Navigating Risk
Tackling risk requires a particular mindset.
Risk happens when a task is arduous and its outcome is uncertain. You have to know you can accomplish the mission–even if you don’t (yet) possess the skills. You have to prepare for disastrous outcomes and ignore their possibility simultaneously.
And you have to put aside the size of the task and simply take the first step. You don’t cycle one hundred miles without mounting your bike and taking the first pedal stroke, and then the one after that, and the one after that. You have to recognize when it’s time to rest and refuel and when it’s time to push on through the pain.
You need a plan. I have a mantra, “Formulate the plan, execute the plan, stick to the plan.” This mantra creates determination and a course of action. Then, when something happens, and you have to adapt, you know what it takes to diverge and what it looks like to get back on track.
Real-world risk
I buy my essential surfing gear from a company aptly named needessentials. They have a risky company strategy where they spend next to nothing on branding and marketing and encourage their consumers to buy fewer goods. Their unbranded wetsuits are about a third of the price of name-brand surf companies like O’Neill and Rip Curl. They prioritize sustainable manufacturing, using recycled materials, and utilize a natural plant-based rubber called Yulex to significantly reduce the environmental impact of producing their wetsuits. If you’ve ever surfed in water temperatures below 60 degrees Fahrenheit, you know how essential a quality wetsuit is.
The needessentials team diverts marketing and branding money into long-form documentaries portraying athletes using their products to accomplish risky adventures. The films entertain while demonstrating how their products stand up to use and abuse. Marketing this way is an insanely risky strategy in a market environment with a consumer attention span of about seven seconds. They ask consumers to watch a 90-minute film to influence them to buy products without logos or branding.
Not surprisingly, these films feature athletes taking significant risks in and out of the water.
Their latest endeavor is a film called Calypte, which catalogs the journey of a pair of surfers with no sailing experience as they navigate from Thailand to Lombok, Indonesia, a yearlong trip covering over five thousand nautical miles.
The adventure seems tantalizing and terrifying and dripping with outsized risk.
Storms chase their 35-foot sailboat across the open ocean. Catastrophic equipment failure could happen at any moment. (A bilge pump fails during a storm in the middle of the night while the boat is more than six hours sailing from the nearest land.) Charts are inaccurate, forecasts are misleading, and pirates lurk in shipping channels and anchorages. Downtime consists of surfing powerful overhead waves over shallow, razor-sharp reefs hundreds of miles from medical support.
You’d be crazy to do it.
You’d also be crazy not to. Because anything with outsized risks also returns outsized rewards.
Business risk
In the film, the surfers take steps to manage risk. They invite aboard experts to teach them to sail, navigate, and repair critical equipment. Along the journey, they partner with local mariners and fishermen to replenish supplies and avoid hazards. They wait out some storms and flee others.
In the software business, we face all kinds of risks.
Starting a company, pivoting your company, launching a new product, changing your pricing model, or deciding to move up or down the market is risky.
Several times, I’ve taken the risk of adapting to a multi-product strategy. Going multi-product isn’t quite as terrifying as a journey that requires navigating the infamous Strait of Malacca, but it’s scary nonetheless.
Sometimes, how your new product aligns with and complements your existing product is obvious. But it’s less obvious whether your customers expect you to include those new product features in the existing product. A second or third product might solve a customer problem in a better, more complete, or unique way. But, it might also hopelessly complicate the sales motion and make for an impossible go-to-market.
More code equals complexity, and complexity brings the risk of product bugs and security vulnerabilities. A new product forces you to spend more money, increases your burn, and amplifies the pressure to execute in the market. Competitors might beat you to the punch with a more nimble, simpler product that solves the same problem, and you are left positioning an expensive multi-product solution. Customers vacillate between all-in-one platforms and best-of-breed specialty solutions; you misread the market signals and find yourself caught on the wrong side of the market trend.
Managing risk
So, you do your best to manage risk.
Prototype your product and solicit customer feedback before investing significant development resources. Experiment to identify and refine your ideal customer profile and target user personas. Deeply research the market to understand trends, buying patterns, competitive threats, and emerging technologies that help or hinder your product initiative.
The exhilaration of market success, of feeling the tug of product market fit, and realizing you’ve cracked the formula that unlocks a $100M business is a lot like the thrill of safely exiting a barrelling wave or arriving at a distant port with sails aloft and hull intact.
To realize those rewards, you must first be willing to take the risk, commit to the journey, trust yourself and your team, and execute faster than possible.
Don’t be reckless. Be diligent and prepared, and then do your best to ignore disaster. Learn to react and repair. Decide how you will decide when to shelter, flee, or brace for a fight. Take the journey with people who share your appetite and tolerance for risk–you don’t want to find yourself at the edge of a cliff with someone who won’t jump.
When you are ready to embark, push the risks and rewards out of your mind and focus on the journey one inconsequential step at a time. Resist the temptation to be afraid of the risks or too motivated by the rewards. Neither your fear nor unrealized gains will carry you through the moments of sheer terror when only swift action gets you safely to the next step.
Enjoy the trip.