When we consider risk, much of the discussion revolves around analytics, alternatives, probability, and bias. But, there are other important factors to consider, which are frequently excluded and, when dealt with properly, can create new opportunities. These include higher than normal results, lower than normal results, enablers, parameters for consideration, and excluding key unknowns.
Entrepreneurs generally advocate the untapped potential of their ideas without detailed analysis of parameters, requirements, and profitability. For example, Venture capital firms that take the risk of investing in several new companies only expect a few to perform with extraordinary results. Last year, they extended too far and many are in financial trouble today. However, the initial risk is appealing because, statistically, people do win the lottery, and companies like Zoom hit the jackpot and do well, especially when you consider the way they’ve evolved over the past few years.
The reverse is also occurring with unforeseen disruptions increasing risk. The slow pace of going back to work, success of tools like Zoom, supply shortages, and inflation are examples of factors not considered in much of our risk analysis. Political change, an increase in crime, and higher levels of stress are creating more uncertainty when assessing change and potential. These can all add to excessive losses beyond normal probabilities.
Another inhibitor of success are enablers. While experience and expertise can improve results, one of the worst strategies in our changing environment is tradition or the mindset that “we have always done it this way.” It simply ignores change, alternatives, and processes, and is frequently fueled by proponents who fear those same things. Sexual harassment, equal wages, and COVID vaccines are some examples where progress has been exceptionally slow due to people being unwilling to recognize the need for change and accept and implement new ideas.
Currently, everyone seems stressed and frustrated with issues like crime and inflation. However, enablers seem focused on short-term solutions rather than a true commitment to solving the problems. We must also recognize that many of these are worldwide issues. For example, both France and Israel are experiencing political disruption as well.
Additionally, inflation, oil prices, and supply shortages are all causing great disruption, which increases risk, but these unknowns will also create opportunities. Innovation in solutions like electric cars is a key area where there is ample opportunity.
Risk management is also affected by quantitative versus qualitative considerations. On one hand, quantitative measures are objective, comparable, and easier to document. However, we must ensure we are using the right measures and analyzing correctly. Qualitative data, on the other hand, can measure issues we don’t always consider and allows for intuition. But, these processes can be compromised easily or measure wrong factors. In particular, bias occurs much more frequently in qualitative analysis.
Risk analysis should also include the various impacts of diversity. The world is creating a significant amount of new wealth, yet income disparity is increasing, with 1% of U.S. households owning over 50% of the wealth. While there is more integration and assimilation, tensions have also risen in political, economic, and social structures.
When it comes to risk, we also need to consider ignorance and ways to manage it. Ignorance shows up in a number of ways, which require different approaches. Some ignorance is just the unknown—like the economy next year, the long-term pandemic impact, and potential new technologies (such as a longer lasting electric car battery). While we can’t assure certainty, we can research alternatives and their consequences.
Some ignorance comes from a lack of knowledge. Consequently, a focus on bias, parameters, and assumptions should be included in risk analysis. For example, we should understand our target audience and trends like the growing diversity and wealth in our country.
Ignorance can also be a function of pure denial. Assuming excess confidence or unilaterally accepting respected colleagues can affect risk assessments. We can avoid denial by embracing openness and searching for alternatives. Organizations need to welcome measurement and feedback. Observing, understanding, and sharing financials, operations reports, and sales reports are the first step. Simple research tools (which social media can provide) should be used regularly. A management style such as the “walk around” and simply asking, “How are you doing? Is there anything you need?” can be priceless. Look for alternatives and ‘what if’ discussions.
Viewing risk as an opportunity rather than an obstacle can help produce positive results. Change is occurring faster and faster and we must resist the urge to crave the comfort of consistency and reliability. We need to shift our mindset to one that expects risk. This might make you feel uneasy, but know that we are all in the same boat. Try to remember that staying flexible will make adapting easier. And implementing sound, proven strategies will not only set you up for success, but put you in a position to effectively and efficiently manage risk.
Dr. Bert Shlensky, president of Startup Connection, prides himself on his ability to define what is unique about each and every business. He works closely with individuals to develop a personalized approach that targets specific areas of concern and offers solutions based on his 40+ years of experience. His team of experts will address your particular needs while working to save you time and money.
A year or so ago, I wrote about how fast change is occurring and how we needed to adapt faster. At that time the pandemic, unemployment, economic growth, and unequal worldwide wealth were among the key issues. Fast-forward and change is still happening faster than we seem to be able to adapt. However, the issues are also changing. Today, inflation, the war in Ukraine, crime, trust, and mental health seem to have taken over our focus.
In any discussion about change, it’s imperative that we look at the process of managing change as well as the specific issues being affected by it. In particular, we need to consider parameters, institutions, and processes.
When it comes to disruptive change, we must remember that parameters change. For example, inflation (which was a key economic factor, but has been relatively dormant) has suddenly become relevant again. The concern is that we may view inflation as too much of a crisis rather than a parameter to be considered. For example, decades ago, I supervised a company in Mexico that collected payments every day because inflation could eat up their profits.
A critical issue in managing change is the increased impact of social, economic, and political volatility in our institutions. In particular, the social aspects, which are frequently disruptive and somewhat new, have been underestimated. These include the pandemic, partisan politics, increased income inequality, and crime. Commodities like lumber and wheat, which traditionally trade in narrow ranges, are doubling and halving in a few months. Disruptions like supply chain, labor shortages, chips, and baby formula are happening regularly. In addition, these disruptions can take months rather than weeks to resolve.
The pandemic and economic recovery have produced imbalances in processes that analysts have failed to consider adequately in AI and other tools. Timing and reacting to special events have been a major missing element, especially where supply chains have long lead times. In addition, the problems are not recognized early in the process and the extent of fixes is underestimated. We also misjudge the interaction among factors. For example, rates and shipping times are not balanced in considering ocean shipping issues. We also underestimate the impact of virtual monopolies in industries like baby formula and computer chips. Thus, minor disruptions can cause major crises.
AI and other tools also assume you have proper information and can develop accurate analysis. The biggest problem is bias, which is frequently unknown or unintentional. I am reading about Apple after Steve Jobs and finding that the analysis, expertise. and skills are very impressive. However, their efforts are guided by many strategies, expectations, and even, “What would Steve do?” As a result, the analytical decisions can be compromised.
Focusing on the processes and solutions relating to change can improve our responses:
Parameters need to be managed to improve decisions.
Understanding the risk, the rewards, and the importance of interconnected issues can improve outcomes.
Don’t allow fear, uncertainty, or tradition to lower your potential and prevent you from trying something new.
This goes for both analytical and social issues. The realities and changes in parameters like populations, the economy, political environment, and social values should all be reviewed and considered regularly. The most important thing to keep in mind is that many variables are changing faster and more often than ever before. So, not only do you need to understand parameters, you need to keep up with the latest ones!
The bottom line is that change requires management and not just reaction. We can’t predict the future, but we can prepare for the unknown. Because how things change is just as important as what things change. When you have a better understanding of the “how,” you will be better equipped to respond to the “what.”
Dr. Bert Shlensky, President of www.startupconnection.net, offers experience, skills, and a team devoted to developing and executing winning strategies. We guide your plans for business success and unlock your profits.Our strategy includes clear steps, and over 150 free articles and templates to facilitate your efforts and guide your process. We’re here to help you get on track and stay there as you move forward. We welcome comments, suggestions, and questions. You can write us at: bshlensky@startupconnection.net or call at 914-632-6977
What is success? It’s abstract, really. For some, it could be money and status. For others, it’s finding happiness. In business, we tend to measure success starting with profit.
In talking to entrepreneurs, I am always fascinated with the different perspectives of success. In general, they believe their ideas are incredible and the obstacles they need to overcome are constraints like finance, resources, marketing, and competition.
I argue that their potential barriers are actually achieving excellence in developing and executing great programs. Why do I think this? Well, 90% of new businesses fail withing five years, and that includes IPOs and venture capital efforts.
Consequently, there are several issues that need to be addressed in order for entrepreneurs to reach their full potential. When an entrepreneur thinks about starting a business, there are two distinct concepts that pop up time and again: Passion and Reality. These are both critical to success.
Passion was best described by Steve Jobs when he said, “Because the people who are crazy enough to think they can change the world are the ones who do.”
Reality is understanding the problems, limitations, and constraints associated with any undertaking. As Thomas Edison said, “A vision without execution is hallucination.” Passion is what gives us the drive to overcome these obstacles. It is the excitement and energy that drive a start-up. It is crucial to balance these two concepts if you want to execute a successful business.
You also need more than a good idea—they’re a dime a dozen. Your best friend might have the next million-dollar App idea. Ideas are great as they are the true engines of innovation. However, an entrepreneur needs to determine whether they can execute the idea and, ultimately, make enough sales to earn a profit. New businesses frequently fail because small (yet critical) issues are overlooked.
Here are some recommendations to help increase potential:
Plan smartly. Think of planning as a long arduous test with lots of work, incorrect assumptions, and missing analysis. For example, 2022 financial markets haveclearly made prior economic and financial assumptions in any plan highly uncertain. The solution is to make plans simple, flexible, and solely for the entrepreneur and not outside parties. It should be a guide, not a fixed template.
Keep plans current and active. A business plan is not a document to be stored on a shelf; it should establish parameters and be developed, tested, and continuously revised. Even with a “perfect” business plan, there will be hiccups and failures along the way.
Learn from failures. This is a critical component of the ongoing planning process.
Focus on passion. This will keep you going through the failures. Additionally, a successful business plan should express why you think the business is a good idea and why it will succeed. If you need to dress it up in a suit and tie to show to investors, do that later. A business plan should be YOUR vision.
Set realistic goals. While time frames, levels, and processes can vary, you need a plan to show profitability: the when and the how. You may do what you do for a number of reasons (passion, fun, fulfillment), but at the end of the day, a business needs to make money if it’s going to last. Make sure that you set your passion aside for a moment and make sure you’re on the path to profitability. What resources do you have and need? Many entrepreneurs follow guides related to large venture capital ideas while most small businesses earn less than $1 million per year. Be pragmatic in these matters.
Take risks. This is a critical part of every entrepreneurial win. Frankly, I think we all need more of it. We tend to think of risk as a taboo concept and it’s really not—once you understand it. In order to benefit from risk, you need to define what risk is to you. Some people view risk as the potential for harm or hazard (think bungee jumping). I view risk as an uncertain circumstance in which one manages to maximize the gains. But, how do accomplish this?
Utilize analytics. More analytics in sports is creating opportunities to assess strengths/weaknesses and create new winning strategies. It has enabled athletes to take more three-point shots, hit more home runs, longer golf drives, and score more touchdowns. More knowledge = more informed decision = less risk.
Consider value and probability. These should inform your goals and processes. For example, winning the lottery has an extremely high reward, but also has low probability. Purchasing investment bonds has lower return than buying stocks, but the risk and volatility of buying stocks is higher.
Be flexible. There are a lot of moving pieces involved in a business plan. And curve balls are inevitable as our world is constantly changing.
Remember it’s an ongoing process. It takes time, dedication, and consistent effort. Peloton, which was one of the hottest companies in the country, recently experienced over a 25% decline in sales. So, we need to constantly compare goals, risk, and the potential of alternatives.
Listen to your gut. Sometimes you just have to go for it. We tend to overthink things or let fear stop us from challenging the status quo. But, if your intuition is telling you something, it’s usually worth listening.
Just as there is no single definition of success, there isn’t a certain path to achieve it either. But, you can set yourself up to increase your chances by creating clear goals and understand the risk, the rewards, and the importance of developing a smart business plan. And don’t forget your passion—the reason you started your business in the first place. Success isn’t fun if you’re not enjoying what you’re doing.
Dr. Bert Shlensky, president of Startup Connection, prides himself on his ability to define what is unique about each and every business. He works closely with individuals to develop a personalized approach that targets specific areas of concern and offers solutions based on his 40+ years of experience. His expert team will address your particular needs while working to save you time and money.
What’s an easy decision? Do they exist? Perhaps, deciding whether you want chocolate or vanilla ice cream… You have two choices, which do you prefer? Seems pretty simple and straightforward. Now, what if you’ve set a goal to eat less sugar… The scale tips toward vanilla… but, you’ve also set a goal to save money and the chocolate is on sale… Now, there’s even more to consider.
Although choosing an ice cream flavor may seem trivial, is exemplifies a very important point: The more moving pieces involved in a decision, the more difficult it is to make. And while more information enables better decisions, more variables make the decision-making process more complex.
The same applies to goal setting and measurement. We all recognize their importance, but achieving accuracy is more complicated. Setting goals and measuring used to be fairly simple as they usually related to maximizing and measuring dollars in a particular period. But, as is often the case, times change and now traditional guidelines are almost obsolete and need revision.
For example, in our growing and more complex economy, millions of workers have been leaving their jobs and pursuing other options. Work at home, lifestyle expectations, stress, and work environment are all supplementing wages as key factors in employment and turnover decisions. Additionally, climate change, current events with Russia, inflation, COVID, the stock market, politics, and diversity are all experiencing rapid changes and simultaneously impacting our economy and lifestyles.
Consequently, these societal changes also affect goal setting and measuring.
So how do we improve goal setting and measurement to make them work for us?
Consider the details surround a goal: Long-term versus short-term, quantitative versus qualitative, risk, and objective versus subjective. We also need to think about the process and complexity of setting goals. For example, do you want realistic and achievable or stretch goals? If goals are too simple, they can ignore important aspects of a situation. On the other hand, if there are too many aspects to consider, there can be a lack of focus.
Focus on key elements: Measurement has become quite complex. Ask yourself how important are the results, speed, innovation, and quality when measuring performance? For example, I believe automation has improved the speed and efficiency of many customer service processes. However, customer service and satisfaction are frequently sacrificed. How many times have we been completely frustrated with ineffective electronic customer series efforts? There is a trade off here that needs to be taken into consideration.
Make communication a priority: In most efforts and organizations there are multiple goals and demands. With so much to manage, critical issues can arise in the areas of prioritization, comparison, and measurement. Communicating goals and their measurement throughout an organization is frequently a secondary priority. Why have them if you don’t manage them?
Examine alternatives and change: Do we understand and really believe our goals? For example, nearly everyone acknowledges that the college admissions and decision processes are a mess. Measurements gathered from a broken process don’t tell us anything useful. Reevaluate a system that isn’t working and set new goals that will yield worthwhile measurements.
Get specific: We all understand the importance of goals, purpose, and direction in cultivating commitment, success, teamwork and coordination. Yet, somehow the execution often goes awry. One common reason for goals not being set correctly is that it can be a difficult process. One of the advantages of professional sports is that the goal of winning is simple and clear. It’s not always quite that simple in other businesses, but the more specific you can get, the easier it will be to execute.
Consider various angles: Short-term versus long-term goals is the best example of how goals may conflict. Much of the financial crises in 2008 resulted from short-term greed conflicting with long-term rationality. Remember to look at things from various perspectives and how time may affect progress.
Don’t forget about bias: Bias is, perhaps, the biggest culprit in unreliable results. For example, customer service surveys are notoriously designed to create positive publicity rather than fair evaluations. The purpose of measurement should never be to confirm your positive bias.
Goals and measurement need to be a tool for business improvement rather than an end in itself. Goals are not easy to develop or measure, but the process is critical to organizational success.
Set goals to motivate you and your team to grow and use measurement to genuinely gauge where you’re at and where you need improvement. Ask yourself (and answer honestly), “What am I measuring? How am I measuring? And what is the purpose of my measurement?”
Whether it’s sales, profits, service, customer satisfaction etc., reliability and measurement over time are vastly underrated!
Make goal setting a priority and communicate your goals to those involved. Be certain to understand the different needs of different situations. Use clear and simple measurement tools, and be sure to utilize the process for improvement, rather than a tool for criticism. And remember, we set goals to make progress and even if we don’t achieve what we set out to accomplish, we still end up further along than where we started. So, stay focused on your goals, make them word for you, measure your progress, and keep moving forward.
Dr. Bert Shlensky, President of www.startupconnection.net, offers experience, skills, and a team devoted to developing and executing winning strategies. We guide your plans for business success and unlock your profits.Our strategy includes clear steps, and over 150 free articles and templates to facilitate your efforts and guide your process. We’re here to help you get on track and stay there as you move forward.
We welcome comments, suggestions, and questions. You can write us at: bshlensky@startupconnection.net or call at 914-632-6977
Positive expectations lead to positive results. This is because confidence and energy increase when we believe in ourselves. Conversely, a negative outlook contributes to a lower chance of succeeding. Basically, with positivity, we are capable of whatever we believe we are capable of.
It makes sense, therefore, to create more opportunities to include positivity. This can manifest in many forms: attitude, environment, expectations, etc.
In recent years, it has become more difficult to maintain positive expectations as stress and uncertainty have skyrocketed as a result of the pandemic. Not surprisingly, there has been an increase in depression, suicide, drinking, and crime.
On one hand, we put up with and even enable negativity and bad behavior. For example, in recent weeks, a coached punched another coach, an actor hit another actor, and we allowed senators to act disgracefully while utterly disrespecting a Supreme Court nominee. While all of these occurrences should be intolerable, most of the reactions were minimal or people used it as material for humor. Bad behavior should not be tolerated the way it is.
Fortunately, to offset this, there have also been some recent examples that highlight how positive efforts can improve situations. One of the most incredible reactions to the challenges with Russia is the response of Poland and Ukraine. They have literally helped millions of refuges find food, shelter, clothing, and new lives in less than a month. Their efforts are proving we can be kind, caring, and positive in an environment that is sometimes completely chaotic.
So, how do we forge ahead with a positive outlook that encourages and fosters good behavior and successful results?
Be supportive. Watching parents and little kids is one of the best examples of executing positive expectations. Kids learning to talk, walk, or ride a bike are full of excitement and confidence. At the same time, parents are supportive, encouraging, and watching with glee. If we could support one another, both in and out of work, with this same enthusiasm, how much more successful could we all be?
Consider your perspective. A great (and often unused) tool for developing more positive solutions is to recognize parameters. The recent volatility in the stock market has been well documented. What is not clear is how to analyze and interpret it. For example, two publications reported results with different interpretations and perceptions. One reported that the S&P 500 increased 3.6% in March. The other reported that the S&P 500 declined 4.9 % in the quarter. Both are true, but the interpretation is different.
Weigh all the options. For example, going back to the office creates numerous positive opportunities while working from home has numerous cost, privacy, and lifestyle benefits. In particular, new technologies have made communication, sharing files, and interaction even better. However, being in the office encourages better culture and communication benefits. We must better understand situations, needs, and performance to develop the best solutions. Many decisions are based on tradition and opinions, but maximizing the alternatives can have great benefits. Which option produces the most positive results?
Get out of your comfort zone. Take risks, shake things up, and avoid getting stuck in a rut. This is how we continue to challenge ourselves and foster growth. Risk needs to managed rather than feared. Understanding the risk, the rewards, and the importance of each can help you improve outcomes. Don’t allow fear, uncertainty, or tradition to lower your potential and prevent you from trying something new. The positive: no matter the results, you have gained valuable tools that will help you to continue improving.
Take advantage of opportunities. We’ve had a lot of disruption lately and that can often feel like a challenge rather than an opportunity. But, in my own experience with corporate turnarounds, it’s much easier to motivate, innovate, and develop collaboration in troubled or changing organizations than within those whose culture is based on the closed-minded rule of “we’ve always done it this way.” It’s amazing how many individuals and organizations have incorporated new efforts like E-commerce, work-from-home, Zoom, etc. in order to adapt to the times and, consequently, have actually improved their results.
All of this isn’t to say that every situation should be met with a naive sense of positivity. There are, of course, situations that are very nuanced and require more than a “just look on the bright side” response. Negative emotions should be addressed and we should always try to respond to distress with empathy rather than false reassurances.
In the end, however, looking for the positive rather than focusing on the negative usually gets us further in the long run. I think we can all agree that we’re happier when there are good things happening. So, let’s not only look for the positive, but help put more positivity out there through our work, thoughts, words, and actions.
Please visit our website www.startupconection.net to book a Free Session in which we can help you develop an action plan that will evaluate potential and risk. We always discuss process, expected outcomes, and cost before you make any commitment.
Dr. Bert Shlensky, president of Startup Connection, prides himself on his ability to define what is unique about each and every business. He works closely with individuals to develop a personalized approach that targets specific areas of concern and offers solutions based on his 40+ years of experience. His expert team will address your particular needs while working to save you time and money.
When you want to stand out, reach out to Bert for the tools that will build your “sticky” brand. My focus is on understanding and analyzing your dilemmas and challenges, so your company becomes profitable faster.
Call (914) 632-6977 or email me at bshlensky@startupconnection.net. Don’t leave without signing up for our useful free eBook!
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