How is your business trending? Risk-reward considerations
In companies, there are generally three ways a business is trending – upwards, steady state, or downward. The reasons for these trend directions are a combination of internal and external factors. Internal ones that you control and are where the management of a company earn their keep. For external factors, these can be evaluated with multiple scenario analysis with a deep dive but can never be considered a crystal ball. That is why the KISS principle can be effective (Keep It Short and Simple).
The question is what is the most important purpose for the company management? Is it just sailing a ship or is it pursuing innovation, taking calculated risks for rewards, and actively working to make things better? When does that become reality and not just talk? I believe the answer is action and getting out of a comfort zone. However, taking action should not just be a reaction made whenever a business is facing a downward business trajectory or a crisis. Taking action should be a continual approach and mindset regardless of how your business is trending.
Entrepreneurs often exhibit the quality of action and conversely hired management tends to act more as defending the status quo and to not ‘rock the boat’. The world needs to thank the entrepreneurs that are creating things as that is where real value begins.
In conclusion, the right balance of risk vs. reward cannot be done on a gut feel nor from overly complex statistical analysis from quantitative experts. It is an integrative approach with an underlying focus on making value. The Nike slogan fits this thought nicely: “just do it”.
(Photo credit: Sammie Vasquez)