percent of Coca Cola’s product lines were lopped off. They also changed the ways in which they worked, letting go of many longstanding procedures. They shifted almost immediately into the future.

Quincey also coined a veritable battle cry for risk-reward thinking: “All that (eliminating the weakest products) has given the organization more belief that risks CAN be taken. We tend to over-research things and hesitate because something could have gone wrong. We forgot about the idea that something could have gone RIGHT!”

“We humans are programmed to over-weight, by far, things we lose versus things we might gain,” he continued. “Risk-taking and innovation is not to let the fear of what you’re going to lose obscure the possibilities of what we might gain.”

We can’t be so afraid to move forward that we freeze in place

While there is no guarantee that you’ll hit gold with every risk-reward effort like the Beatles and Coca-Cola did, resilient innovators pick themselves up from setbacks. After all, what's the alternative? Sometimes there isn't a good one. Trial-and-error is a big part of taking risks for the sake of progress. Thomas Edison, who held over 1,000 patents, explained his temerity this way: “I have not failed 10,000 times. I’ve successfully found 10,000 ways that will not work.”

The hospitality business, for example, was particularly rocked by the pandemic. According to The Wall Street Journal the industry lost almost 4 million people – a quarter of the leisure-and-hospitality workforce – who lost their jobs in the first 12 months alone of Covid-19. Overnight, that entire industry was flipped on its head. Change by necessity was de rigueur for survival.

A restaurant chef I know faced the hard realities of the pandemic. As her business began to crater under the weight of Covid-19 regulations and lockdowns, she took drastic steps to keep her business alive. She began re-working many of her time-honored recipes to accommodate the changing tastes and dining habits of her patrons. She left behind much of what made her successful in order to embrace evolving dining preferences and conditions. Her risk of letting go subsequently opened up a new fan base for her menus and thus became her recipe for her next-wave innovation.

The chef is not alone. What is borne from necessity often ends up becoming the new standard. As a recent article in NerdWallet.com points out: “Many small-business owners have embraced pandemic-era trends for the long haul — not just to adapt to public health guidelines, but to diversify and grow revenue... Many found that changes in their business models have helped their companies grow and they are likely to continue with those services.”

Don’t make risk-reward decisions in a vacuum

Risk-reward, however, isn’t recommended as a “close your eyes and jump off a cliff” move, and such decisions shouldn’t be taken lightly. Analysis and consideration of the collateral fallout and the up-side/down-side potential is critical. There are hurdles to overcome, levels of acceptable risk to be calculated. The road to innovation is rarely just paved with roses and lavender. For example, naysayers in organizations are often extremely tough customers when it comes to selling risk-reward propositions. This can lead to internal struggles between the opposite factions of “We can’t” vs. “Why can’t we?”

Innovation comes with a price. There are vitally important factors on several sides of an issue that need to be carefully considered, such as people, planet and profits. Decisions affecting those elements can be far-reaching and must be a part of an organization’s innovation equation. The element of change can be a cruel teacher as much as it can be a breath of fresh air.

There’s a saying that “decisions made in a vacuum suck.” That’s why smart leaders make it a habit to seek honest, straightforward input from trusted advisors and other resources, such as front-line team members and customers. Ask your own set of “Round Table” advisors questions like these:

What are we risking?

What rewards we are trying to achieve?

Does it make sense to do this (reality check)?

What will we need in order to make this happen successfully?

While input from others is helpful in the analysis it’s leaders alone who must accept responsibility for the decisions and results. Leaders must lead and direct to keep the process moving forward so things don’t get mired in drawn-out debates and paralysis by analysis. Windows of opportunity close quickly.

It’s very much like a professional golfer, whose sport is all about risk-reward. The golfer consults with his or her caddie before the next shot in order to get their input on the nuances of the hole being played. Though they value the strategy tips in assessing the situation, the golfer knows that the actual execution of the swing -- and the result -- is all their own.

What about applying this for your team or business?

You don’t have to be the Beatles, Coca-Cola or a restaurant chef to make a successful go of this. The risk-reward concepts expressed here can be scaled and applied across a diverse array of organizations, large or small.

Let’s start with a simple yet profound truth, what I refer to as “Rule 1 and 1A of Business”: The two primary goals of a business are the acquisition and the retention of customers. Everything else you do must support those two functions, because without one or the other you can’t have a successful business. It’s that simple. If your risk-reward initiative doesn’t somehow improve or solidify these two goals, then why are you doing it?

Once that is established, I recommend that you next focus your initial risk-reward efforts on improving four critical components that greatly impact your business: Customer satisfaction, service/product excellence, employee engagement and sales numbers. If you shine in these first three areas, the fourth one usually happens.

Whether out of necessity for survival like Coca-Cola or the innate desire to grow like the Beatles, embracing risk and letting go of something for the prospects of getting more of something else is really a process, not an end.

And as John Lennon once said, “Everything will be okay in the end. If it’s not okay, it’s not the end.”

?----------------

Coaching questions to consider:

*????What risks do you think need to be taken in your business or organization, such as ways of doing business, delivering your products/services, customer care, employee engagement, etc., in order to innovate and thrive moving forward into the endemic?

?*???Have you assessed those risks in an analytic way such as best-case/worst-case scenarios? What level of risk are you willing to accept to achieve your goals?

?*???What elements of your organization do you have available that will enable this risk or pursuit of innovation to actually happen? Can your infrastructure, technology, processes and team members ("bench strength") handle the new processes and changes that are expected to take place?

?

?