Friday, 22 March 2013

Risky business is good business.

Risk is not negative.

It simply means we don’t know what the future holds.

Does this mean things will turn out good or bad?  Who knows?

If all risk is negative then the future is bleak.

A business must keep moving forward or it will die.

This requires strategy.

There is no right or wrong strategy.

What there are is a set of compromises for each strategy.

The key to choosing the right strategy is to focus on the compromises.

The right strategy has the compromises that a business is prepared to accept and is ready to deal with as they arise, in order to keep moving forward.

If a business does not allow compromise to get in the way, how can the strategy go wrong?

This is what many businesses confuse with risk.

They move forward with a strategy unaware, unaccepting or unprepared for the compromises that came with it.

But it’s getting harder.

The world is changing rapidly and business has no borders.

External forces beyond our control are changing the game for many businesses.

If the game changes, so do the compromises.

Many businesses aren’t aware the compromises for continuing to do the same thing have changed and this is what’s causing them problems.

Avoiding this situation requires innovation.

If we are aware of the compromises for doing certain things, then we are aware of when they change.  However, if we now have less control over choosing a new course of action that will change the set of compromises, then we must innovate to start a new game.

So a simple recipe for success might look something like this:

  • Embrace the future.
  • Keep innovating.

What's your recipe for success?

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Richard Lipscombe said...

There are definitely right and wrong strategies. Tupperware in the 1950s had the wrong strategy until Brownie Wise introduced Earl Tupper to her Party Plan. It is highly likely that we would never have known about Tupperware if Earl Tupper had continued to sell his invention via traditional retail. His magic seal that locked and unlocked in an instant had to be demonstrated to women and that was achieved brilliantly via home-based parties.

At the conceptual level I just want to say there is a lot here about compromise. I know it is conventional wisdom that compromise is good. But I believe, and in my life I know, that to compromise is to fail. To need to compromise means you have no big picture narrative for your future success. If that is the case then you have not been actively negotiating your narrative. This is the root cause of developing poor or bad strategies that have 'unintended consequences'. Those consequences lead you negotiate as we have all been taught to do by focussing on the outcomes not the narrative. Once we focus on negotiating outcomes we seek compromises that leads us to more compromises and so on. Here is a simple example of what I am talking about. As a kid I played a lot of street cricket. These games had a lot of loose rules associated with them. Because these rules were vague they were constantly challenged. Arguments developed. Compromises were made so that we could all get on with the game. With each compromise these vague rules became more and more contestable. More and more time was spent arguing and less and less time actually bowling or hitting the ball. I found I was often cast as the 'kill joy' because I would take my bat and ball and go home. I did it because I had a bad temper. But looking back it was the right thing to do given that I went there to bowl or hit the ball not build a 'consensus' or a 'coalition of interests' around which compromised set of rules to play under. See ball hit/catch/throw ball or see wicket hit wicket with ball was a pretty good sense of my narrative for success in street cricket.

So many workplaces today are so full of compromises that they are toxic. Compromises lead us to a lesser not a bigger future. We have to learn new negotiation skills. We have to learn to negotiate the narrative not negotiate the outcome. A negotiated narrative enabled NASA to send men to the moon and bring them back alive. The lack of a negotiated narrative led NASA to compromise, to negotiate the outcomes, in every phase of the Shuttle program and this led them to fail.

Cheers, Richard.

JL of Balak said...

Hi Richard. Thanks for participating in my blog. It's fantastic that you've taken the time to do this.
Your points are well considered.
So we now have two valid points of view:
- to compromise is to fail
- to not compromise is to fail
I do believe that a business adopting a particular strategy with zero compromise is fraught with danger. Additionally, not identifying and managing or accepting the compromises of a particular strategy is adding to the many problems we see in business today.
Zero compromise is very aspirational and we'd all love to do business in the perfect world - but it just doesn't work that way.
Not dealing with the compromises of a particular strategy is wishing for zero compromise and 'if I shut my eyes hopefully these issues won't appear.'
A business has to compromise between the multiple things it wants to achieve. There will always be conflicting issues that work against the success of a strategy. These conflict our mind when choosing strategy.
So a business chooses strategy by (as the dictionary says) "settling on and agreeing" to manage and control a "mutual set of compromises". The business agrees that out of all the different compromises it could take on, THIS set of compromises are the ones it is willing and able to control - and so that is the strategy with the greatest chance of success.
Unfortunately, not getting good at managing compromise has led businesses to close their doors and take their bat and ball and go home.

Geoff Twine said...

I agree business requires effective changes very fast these days. No Long distance call or letters these days. Even a good old fax doesn't hit the spot fast enough. The experience I have run into a few times is trying to market a service or product to a company that has not considered the need, is not in their short or mid term goals and so on. When this has happened. I have witnessed it popping up 4 to 6 years later as a great new project or someone else has picked up the ball and run with it. I get asked "why do you keep so much of your past work files or boxes"?. I understand why I do, but I am sure most don't. With me it is the timing and being very objective with your business decisions.That must include how you approach your targets or market. I have missed some great opportunities not following this process. Currently trying to slow done and read the play better. Keep on our opponents toes and NO longer than arms length. When we make the opportunity open up. We move into the corridor and kick strait and long. Pick up the loose players, tighten up the play and make a good kick directly through the centre of our and their goal posts!!!. You little beauty. Step right up! Every one Winner...