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8 November 2010

Richard Branson on Calculated Risk

Virgin founder Sir Richard Branson during the opening keynote at CTIA Wireless in Las Vegas, © 2008 TechShowNetwork | more info(via: Wylio)It really blows my mind when I read an article by a very successful business person and realize that what they're talking about is something that I've done without even consciously understanding that I'm doing it. Richard Branson's take on risk is a perfect example of this:
In life, it's better to stick to a few simple values and aims; the same holds true for business. One guideline that we rely on is that if a new business has the potential to damage your brand in any way, you should not invest in it.
Several years ago, for my 30th birthday, my wife and I went skydiving. Lots of our friends thought we were crazy for jumping out of a perfectly good airplane with nothing but a large piece of canvas to keep us from becoming a messy spot on the ground.

To us, it was a calculated risk. My wife and I both place a high value on new and exciting experiences. I wouldn't say we're risk takers or excitement junkies, but we both want to go different places and try new things. When skydiving came up as an option, we did the necessary legwork to ensure we had a credible diving school and that they followed safety standards. Once we were assured, we signed up and had a great time.

This was a calculated risk. Yes, there is the possibility that neither the primary nor backup parachute would open, but the possibility of that occurring was so minimal when compared to the joy of the experience that we could not resist the opportunity. We calculated the risk, found it to be small in relation to the activity and signed up.

I see that projects are really the same thing. You recognize a need or an opportunity. You check to see what risks are involved. You check to see what rewards the company will reap for a successful project. You compare the two to see if your calculated risk is large or small. If the risk is small, you take the leap.

Over the years I've seen too many risk/reward scenarios complicated by adding in extraneous detail that frankly isn't really anything but a stakeholder feeling the need to make themselves known by bringing up a lot of 'potential risks'. Yes, thinks happen on a project you need to prepare for, but adding the need for a plumber to be onsite 24x7 during rollout because the project team will be dumping too many coffee grounds down the break area sink is frankly ridiculous. Yet, I've seen so many similar risks (ok, not quite as absurd, but you get the idea) added to a potential project for no other reason than the stakeholders are attempting to kill something they just don't want to do, no matter how good it would be for the organization.

So that's why I like Branson's approach; its simple and gets to the point. Its not that a deep analysis isn't needed, but it isn't as needed as many people believe it to be. If it aligns with your business and organizational philosophy, if you can do something to add value better than any of your competition and you find a way to protect the downside, go for it.