Calculated risks are key to business growth, says Australian Centre for Business Growth chair Jana Matthews
If we want to pull out of this recession any time soon, business owners, board members and politicians alike must take calculated risks.
Having endured the pain of the pandemic, an increasing number of business owners are looking ahead to 2021 and focusing on economic recovery and growth.
Tentative green shoots are emerging, with better-than-expected Australian labour market data in September and an OECD upgrade to the forecast for 2020.
Victoria appears to have gotten the second wave under control, NSW has learnt to manage COVID-19 outbreaks, and South Australia, Northern Territory and Queensland are beginning to open up their borders.
Given these encouraging signs, this is an ideal time to reflect on the current and future strategy for your business, and ensure your organisation is ready to rebound.
Here are three actions to take.
1. Take calculated risks
In business, like in sports, you need to score goals (sell to customers) to win (secure revenue). This means you need to take risks and bet on specific opportunities that you calculate will yield a high return.
Risk and opportunity are often two sides of the same coin, so don’t try to avoid risk altogether or be excessively risk-averse as we come out of the pandemic.
Philip Lowe, head of the Reserve Bank of Australia, noted that if Australians come out of the pandemic more risk-averse than before, that will seriously impact our recovery.
If we want to pull out of this recession any time soon, CEOs, boards and politicians must be willing to take calculated risks, think through appropriate risk mitigation strategies, make decisions, and move ahead.
Avoiding risks is simply not an option.
Instead, we need to develop the capacity to assess risks and risk mitigation strategies.
2. Stay doubly focused on your customers’ success
Ask yourself: ‘How does our product or service enable our customers to be successful?’
Once you have identified the answer to that question, make sure your prospects and customers understand the specific value that your company’s products or services add to their business.
Work hard to develop a deep understanding of what your customers need to be successful.
Don’t build in every feature and benefit that could possibly be of interest. Instead, spend time and money probing what your customers need, want and value.
Listen to their responses, and then figure out how to deliver it to them.
As Henry Ford noted, people may have said they wanted a faster horse, but he understood that what they actually wanted was to travel faster.
No one asked for an electronic toothbrush, but they did want to keep their teeth clean and reduce the number of trips to the dentist.
Listen to the meta-message your customers are telling you, and then develop your products to meet their needs and make doubly sure those products are something they value.
How do you figure out what your customers value? Put yourself in the shoes of each of your customers and look at the world through their eyes.
Some of the most successful companies I know are practising what I call ‘customerisation’.
In short, they are looking at each of their customer’s value chains through the eyes of that customer, then developing products and services that enable that customer’s customers to be successful.
Delivering what your customer’s customers value creates customer ‘stickiness’, and a huge amount of information about what additional products and services your customers are going to need, want and value in the future.
Use this information when deciding which product or service to develop next.
3. Stay hungry, be choosy, and keep learning
As a company grows, there are many new lessons for the CEO to learn, strategies to pursue, and problems to solve.
Command-and-control and genius-with-one-thousand-helpers leadership models are not appropriate models for company growth.
Instead, CEOs need to learn how to surround themselves with people who match their company’s values, are high performers, and to whom they can delegate.
Members of the executive team, board members, investors, advisors and service providers all need to be willing to sign on to the company’s mission, values and vision. Alignment is key.
Keep learning, but be very selective about which people you use as role models and whose advice you take.
No matter how well-meaning or how much you might like a person, their experiences and lessons may simply not be relevant to the situation you are facing.
Not many people know what’s required to grow a company, so seek out the ones who do, and apply the appropriate discount to advice that others might offer.
In summary, if you take calculated risks, develop products and services that enable your customers and their customers to be successful, and you stay curious and practice selective learning, it will be difficult for your company not to rebound and grow.
