Doing Business Boldly

Doing Business Boldly by Daniel Kehrer

In one line: Businesses must be willing to take risks and capitalize on new opportunities to survive and grow in the ever-changing modern business environment.

The Heart of Business Risk

Creative Destruction
Capitalism is about change, not just creation, and requires active risk-taking. Often the biggest risks with the greatest opportunities require drastic change to old products or practices. Resisting change can be a bigger risk to a company's survival than trying something new.

Risk-Taking Reconnaissance
Having the right information is crucial to taking smart risks, but there is never perfect information. It is easy to fall into the trap of analysis-paralysis, and decision-makers must realize when they have enough information. "One lesson of risk dynamics is that risks are most treacherous when decision makers act as if they're not taking risks, when they really are" (p18).

High-Flex
Active Risk-takers (ARTists) must be flexible and adapt to changing situations. A flexible ARTist can adapt and take advantage of new information or situations, and things rarely go according to plan.

Championing Change
Change is constant, and ARTists must embrace and push for change when it is needed or advantageous. Neither products nor markets have infinite lives, and what is hot today may be obsolete tomorrow.

Paying the Price

Active, Not Passive
Risk tends to be seen as universally bad and to be avoided. Risks often represent opportunities, but should be perused intelligently. Companies that take more risks innovate more, because they are willing to do and try what others are not.

Seeing Rewards over Dangers
Danger or risk can represent an opportunity, but the mind perceives gains and losses differently (Prospect Theory). Risks should be evaluated based on reality, not perception.

Taking Responsibiltiy
Successful ARTists must and do take on responsibility. Most people avoid responsibility, because they prefer freedom from choice over freedom of choice.

Risk is Contrarian
Innovation is inherently new, which means being contrarian and bucking a trend or going against the crowd. Its success is very hard to predict. This means that taking a risk to capture a new opportunity often means going against the crowd.

Seeing Through the Risk Mind

Thnking and Perceiving Differently
ARTists perceive risk as opportunity, and see risks from multiple angles, and different angles than most other people and make connections that others don't. They also have a strong desire for competence and making an impact

The Spirit of Wealth Creation
Wealth is created by taking risks. An individual or company must choose the right risks for themselves. Companies often fail because the try to do too much instead of focusing on doing a few things very well. Taking too many risks, or taking unwise risks, can be worse than taking no risks.

Grasping Risk's Geometry

Perception of Control: An ARTist's Paradox
ARTists have the confidence that they have influence over the risks they take. They don't always have any control at all, but the perception of control is more important psychologically than reality. People generally have a self-perceived internal or external locus of control. Those with an internal locus of control believe that they can influence the outcome, and tend to take frequent but calculated risks. Those with an external locus of control believe that outcomes are out of their hands and up to fate. They take fewer risks, but those that they do take can be very large.

Sharing Risk: "Other People's Money" and "Other People's Brains"
Reducing risk is different from reducing a risk's effects. There are several ways to mitigate a risk's effects:

• Pursuing the risk as a joint venture with partners
• Constantly reviewing the situation to make course corrections
• Having the flexibility to respond to changing circumstances
• Acquiring information to better inform decision-making

Confidence is crucial for intelligent risk taking, but self-reliance to the point of believing that one can do it all can stifle intelligent risk-taking and lead to narrow-mindedness. Use other people's money or brains to complement your own resources.

The Flip side of flops
Risk-taking is a process of trial and error, and failures are inevitable. As the adage goes, you learn more from failure than success. Perfectionists who strive for an impossible goal make poor risk takers, because they are terrified of failing to meet a goal they cannot accomplish.

Risk-Taking Tactics

Quick on the OODA Loop
The OODA loop is a decision-making framework from the US Air Force composed of four basic steps: Observe, Orient, Decide, and Act. These steps must be taken to make a decision, and to respond quickly to a situation, one must take these steps quickly. Some companies have created cultures of "intrapreneurship," or entrpreneurship within a company. This pushes decisions down the chain of command so that the company can respond more quickly, and requires a healthy appetite for risk taking by lower level managers.

Risking from Strength
ARTists should play to their strengths when taking intelligent risks, to take advantage of their natural edges.

Follow Trough
Comfort and overconfidence destroy risk takers. Taking the right risk is insufficient for success by itself; intelligent risk taking requires good execution and follow through.

Revolutionary Risk

Making Mental Measurements
Entrepreneurs have to know how to take the right risk, and when to abandon an idea (know when to hold 'em and when to hold 'em).

Freedom: Concomitant of Control
Management is shifting from control to experimentation, risk taking, and providing the freedom to act. Fast action is necessary to take advantage of new opportunities as well as having the freedom to do so.

Seeing the Big Picture
Risk-taking is active; risks must be sought out to make investments. Risk-taking is continuous; ARTists constantly face new risks and decisions, even throughout a single "risk" taken by pursuing a particular idea. Bigger risks don't necessarily mean better ideas. Risks can become opportunities when you broaden your scope and look at the big picture.