Recently, I had the opportunity to talk with Tom Panaggio, entrepreneur, strategic advisor, speaker and amateur race car driver about taking risks, winning, and using failure to propel success. Tom is the author of The Risk Advantage: Embracing the Entrepreneur’s Unexpected Edge.
The 2 Big Advantages of Risk
Why is risk an advantage?
There are two big advantages to risk.
First and foremost risk is directly connected to opportunity. Every opportunity must have an element of risk or there will be no benefit. Risk is the cost of opportunity. All businesses and organizations must be in a constant state of forward progress because of competition and the ever-changing demands of customers. Therefore, as an entrepreneur or business leader we must continuously seek out opportunities to meet these demands. A leader who recognizes the vast importance of forward motion for their organization accepts risk as merely a cost of opportunity and then actively endorses this philosophy throughout his business in setting the stage for long term success.
Secondly because most people have a tendency to avoid or minimize risk, those who have the courage to embrace it already have a competitive advantage. For example my company was a non-stop marketer. We knew that our competition was not willing to risk the investment in marketing to the degree that we were. So we took advantage of their unwillingness to risk the marketing dollars and dominated our market space by out-marketing them. We put ourselves in a position to win by embracing the risk of marketing.
How do you encourage the appropriate amount of risk?
It is important to understand that my position on embracing risk does not advocate blindly engaging in any and all opportunities regardless of the potential outcome. But the only way to achieve long term success is to have the courage to embrace risk each and every day. With that said, there is no standard to determine what level of risk is appropriate, and there is only a blanket rule of thumb that can be generally applied. That’s the great challenge of being a business leader: recognizing worthy opportunities. Any opportunity that is void of a sufficient benefit or is described as “no-risk” should be avoided. Each situation that requires one to embrace risk must be evaluated on a unique basis.
If pressed for an answer, I would say that we always start with the end to determine if this is an opportunity worth pursuing. What is the reward or benefit the company receives from committing to this opportunity? If an opportunity provides little reward or doesn’t help with the company’s forward motion, then we limit the amount of risk. If the opportunity can change the competitive landscape for the company or increases the value your product or service has for your customers, then the level of risk increases by the potential return.
Everyone wants a formula or template they can apply to all business situations. That shifts the responsibility from the business leader to the formula. But in the end, business leaders need to rely on their gut intuition and have the courage to step outside the comfort zone.
Adapting A Winner’s Mindset
How do you adapt a winner’s mindset?
This is really a difficult concept to grab hold of because human nature is pushing us to play not to lose rather than to go for the win. A study was done and it found out that most people get twice as much joy from not losing as they do from winning. Lose aversion creates risk aversion: “I don’t want to lose what I have.”
My father was a basketball coach so from a very early age the idea of winning was a way of life. I was conditioned to want to win and, therefore, not only to think like a winner, but more importantly ACT like a winner, which means having the internal drive that says, “I want to win” and then focusing on preparing for competition, execution and moving forward.
The truth is business does not support the theory of, “It’s not whether you win or lose, but how you play the game.” In business you not only better play the game right, but you have to win, too. Competition in business has no level of compassion, you either want to win and then act like a winner or you get eliminated. So if you do not possess a winner’s mindset when you launch a business, the odds are you will not succeed.
Using Failure to Succeed