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Risk-taking complemented by Plan B

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Risk-taking complemented by Plan B

Seni Adetu

Taking risks in business has become a near “norm.” Indeed, risk-taking is already part of our lives in many ways: hiring people (forget about what you see at interviews- every hire is a risk), launching new technology, birthing innovation, etc. The operating environment is so unstable and unpredictable that the worst position any organisation could be is staying static and lacking dynamism.

Without taking a risk in business, you can’t affect your organisation positively by way of creating a transformational breakthrough. If all you do is play ‘away from the cliff’, to avoid falling over, then you will not be giving yourself the chance to create a legacy. One of my favourite quotes in business was credited to Miles Davies: “If you are not making a mistake, that’s a mistake.” Life (especially in business) is about exploring, dreaming and discovering; a la Mark Twain.

Several of the top 10 most capitalised companies in the world today are technology and e-commerce companies that didn’t exist 30 years ago – Apple, Amazon, Facebook, Google, etc. They have almost completely displaced the conventional companies at the top of the ladder. They ventured into creating a new world for commerce and/or social engagement, and their success is phenomenal. In fact, a few days ago, Apple became the first American company (in history) to hit the USD trillion mark in market capitalisation – double the size of Nigeria’s GDP. Amazing. This said, if anyone ever suggests that risk taking is easy or that its outcome is always rosy, that person is being economical with the truth. When we say risk and reward go together, we mean it in both ways of positive and negative. The higher the risk, the higher the reward, if it works. Unfortunately, the bigger the fall if it doesn’t.

About 10 days ago, we woke up to a CNN news story that Facebook had lost about $120bn or 19 per cent of their stock value, the biggest ever stock value decline in one day. Mark Zuckerberg, its founder was $16bn poorer by this out-turn, which was linked to their announcement of a “privacy first” strategy. Sometimes in risk- taking, the motivation is not necessarily about something is wrong, but really about what’s possible.

There was a company that was growing net revenue at about 12 per cent an average for a few years before I took over as CEO. Looking at the company from afar before my appointment, I thought that growth magnitude for a big company was incredible. It was not until I assumed office and discovered that its main competitor was growing at double that pace that I realised there wasn’t much to celebrate about 12 per cent. My further analysis revealed that the company had been playing safe — no major innovation or renovation work in a while, commercial venture pursued in a moderate version, etc. So to consistently deliver superior shareholder returns long-term, you must take (calculated) risks, and you must have a mitigation with the proverbial “plan B” as its arrowhead. How?

(1) Bounce the (risk) initiative off experienced people: When you come up with ideas that are seemingly risk-prone, you must open up your chest for a bombardment of business provocations to unravel areas you may have overlooked. Most blue-chip companies doing well in Africa have such strong governance structures that mandate you to escalate certain business initiatives to higher authorities, so they can act as thought-partners to enrich your thinking. In some cases – depending on the quantum of the risk or likely impact on the business, this is escalated all the way to the board that is typically made up of seasoned executive and non-executive directors whose main disposition is the long-term sustainability of the business. When taking a major risk, it’s good to run your “if – then” scenario with experienced colleagues that can help you generate your Plan B.

(2) Link with best practices: Do global or local benchmarking in a related field when taking a business risk. You must run your insights well and ensure you are as grounded in the subject area as possible. Do your risk matrix analysis and come up with a firm mitigation plan. Where possible, and if learning exists, take such on board onto your insights and impact analysis. Don’t reinvent the wheel if it is not necessary to do so.

(3) Be fleet-footed: As this is a dynamic economic world, it goes without saying that the business leader must be super-dynamic. There are leaders who still pull all matters relating to company decisions to their desks, wanting to approve every expenditure “from N1 to N1bn,”and failing to delegate as appropriate. In the process, they unwittingly create unnecessary delays and bottle-necks in their organizations and get swamped. The best way to create a plan B in a risk-taking environment is to predetermine the position of and build the exit gate from beginning (same way you build a house with a fire exit door – not because you are expecting a fire incident in the house). Always assume your competitors are smart too. Never ever look down on them. When you are embarking on a big commercial risk, it is not impossible your competitors are thinking in that wise too. Yes, to some extent you are different companies, but in most business sectors, the players are similar in more ways than none. If you had projected you would be the only one launching an innovation, for instance, and you and your competitors launch simultaneously, with the result you can’t achieve your return on investment projections, your Plan B must kick in immediately. The ability to respond rapidly to external challenges and operational opportunities is massively important to surviving long into the future. One of the things all sound businesses must do is to test their mitigation plans from time to time by creating artificial crisis around the identified risks and getting the team to respond as though it were real.

In closing, risk-taking is an imperative to business success — no doubt. There’s however wisdom in ensuring that in taking the risk, you are clear what your fall-back position is – a la Plan B. But that said, the consciousness of a Plan B must not distract you from putting all your horse power behind the main goal. Someone said nothing frustrates the success of a Plan A than the consciousness of a Plan B, so be mindful of the need to pursue the main dream as if there are no alternatives; even if you have created one from the outset.

Source: Punch

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