Life is full of risks, and as a subset, business and the managing of organizations is perhaps even riskier. Managing those risks better is what separates proverbial losers from winners.
“Risk taking,” football player Jim McMahon once noted, “is inherently failure-prone. Otherwise it would be sure-thing-taking.”
That hot product that sold like wildfire last month could be toast next month. The “must have” candidate you recruited turned out to be “must not” after a few months. Skyy Spirits CEO Gerry Ruvo took risk and killed off his second leading product, betting that a new product category would sell better. (Its sales doubled.) Read about the lure of the “can’t miss” talent here and here – and learn that much of the time that can’t miss talent misses.
As I drove up from San Francisco to Portland with my 7 year-old son Traylor in tow last week, many types of risks came to mind including risks you don’t know about, and the risk of doing nothing. Add those two risks with operational (think day-to-day happenings), strategic, hazard (paging British Petroleum?), and reputational risk and you pretty much have the whole risk field wired.
Oregon (as in state) provides a great example of strategic risk taking in action. While imperfect, the citizenry through its legislature took a bet-the-farm move (literally) in the 1970’s toward controlling growth by requiring land use planning statewide. Oregonians saw the risk of not taking action as leading to certain Californication, best evidenced by the type of uncontrolled 1960’s strip mall development in the Oregon coastal town of Lincoln City. Pretty it was not, and the type of future seen in Lincoln City galvanized people to take a controversial choice of an alternative future.
In brief, the State of Oregon took an informed strategic risk to obtain a different future than the one that was likely by doing nothing. The result? Oregon is generally regarded as one of the best places to live in the nation; Portland, its largest city, consistently ranks in the Top 10 places in the United States to live.
Traylor and I also stopped by my alma mater, Willamette University. Willamette provides a great example of the risk taking by doing little or nothing. Like an ostrich with its head in the sand, Willamette’s tact is one born of the hubris of modest success, and a vision that fails to see the steamroller of technological change and economics that will do to most private liberal arts universities what the same forces have done – to cite just four sectors – to health care, publishing, advertising and travel services. The drumbeat is loud and it’s already started but like the observation of the main character in The Polar Express, few people at Willamette seem to hear it.
The road to hell is paved with good intentions, and in Willamette’s case, it’s aided by a heavy dose of complacency expressed in actions that suggest that change on the margins is what is needed. [True story: As part of an effort to engage alums, Willamette’s University relations has established a Twitter account. Total number of tweets since the founding of @WillametteAlumni in January 23, 2009? 65. Williams College, starting three months earlier, has over 1,000 tweets. Welcome to the new highly engaged Willamette alumni outreach effort.]
When the hammer of serious change hits – and it will – the private liberal arts schools at the top of the list – Williams, Wellesley, Wesleyan and Whitman stand the much better chance of surviving. The Willamette U chant of “We’re number 50” might sound good to trustees but it won’t begin to cut mustard in a market where unless you’re on top, cost and ease of access become primary components of consumers choice of post-high school education.
In the case of risk taking, Willamette’s greatest risk is that is taking none. The results will be seen in the years to come, but for our family’s purposes, we’re thinking Whitman, Claremont or Brown for Traylor, not Willamette.
The trick, as it were, is to understand the risks and opportunities that stand before you.
My former Barclays Global Investors colleague, Terry Watson, who headed up global Risk Management at the firm once told me that managing risk includes what you know, what you think you know, what you think you don’t know, and what you don’t know.
I thought of all those risks as Traylor and I drove back into San Francisco from our time road trip to Oregon, his head tipped back taking a much needed nap after five days on the road. Having a child may for many be the ultimate risk of all. Even if you have perfect biology or for those of us in the adoptive community, great birthparents, there are any number of land mines along the way, none the least is your parenting skills.
George Patton once said “Take calculated risks. That is quite different from being rash.”
You get informed by those risks, you try to understand them. And sometimes, you even take them.
Life Back West is an occasional set of writings focused on ways people, teams and organizations can be both more effective (doing the right thing) and more efficient (doing the right thing well). More about executive, career and team / leadership coaching services can be found at the “About J. Mike Smith and Back West, Inc.” sidebar or the “Hire Me” tab above. You can also read an online interview with me at WhoHub, as well as participate in my learning community courtesy of KnowledgeCrush.