Take The Right Risks
Last week we introduced the 7 Transformers that enable personal growth.
Today we will bring to life the first of these as we progress up the transformation curve.
You’re trying something new: you’ve made a lateral move, been promoted, or started a new job. You are confident that you can be successful, but so much is unfamiliar. It’s easy to be frustrated. Take a deep breath, and remember that at the beginning of this S-shaped curve, progress will be slow
Starting something new means taking a risk. But in our society, the word “risk” has assumed mostly negative connotations. When someone tells us “that’s risky,” most of us a visceral, fearful reaction. But Mother Nature seems to have built a loophole into our sense of well being, because embedded somewhere within the human genetic makeup is an inclination to take risks.
Of course, in order for evolution and natural selection to favor risk-taking as a behavior there has to be a benefit, and that benefit has to outweigh the outcome of doing nothing. Many examples from the animal kingdom support this hypothesis. According to research by Dr. Lee Alan Dugatkin, who was trying to understand a continuum of risk-taking, fish willing to take risks were likely to mate better
There are two fundamental types of risk to consider when contemplating some kind of transformative action: Competitive Risks and Market Risks.
Competitive Risk refers to the risks involved with entering an existing market with a competing product. There’s probably an already-established market leader and other players, meaning you’ll be in a tough fight to gain traction. There is a king pin and it aint you. There will be customers but you will have to gauge whether you can compete and win.
As an individual this is when you apply for a job that already has well qualified prospects. Competitive risk involves head to head competition. How successfully can you compete against ten, twenty, even fifty applicants for a single big opportunity? Or against six similarly qualified peers vying for promotion? This is brutal math; the ratio of winners to losers is daunting.
Market Risk is what you assume when you effectively create a new market, by identifying a need that is not being met and creating the product or service that addresses this need. If there are customers, you are then favoured to own the market. This is what Netflix did when it spotted the opportunity to deliver videos cheaply and directly to consumers’ homes, eventually forcing Blockbuster to adopt the same modus. But by then it was too late for the latter to succeed. It had been ‘netflixed’. What had been a market risk for Netflix, became a competitive risk for Blockbuster, and research tells us that market risk is, well, less risky, than competitive risk.
In fact, your odds of success are six times higher and the revenue opportunity 20 times greater with market risk, says Whitney Johnson. “Despite our love affair with the certainty of competitive risk, the natural world, business research, and brain science all tell us that trying something new is less risky and ultimately more satisfying,” says Johnson.
So for an individual this is leaving a ‘safe’ corporate job to become an entrepreneur or a thought leader in a space that no one else is in. Or by staying I your corporate job and creating new arenas of competition. There may be no official job posting or even an established position. But you detect a gap and articulate a way to fill it: with a new job, tailor made for your expertise. You may be told “no thanks,” but if a manager says, “yes please” to your idea, there is no competition for the spot. There is a risk of being denied but not of being outmatched.
When you make the decision to start something new, first figure out the jobs you want to do. Then position yourself to play where no one else is playing. Despite our love affair with the certainty of competitive risk, the natural world, business research, and brain science all tell us that trying something new is less risky and ultimately more satisfying. It’s the difference between a friends and family lemonade stand that earns a few dollars (which you may love) and one that takes in multiples of that (love and money) – because customers are truly thirsty for what you know how to do, and because you are the only one serving it up.
To get a deeper understanding of how these capabilities play out with each individual, read more at Take The Right Risks which will outline two Melbournians: Tim Ovadia (a friend and colleague) and a true transformer: Martin Crampton.
Tim Ovadia spent the first 12 years of his working life in the world of advertising. This culminated with his ascension to Managing Director of one of Australia’s leading agencies (with Diageo on the books less). Tim took a ‘step backwards to move forward’ with his move to What If (who at the time were the world’s leading Innovation company). Fosters were the lucky recipient of his desire to move the family back to Melbourne when he took on a contract role to develop a Global Marketing Capability program called FAME (Fosters Achieving Marketing Excellence). He was rewarded with a General Manger role looking after the all-important Insights area for CUB. This led to his greatest leap being the chief marketer of iconic brands VB & Carlton Draught. At every turn Tim was taking a risk. Who would have known that a ‘suit’ for Y&R would one day be at the helm of some of Australia’s greatest brands. I am sure his team has loved his boldness.
Martin Crampton’s real estate portal was also a disruptive venture. He parlayed a stint as a developer and demo specialist for a software company in Melbourne into a decade-long marketing career, first at the software firm and then at two multinational manufacturing companies (Bic and Stihl), before starting his own consultancy. In 1993 he leapt into another profession and, with his partner, created Australia’s first national real estate portal (before Realtor.com). Crampton later sold that business and started another one that focused on online services. He currently works on ventures involving franchised data and social media. But his personal disruption started well before that launch, when he realized that marketing strategy, not development and sales, drives usage of software products. He seized the opportunity, thereby positioning himself for a series of big marketing jobs before his next transformative move.
Brain Science also supports market risk over competitive risk. The stressed out, “on guard” or fearful state of mind associated with competition wears down our cognitive functioning over time. When you compete, it’s as if you are going into battle. Your sympathetic nervous system mobilizes the body for a fight-or-flight response, activating the hypothalamus, stimulating the pituitary gland, and releasing cortisol. Your body likes the cortisol initially. This is why studies have found that soldiers in combat are more effective in their firs month on the front lines. But as the cortisol rush levels off, cognitive functioning deteriorates. Judgement, memory and even the immune system all decline, while irritability, depression, moodiness and ailments increase.
Taking a market risk involves a much healthier mental state. In my own experience, even though I crave certainty and the control of a focused task to complete, moving into terra incognita feels better. It is restorative, both emotionally and physically. A study done by Kennon M. Sheldon and colleagues suggests that opportunities for self-expression – for example, creativity – may increase feelings of agreeableness, conscientiousness and openness, leading people to act more responsibly, cooperatively, receptively, and cheerfully. Whilst we perceive a new fangled idea as more risky than an established one, what happens in our brain tells us otherwise.
Managers are not immune to the lure of certainty. Vacant positions are frequently advertised the same way they were the last time we hired, without the slightest evaluation of what the jobs call for. The result being the new employees are often brought in to do a job that a current employee has, out of necessity, already started doing. There is now an overlap, a duplication of effort that causes your people to butt heads. When you put people in competition with one another who are supposed to be on the same team, failure, at some level, is almost guaranteed.
Each employee (and each manager) requires an individual curve to climb. In hiring for, or moving an employee to a new role, skew towards market risk whenever possible. What needs aren’t being met on your team or in your business? Does it make sense to redistribute responsibilities among current team members? Create a new role? Would more high-quality candidates be available if you looked beyond the margins of a currently available job?
If you assume market risk and deploy employees where no one else is playing, you will improve the odds of your workers’ (and your own) success.