As we start wrapping up another year, it’s a good time to examine areas we are looking to improve. One proven way to get better results is to take more risks and then take even more risks.
Overall, we avoid reasonable opportunities to utilize risk to our advantage—most likely because we have an unhealthy relationship to the word. Maybe we need to start thinking of “risk” as the “potential to win.”
Recently, I saw a perfect example of how this detrimental aversion to risk actually does more harm than good. Two underdog football teams lost because they refused to take risks and be unconventional. I believe the coaches were simply afraid to be second-guessed and made decisions that were almost guaranteed to lose. Similarly, sports teams consistently take fewer three-point shots, steal fewer bases, and attempt fewer two-point conversions than the odds would dictate.
This phenomenon has also been well documented in organizations. Some of the most notable examples are Kodak refusing to recognize digital, Xerox basically abandoning Windows technology, and retailers failing to recognize the impact of the Internet. Currently, the financial markets seem hesitant to recognize the slowdown in tech stocks. Why do companies act this way in spite of the many cases in which change is both organizationally and financially justified?
If you’d like to avoid this tendency of evading probable wins, here are some strategies to increase risk with limited downsides:
Manage probability better. This can provide greater opportunities, including both value and probability of success. For example, when lotteries increase, the odds of winning remain constant, but the value of winning increases dramatically.
Keep your perspective in check. As uncertainty and change accelerate, probabilities can also change. For example, many analytical efforts are reduced by the volatility of 2019, 2020, 2021 and 2022, which need to be considered together. Getting excited or depressed about one year is erroneous. In general, the four years together provide a more positive and reasonable perspective than just one year. See also: Embrace Uncertainty with Positivity.
Don’t be afraid of losing. Many studies have shown that we are about twice as likely to avoid losses than pursue gains. For example, we will trade stocks with gains twice as fast as selling stocks with losses despite tax advantages for selling losses.
Understand and maximize goals and needs. The simplest technique is to understand the needs and goals of your partners in a relationship. For example, are you willing to endure short-term losses to develop long-term gains? Similarly, are you willing to invest in efforts like quality, customer service, and people to improve the chances of success? See Make Goal Setting and Measurement Work for You.
Reduce bias as much as possible.The greatest detractor from effective decision-making (which can be intentional, random, hidden, or even unknown) is bias. Probably the greatest source of bias is our own set beliefs, experience, and reliance on a “we have always done it that way” mentality. Thus, we simply ignore information or facts that are different than our own. Another factor is incomplete or wrong information. However, when we eliminate bias, we increase our probability for success.
Be more open. Organizations need to be open to measurement and feedback. Observing, understanding, and sharing financials, operations reports, and sales reports are the first step. Take advantage of simple research studies, which social media can provide. These are worthwhile tools to use regularly. A management style such as the “walk around” and asking simply, “How are you doing? Is there anything you need?” can be priceless.
Remember that mistakes are often the best way to learn and grow. One of my favorite phrases is, “If you aren’t making mistakes, you aren’t trying hard enough.”
Environmental and external influences can greatly affect risk as well. Inflation, oil prices, and supply shortages are causing great disruption today, but they will also create opportunities. Electric cars, the chip shortage, and logistics are areas where unknown opportunities will emerge.
Risk considerations are also affected by quantitative versus qualitative considerations. On one hand, quantitative data are measurable, 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.
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. Other forms of ignorance are the refusal to accept new information or unwillingness to remain open-minded.
Viewing risk as an as an opportunity rather than a danger can 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 and embraces risk. If we can learn to implement sound, proven strategies, we’ll simultaneously set ourselves up for success while being 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.
Use These Quick and Simple Ideas to Improve Your Business
With the end of the year quickly approaching, it’s a great time to reflect on where we are and where we’d like to be. But, since it’s that time of year when everyone’s schedules are impossibly full, we’ll keep this quick, simple, and practical.
Below you’ll find several resources to help improve your business. I suggest picking one or two posts, and committing to incorporating one or two suggestions from each. My personal recommendation is the 80-20 post, which is simple and almost guaranteed to produce results.
I also encourage you to provide feedback and let us know which suggestions you found the most useful.
And remember, as the end of the year approaches and stress levels tend to increase, be kind to yourself and others, find ways to relax, enjoy time with family, but also make time for yourself. Take deep breaths, cut yourself some slack, and know that your best is enough.
Hopefully this end of the year list inspires you to incorporate some fresh ideas into your business and explore various strategies. I also recommend using the content to develop and test new alternatives and solutions. In your efforts, don’t be afraid of some failures along the way—it’s the best way to learn and grow. Good luck!
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.
We’ve all been asked the glass half empty or half full question… It’s easy to give this discussion more importance than it deserves, or even make it more complicated than it really is. The bottom line is that the question aims to determine whether someone is an optimist or a pessimist. But, what this question fails to consider is whether someone is a realist. I know people who are optimist realists and some who are pessimistic realists. Both can be effective; it’s simply a matter of approach. The commonality, though, lies in the fact that they look at things from a realistic and, often, analytic lens. And that is why they get results.
Take poker, for example. Professional betters fold about 75% of the time after seeing the first two cards. Amateurs only fold 50% of the time. This has nothing to do with whether they were optimistic or pessimistic about their chances. It has to do with understanding the game and considering statistics from a strategic perspective.
The stock market is another example where assumptions and “opinions” can be dangerous. How many stocks like WeWork, Peloton, Teladoc, and Zoom all grew based on unrealistic expectations and then crashed? In 2021, nearly every new issue is down an average of more than 50%.
Furthermore, analysis and AI are valuable and often help improve results, but we have to also consider the accuracy and validity of the analysis. For example, the pandemic has made much of the data from 2019-2021 less reliable in forecasting. Economic, political, and environmental changes can impact the assumptions and process of our analysis. Case in point: higher winds and higher water temperatures from climate change worsened the impact of Hurricane Ian. Structural changes, like the war in Ukraine, crime, and inflation, can also affect our assumptions and analysis.
Timing and circumstances should also greatly influence our perceptions and predictions. While we may understand product life cycles, we often forget how age, competition, and technology can affect our progress. For example, over 60% of advertising is over the Internet rather than traditional media. And many politicians and managers continue to serve despite waning capabilities and energy.
In general, being optimistic is frequently recommended to keep a positive attitude, understand potential, and motivate maximum efforts. And, while many issues require evaluation, there are plenty of opportunities to capitalize on optimism. The pandemic has stimulated new opportunities like working from home and virtual learning that need to be given time to reach their potential. For example, small Universities are sharing courses with other local Universities to expand the offerings available to students. These need more analysis and objective thought rather than simple opinions to have success—this is where that realism comes back in play. It’s great to be excited about good ideas, but we also need to take a realistic look at whether they are effective.
And, when it comes to decision-making and implementing new ideas, we can all afford more risk. People tend to have a pessimistic view of risk-taking. Or, they believe you need to be optimistic to benefit from risk. But, it’s really more about being realistic and evaluating results and considering alternatives. We need to recognize that the upside of many risks is much greater than the limited downside. Additionally, need to understand outcomes and accept reality. Part of that reality is that failure is always part of the process.
Other culprits that pull us away from reality include denial and bias. Denial can make us avoid potential negative outcomes or ignore facts. Bias causes us to overestimate markets, ignore competition, and not consider the issues in execution. These can be a result of our enthusiasm—we want to believe something is true because we are excited about the possibilities. This is a great example of how unchecked optimism can actually thwart our efforts.
So, how can we make sure we maintain a realistic outlook and approach?
Encourage openness. Organizations need to be open to measurement and feedback. Share financials, operations reports, and sales reports. More eyes equal more feedback. This can reduce oversight and bias.
Search alternatives. Don’t get stuck doing it one way. Try new things and see if you can do it ever better.
Discourage enablers. While experience and expertise can improve results, one of the worst strategies in our changing environment is “we have always done it this way.” It simply ignores change, alternatives, and processes. This mindset is frequently fueled by proponents who fear change and discomfort. Don’t allow people to enable this narrow-minded thinking. It’s not inclusive and not realistic.
Measure correctly. Are you in need of quantitative or qualitative measurements? On one hand, quantitative measures are simpler to document, measurable, objective, and comparable. However, we must ensure we are using the right measurements and analyzing correctly. Qualitative data can measure issues we don’t always consider and allow for intuition. However, qualitative can also be easily compromised and measure wrong factors.
In the end, whether the glass is half empty or half full doesn’t really matter as long as we can see that the glass exists and that there is more than one way to interpret how much water it holds. People will always see things differently—our education, experience, genetics, history, circumstances, and a variety of other factors influence how we view the world. Rather than arguing about the differences in our perceptions, perhaps we can discuss them and learn from each other. Together, we can expand our collective knowledge by considering the potential and opportunity that exists in our unique interpretations of data and circumstances. And with a realistic approach to analysis, and a genuine desire to pursue new, improved, and varying outcomes, we can achieve more together.
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
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.
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.
Have you ever asked a question only to receive the dreaded, “Because I said so,” response? This is often a phrase repeated to children, but even adults are prone to hear things like, “Because this is the way we’ve always done it.” If you’ve been on the receiving end of these statements, you know that they are never satisfactory explanations to questions. They’re a cop out—a way to evade the underlying issues and, perhaps, an unintentional admission of one’s fear of change or refusal to embrace innovation. And, that is exactly how we get stuck in patterns that don’t work within systems that are unwilling to adopt new structural paradigms—even when it’s the obvious answer.
Many people, myself included, have been writing on this topic for 5-10 years—reiterating time and again that our economy is dramatically changing and many analysts are ignoring the consequences. What is even more perplexing is that we continue to ignore some proven models of success.Several years ago, Walter Isaacson wrote in The Innovators about the impact of technology, the digital computer, and Internet revolution. These trends have only accelerated in recent years. One of the most interesting themes is the commitment, diversity, collaboration, and even friction, among diverse participants in almost every phase of the revolution, such as Jobs and Wozniak or Gates and Allen.
The results of this technological shift are evident in a comparison of stock performance of traditional companies versus newer tech companies. The stocks of P&G, I.B.M., G.E., Coca Cola, Dupont, and AT&T have DECLINED an average of 8% annually over the last 5 years. In contrast, the price growth of companies like Google, Facebook, Apple, and Amazon has increased at a rate of 24% annually. This trend is also evidenced by G.E. and other huge companies’ recent decision to dissolve their outdated structure.
To put that in perspective: investing $100,000 in the traditional companies 5 years ago, would be worth about $66,000 today. Investing $100,000 in the tech companies 5 years ago would be worth about $300,000 today.
Financial advisors also seem to be reluctant to embrace this shift. For example, much of their discussions focus on bonds versus stocks rather than tech stocks versus industrial or value stocks.
It’s really no surprise that so many businesses are failing considering both society and business refuse to recognize that old paradigms and structures are already obsolete or are well on their way. For example:
Large corporate structures (like print publications and brick and mortar retailers) are all gradual losers, or worse.
Companies as well as society continue to do what they have done in the past, often with poor results. Despite massive economic and political efforts, issues like income inequality, healthcare, and infrastructure investment will continue to hold back our economy.
With little real attention to these changing trends, the poor performance of many organizations is virtually a given.
Even more distressing is that it’s the structural paradigms of these organizations producing much of the deficient results, rather than the typical financial discussions. For instance, the long-held propositions that business advantages, like economies of scale and utilizing expertise and marketing synergies, are simply false in many cases. Rather, these and other former industry leaders are failing because of the following limitations:
Many large companies have tunnel vision, organizational constraints, etc., and ignore emerging technologies and opportunities.
They lack the flexibility to respond to the needs of the market and use outdated solutions to new problems.
They fail to allow the vision, entrepreneurship, and risk necessary to succeed, while heaping huge income growth on unproductive leaders.
In contrast, new structural paradigms are providing numerous opportunities for successful change:
The success of smaller, more innovative companies shows that many organizations should get smaller (or act smaller) in order to effectively deal with today’s environment.
Reducing layers and creating professional cultures are a start. Boards and management need to split up organizations like G.E., create spinoffs, or implement more independent groups. That may be what’s really necessary to maximize the potential of both individuals and organizations.
Large organizations say they want excellence, entrepreneurship, innovation, risk-takers, etc., but, really, they tend to encourage mediocrity. For example, short-term goals and reviews for both organizations and individuals actually inhibit the development of more positive cultural characteristics, rather than spur them on.
Testing and failure, which are critical parts of innovation, are punished more than rewarded. Even sound risk-taking is reduced because of the fear of repercussions within the organization. In short, organizations frequently ignore the advice, “you can’t score if you don’t take a shot.”
Organizations need to be open to measurement and feedback. Looking, understanding, and sharing financials, operations reports, and sales reports are the first step towards embracing new structural paradigms. Simple research studies, social media, and other devices are additional tools.
Open systems and collaboration are like winning the trifecta at the horse track. Open systems have been around for a long time but are becoming the norm for success. They reject bureaucracy, authority, hierarchy, and closed decision-making processes. They encourage participation, diversity, new rules, and to some extent, chaos.
These new structural paradigms, cooperation, smaller can be better, and open collaborative systems, offer great hope for organizations. While they rely on innovative approaches to problems, the solutions are readily available. Therefore, once we acknowledge that different strategies are needed, we can implement new tactics, provide opportunity and education, and allow our organizations to be effective.
I strenuously argue that if we do not learn to accept and accommodate innovation and deviant behavior both inside and outside of organizations, we cannot change or achieve excellence.
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!
Feeling stumped or overwhelmed? Contact Bert at (914) 632-6977 or Email to start the process. Thanks!
