Why Winners Take Risks

 

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

 

“A leader who accepts risk is setting the stage for long term success.” –Tom Panaggio

 

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.

 


“The only way to achieve success is to have the courage to embrace risk every day.” –Tom Panaggio

 

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.

 

“If you do not have a winner’s mindset, odds are you will not succeed.” –Tom Panaggio

 

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

Failure Is Not Defeat

This is a guest post by Tom Panaggio,
 Author of The Risk Advantage: Embracing the Entrepreneur’s Unexpected Edge. Tom is an entrepreneur who spends his time advising companies, speaking and spending time on the racetrack.

Vince Lombardi never admitted to failure. He always said that he never lost a game, he just ran out of time. To Lombardi, failure was not fatal; it did not mean that hope was lost. He simply refocused his team and made the necessary game strategy alterations. In his mind, he never lost or failed because he always made the necessary changes going forward.

There is a difference between failure and defeat. Failure is temporary, but defeat is permanent. I’d love to see the statistics for how many entrepreneurs mistook a failure as defeat and gave up. For anyone who accepts defeat, there is no hope, only regret.

 

Failure is temporary, but defeat is permanent. -Tom Panaggio

 

Today, I am an amateur race car driver. That obsession began in 1983 after I attended a sports car race at Daytona International Speedway. My background was in traditional athletics, and I knew nothing about racing or how to even begin to get involved. All I knew was that I wanted to do it. After conducting some research, I found that I needed to go to two accredited racing schools to qualify for a license, with the caveat that school number two must be a Sports Car Club of America (SCCA) sanctioned school. If I didn’t pass this second school, there would be no racing for me.

9781938416446The first school I attended, Skip Barber Racing School, supplied everything needed, including a real race car and all the safety equipment. The second SCCA school supplied only the racetrack and instructors; I needed to provide my own race car. By luck, I knew someone who owned a race car and was retired from driving. He was gracious enough to let me borrow his car if I paid to get it track ready. That turned out to be a mistake on his part.

I failed at the second racing school. Twice. In consecutive weekends, I failed due to mistakes. (Okay, I crashed both times.) The second failure caused the untimely death of the borrowed race car in a spectacular crash at over a hundred miles an hour. I can still see the track workers leaping from their protective bunker moments before I plowed into it.

Everyone told me to quit, to give up. They said that I didn’t have what it takes to be a race car driver. Even I had doubts, but my desire to race had not lessened. In fact, everyone else’s doubts made me want to prove that I could do it. I was determined, and I wouldn’t let failure defeat me.