Who is Integrated Strategies?

November 30, 2007

The Joys of Risk

Taking risks is one of those things in life that can really get the adrenaline flowing and make big things happen. There is a surprisingly high number of people afraid of risks that like to follow the proven paths until they reach the end. The issue becomes that success takes risk. Anyone who avoids risk can never really find success.

Any large project will require decisions to be made without knowing all of the information. The risk avoidance method is to wait for more information before making a decision. Not making that decision is a decision in itself though. The opportunity cost of the decision timing is often the difference between success and mediocrity. A project that comes in two weeks ahead of schedule and 10% under-budget is a success. A project on-time and at budget is expected. Sure, the risk is that every assumption made for the early decision is incorrect resulting in more delays or costs but those can be mediated down the road to offset and get back to the expected result.

Decisions come down to statistics in the end. You can wait until you are 95% sure to make a decision or you can make it with only 70% certainty. The difference is an evaluation of the opportunity cost for development of the 25% separation. Strategy decisions usually will never even reach the 70% mark. Evaluating the alternatives and roads to success is a skill that certain people develop because they respect risk and are not afraid of it.

Innovation is a risk driven process. People afraid of risk will not be as innovative and creative. New ideas are always clouded with uncertainty. The margin for error can be quite small and the risk/reward ratios are daunting. However, every well respected management magazine, website or writer will tell anyone who listens the necessity to innovate and evolve as time goes along.

Growth is a risk decision. It is possible to grow without changing the business or branching out, but growth without change is a limiting alternative. With growth comes the need for expanded responsibility, complementary product/service lines, additional product variations or research and development.

Risk should be embraced as part of a business culture. Not blatant jump and guess risks, but the thoughtful decisions with an effective reward potential. If you are not taking risks as a company or individual, you are probably not reaching your potential.

Technorati Tags: , ,

No comments: