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Welcome to Leading With Force — a podcast where seasoned entrepreneur Brian Force shares the invaluable lessons he's learned on his journey through this crazy, wonderful life. Having built several multimillion-dollar companies, Brian dives into the nuts and bolts of building successful teams, scaling businesses, and leading with passion and purpose.
Each episode offers practical tools to effectively cast your vision, build your team, boost productivity, and become the leader you were meant to be. Brian's mission is to inspire you to unlock the incredible power within yourself, achieve your goals, and make a meaningful impact on the world. Join us as we explore how to find your inner leader, empower others, and embrace your journey.
📍 They really just focused on how do they minimize? Their downside, how do they put themselves in a place where nothing bad can happen? And unfortunately, when you do that, when you focus solely on minimizing risk, you limit your exposure to the upside.
And when you're limiting the exposure to the upside, you're actually taking on more hidden risk than you probably know. Hey, everybody. Welcome back to the show. I appreciate you joining me for another episode. Before we dive in today, a quick PSA. If you're enjoying this show, if you find it valuable, give Please consider subscribing if you're watching, and if you're listening to the podcast, go ahead and leave me a review.
It really helps me with my mission to reach more people. And then if you'd like, go over to brianforce. com and subscribe to the newsletter. I spend a lot of time really coming up with actionable guidance to bring you every single week. You can always respond to those emails directly, and I try to have conversations with as many people as possible.
So check out brianforce. com and go subscribe. Over there as well. All right, that's enough for me. Let's get back to the show 📍 The data from the US Bureau of Labor Statistics will tell you that only 40% of small businesses make it to their fifth birthday. Not only 40 percent of new businesses that get started last more than five years, it's a pretty sobering statistic.
It's probably something that you were relatively aware of that new businesses have a high failure rate. There are a lot of people that get into business with an idea or a concept and they start to move forward in five years or less later, that business no longer exists.
What's also true is that of the businesses that make it more than five years, 40 percent of those businesses end up creating true generational wealth for their owners. Meaning once you make it beyond that five year threshold, 40 percent of those businesses end up doing incredibly well. Really, they end up manifesting or getting close to manifesting the vision that the founders had for the company. So when you make it past five years, 40 percent of those businesses end up doing very, very well. And the success or failure of every one of those businesses, the ones that don't make it five years, the ones that do make it five years, but don't ever really end up hitting their goals.
And the ones that end up becoming massively successful, they all come down to a very simple concept. And that is how those companies manage risk.
How you manage risk in your business is ultimately what will decide whether you crash and burn or become wildly successful.
And notice I said manage risk there, how you manage risk is crucial, not what you do to minimize risk. Minimizing risk is an entirely different concept than managing risk. Because if you minimize risk, you also minimize your downsides.
Oftentimes, when we first get into business, we have this idea of playing it safe, of just getting in, Figuring out what our MVP is, our minimum viable product, feeling our way into the marketplace, keeping it small, learning as we go and really mitigating and minimizing our exposure, minimizing our risk, starting slow and building on our successes as we learn.
There's nothing wrong with learning and growing and building over time. The problem is when we try as hard as we can to minimize our risk. We also minimize our exposure to our best case scenarios. We minimize the exposure we have to our competitive advantage. And so the best companies don't minimize risk necessarily.
They mitigate risk in the sense that they manage it as best as they can to minimize their exposure to the downsides and maximize their exposure to the upsides.
That ability to mitigate risk to create the biggest delta between the possible upside and the possible downside is how companies succeed.
We're talking about exactly how to do that today.
First, I want to dive a little bit deeper and make this really tangible so we understand what we're talking about here. I have several really amazing entrepreneurial friends in my life and you may have some like this as well who are now exiting their first or second companies and they've been wildly successful.
And these are the same people that years ago were taking out second mortgages on their homes or putting everything and maxing out their credit cards from the looks of it. These are the types of people that were going all in and taking massive risks in their business. But if you talk to these people, these wildly successful entrepreneurs, most of the time you will find that they don't find themselves to be massive risk takers.
More often than not, you will find that they believe that they had a competitive advantage. They saw an opportunity in the marketplace and they went all in because they thought that they had a massive edge.
Meaning that while it seems like they were taking big risks for the potential payoff, the risk was relatively well managed. Meaning the downside in some cases was yes, that they lose everything and they've got to start over and maybe you have to go do some things that you don't really want to do for a while.
But the potential payoff was absolutely life changing. That's the concept of managing risk. That's the difference between managing risk and minimizing risk. If any one of those entrepreneurs was just looking to minimize their risk, their companies would have never existed in the first place.
They wouldn't have taken out that second mortgage on their home. They wouldn't have maxed out all their credit cards. They wouldn't have had the belief in the potential upside that they had that made them wildly successful. And so if they were just looking to minimize risk and play it safe, they would have gotten trapped in the same cycle that a lot of entrepreneurs get trapped.
They have a great idea, a great concept. They, they think there's potential upside there, but they've never really thought about the risk verse reward. They've really just focused on not risking. They've really focused on minimizing. How do I minimize?
They really just focused on how do they minimize? Their downside, how do they put themselves in a place where nothing bad can happen? And unfortunately, when you do that, when you focus solely on minimizing risk, you limit your exposure to the upside.
And when you're limiting the exposure to the upside, you're actually taking on more hidden risk than you probably know. A great example of this is the real estate sales business around 2008 was on the precipice of a massive market shift.
This was an absolutely life changing event for millions of people, and even more so for people that made a living in commercial and residential real estate sales. Their entire market changed almost overnight and millions of them all of a sudden found their entire business at risk.
This is because when you're minimizing your risk in your business, you're often not looking forward clearly enough to see where the market risk is and to see where the potential opportunities in the future are.
There are also people in residential real estate sales that did incredibly well during this time period. They were forward thinking enough to realize what was about to happen.
And by the way, this didn't come out of nowhere, there were months and months of stories and information being distributed leading up to the burst of the housing bubble.
Anybody in residential real estate could have pivoted. What the best residential salespeople did was realize that the inventory was about to shift in a massive way and they changed their primary focus from going after buyers and sellers during their lead generation activities to going after banks and getting into the REO business.
Real estate owned and foreclosure game and this short sale game and starting to educate themselves on how they could bring value to the market players that were going to be really important in 2008, 2009, and 2010, there are some real estate sales businesses that had their best years ever during the financial crisis because they looked at the market.
And they took calculated risks as to how they were going to shift their operations. If the market never really headed in that direction and things didn't get as bad as they ended up getting, they would have been exposed to some downside. They would have pivoted their entire business and not been able to capitalize in the way that they thought they were going to be able to, but the potential upside was much greater than that downside risk. And so those businesses did very, very well because they managed their risk, not because they minimized it.
Anybody who was looking to minimize their risk did really poorly in that business for a few years because it was the equivalent of Just standing on the tracks as the train approached
And you could find all kinds of examples of these types of stories. Jeff Bezos and Amazon is a great example. During the financial crisis of 2008, they really went all in on their Kindle platform. There was really very little push during that time towards innovative technology. People just weren't spending money the way that they used to. But Amazon saw an opportunity because they realized that the way that people consumed content was changing.
And they took a managed risk on going all in on their Kindle platform. And it's one of the things that's made the company as successful as it is today. It was a huge stepping stone for them.
Netflix was the exact same way with the introduction of streaming. They gravitated their entire business model away from shipping DVDs manually to people to providing a streaming platform, something that people had never really seen before. At least at that scale,
it was a managed risk because even though they were pivoting their entire business model, the upside was absolutely life changing going from shipping DVDs, one at a time to consumers to creating really the first streaming platform, something people had never really heard of before, but they knew the industry was going that way.
That paid off in a way that I don't even think they could have ever imagined at the time. That's what it really looks like to manage risk well.
And in order to manage risk well in your business, first we need to understand the different types of risks that we face. There are three different types of risk that you're going to face in your business. The first one is financial risk. Financial risk is the most obvious one. That's what you're doing with your money.
When I spend money on this, what is the risk that I'm taking? If I invest 10, 000 into a new marketing strategy, what is my risk? Normally those are very easy to calculate.
My risk is 10, 000. And I need to understand what that means for my company. If I don't get a return on that investment at all, my risk is absolutely that dollar amount. And then what the opportunity cost is for that money to be deployed somewhere else. Is there somewhere else that I could put that money?
What is my risk of not putting it there? And, and what is the risk of putting it here and losing the entire thing? Those are the most straightforward. When I bring on a new partner, there's financial risk in that. What if I pay this salary for six months and this is not the right person? I've flushed X amount of dollars down the toilet.
That's financial risk in your business. There's also. Operational risk, operational risk is what is the risk of what I'm doing right now, the move that I'm about to make, what is the risk to my operational infrastructure? So if we go back to that. Bringing on a new team member example. When I bring on a new team member, I have both financial and operational risk.
I have the financial risk. That is the money that I'm paying them to come on and partner with us and fulfill that role. And I have the operational risk. Meaning if I put the wrong person in this seat on the bus, what is the risk to the entire operation? What is the risk to the success of the machine that we're building?
The way that we serve our customers, our culture, how efficiently we operate as a business, what is the risk to that? And so that operational risk is something that we really need to look at.
I think the best example of operational risk is when we move our entire company to a new operating system or main piece of software. When we have a massive database in our company and we move to a new CRM system or we move to a new platform.
That takes A lot of planning that takes a lot of commitment and it's a massive operational risk because it throws the whole business into a state of flux and controlled chaos until we get it right and get it on the other side. It's one of the reasons that so many companies will just be stuck in the dark ages when it comes to their operating systems, the software that they use.
They'll just be using the same thing they were 15, 20 years ago because they feel that the operational risk of moving to a more modernized setup is too great. If they started to move, things would fall apart. That's an operational risk.
And so you're going to face many operational risks in your business as well. And you need to look at how you can manage those risks. Because that is a perfect example. What is the risk to your operation of staying on the same operating system you were using 20 years ago?
And what is the potential upside of making that adjustment and making that transition, going through that controlled chaos and that little bit of pain, how much more operationally efficient will you be on the other side? You've got to learn to manage. Those risks. The third risk that you're always going to face is market risk.
Market risk really comes in two flavors. What is the risk of staying exactly who you are and where you are in the market right now? And what is the risk to the entire market as a whole? The market at large. Meaning, is the market developing and you're staying the same? Are you not innovating? Are you not keeping with the times?
Are you not adapting to new customer preferences and ways of doing business? Or is the market as a whole changing and is your company at risk of not changing with the market or adapting new market strategies as that market evolves?
The restaurant industry is a great example of this. 15 years ago, it would have been unheard of that your favorite sit down restaurant would be somewhere that you could pull up your phone and press a few buttons and get food delivered to your door within 45 minutes.
It just didn't exist back then. It was completely unheard of. But as apps and technology developed, they changed the restaurant market, they changed the industry and they changed consumer preferences. And so restaurants that adjusted and adapt, they really took advantage of the ability to reach new customers and to reach their current customers in a new way.
And they've done very well. Now the entire market itself has changed. There are entire restaurants that don't have indoor dining. They have ghost kitchens. They have restaurants that don't even have a front facing presence. They literally only exist to make food for people that are ordering it through an app.
It's an entirely different market now. And for those that took calculated risks in really leaning into that strategy early on have been rewarded and will continue to be rewarded and restaurants that were really late to the game because they were simply just trying to minimize their risk.
They didn't catch that wave and now they're behind the curve.
This is a really fascinating trend in the business world that's evolved over the last 20 years or so is that minimizing risk really used to be the name of the game. How do you figure out what it is that you do do it really well and then minimize your risk and minimize your downside exposure and just grow slowly but surely over time.
But the world moves so fast these days that time gets compressed and rather than minimizing our risks We need to learn in our businesses how to manage them because the velocity of technological advancement, consumer preferences are changing landscape.
It's happening so much more quickly than it used to. And we need to be prepared to take advantage of it. If we're not managing our risk and looking for potential upside, we're really standing still, which is the same as minimizing risk, which puts us at risk of becoming obsolete very, very, very quickly.
This is what really successful entrepreneurs do better than anyone else. They're not necessarily bigger risk takers. They're just better at deciphering between managed risks and reckless gambles. Everybody's got to go all in at some point. In your entrepreneurial journey, you might have to go all in several times.
But business isn't that much different than a game of cards. There are times when the best thing you can do at the poker table is go all in. You've just got to make sure that you're not going all in just because you're emotional and because you really like the two cards that are in your hand. You've got to go all in because you see a distinct advantage and you see an opportunity and the pot is right.
And you've got a good read on the players at the table. When you've got an advantage or you see a much higher potential upside than you do downside, that's when you go all in. And that's what really great entrepreneurs do better than anyone else.
So let's break down how great entrepreneurs actually identify and calculate those risks Identify the Delta between the upside and the downside and decide what path they're going to go down.
I use a very simple framework in calculating risk. It's called the 3M framework. 3Ms to decide whether or not whatever path you're exploring is worth the risk.
There are three different M words that go along with that risk. That risk must be measurable. It must be manageable and it must be meaningful. So when you're exploring any new path as an entrepreneur in your business, you need to ask yourself, is the risk measurable? Is it manageable? And is it meaningful to the business?
So let's start with the first M measurable is the risk that I'm considering taking measurable. It's about the most straightforward one. Let's say that I am going to invest in a new marketing strategy or an entirely new ancillary stream of revenue for my business, and I have a hundred thousand dollars in upfront costs to get started, and I'm gonna have a $15,000 a month burn rate, meaning it's gonna cost me $15,000 to keep moving down this path.
Whatever it is, I can measure my risk there. I know that it's gonna cost me 100, 000 up front, and I know that it's gonna cost me another 180, 000 a year or 15, 000 per month to the company to continue down this path. So now I know how many new customers I need to acquire for whatever I'm selling, whatever product or service I'm selling.
And I know how quickly I need to hit a break even point, meaning I could be acquiring customers and they could be paying. But if my burn rate, for example, is 15, 000 a month, at what point am I making at least my burn rate? At what point am I making more than my burn rate? At what point am I actually making money off of this?
Because I've got to recoup the initial 100, 000. I've got to get past my break even, which is my burn rate every single month. So if I'm making, let's just say. 30, 000 within six months. Now I'm past my burn rate by 15, 000 and I'm able to contribute 15, 000 more towards my a hundred thousand dollar initial investment, which gets me out of that in seven and a half months or so.
I'm like, I don't have a napkin to do napkin math. But you can measure these things in your business. Is this risk measurable? I'm going to invest that a hundred thousand dollars. It's going to cost me 15, 000 a month to keep it going. This is really like you can measure the entire business from the ground up in this type of measured risk.
When we go into any new business, we want to look at the upfront costs. We want to look at the burn rate of having the right tools in place and the right people on board. And we need to know how many customers do we need to acquire? And what do those customers need to be paying us for the company and not only stay afloat, but to be successful and actually hit our goals.
So is the risk measurable? That's M number one, and it should be pretty straightforward in your business. M number two is manageable. Is the risk manageable? Now, this is a little bit more nuanced. This is where, you know, your business better than anyone else, but this is also where you get to know your business when you're asking yourself, is a risk manageable, which you need to ask yourself is, can we actually handle going down this path right now, operationally?
Do we have the infrastructure? Do we have the right people in the right seats on the bus? We can go and explore a lot of different avenues and all sorts of different paths in our business. But if we don't do them well, then the risk, the measured risk, that financial risk. We're going to parlay that with unmanageable risk, meaning we might have had the right idea and we might've put the right capital behind it, but we didn't put the right resources behind it.
We couldn't manage the risk or it was too noisy. It detracted from us doing other things in our business. I'll give you a great example of this in one of our businesses right now. We just brought on a new business development manager for one of and this person has a scorecard, just like every single role in every single one of our businesses.
And when this person is really successful, they're going to help us expand the business. That's what a business development manager does. And we're going to responsibly grow with that person. We're going to protect our operational infrastructure.
We're going to move new people into the right seats on the bus as the bus expands. I have a whole other strategy for gaining new customers that I think that we're about a year to 18 months away from right now. I really want to bring on an entire acquisitions team to help really increase the velocity of our business's growth.
And I know that we'll be successful when we do that, when we bring in the right person and the right systems, give them the right resources and manage them and lead them well, they're going to be successful as well. But the reality is if I was to bring on a really killer business development manager and a great acquisitions team, all at the same time, that would be an unmanageable risk to the business because when they both succeed in their roles, All of a sudden, our operational infrastructure can't handle the new business.
Our service to clients will suffer. Our ability to get things done internally will suffer. Our ability to onboard new clients. Our phones will be ringing off the hook. We've got to grow responsibly so that as this person succeeds over here, We're growing our operational robustness, our infrastructure, really learning a lot, tightening things up and getting to a point where we're ready to bring on the acquisitions team over here, 12 to 18 months from now,
that's the whole premise of managing risks and asking, is the risk I'm taking manageable right now in my business for these two strategies, they're not both manageable right now. So we're going down one path first, really refining that with an eye on the future.
Our market risk. Knowing that bringing on an acquisitions team 12 to 18 months from now is going to give us a competitive advantage in the marketplace. But we also have to be smart enough to manage those risks and do things in the right order at the right time. So your operations in the middle don't fail.
So you have to ask yourself in your business, are you running down too many rabbit holes at once? Are you taking manageable risks, especially when you've already measured those risks from a financial standpoint and you've got a lot of money you're putting behind them. If we were to bring on both of these two paths right now, it would cost money.
It would cost money in the form of salaries in the form of resources, all kinds of stuff. And if we didn't put them in a position to succeed within our platform, not only would we be setting them up for failure, we'd be putting a lot of money at risk and we wouldn't be able to recoup it. It'd be a big financial loss as well when it didn't need to be.
Yes, both risks are measurable. But only one of them is manageable right now in the business. So we have to ask ourselves, which path are we going to go down first? And I have a gut feeling that you probably have a lot of paths that you want to go down in your entrepreneurial journey. You probably have a lot of great ideas.
That's what entrepreneurs have. They have great ideas. One of the things that sinks businesses though, is that entrepreneurs don't think deeply enough around whether the risks they're taking right now are manageable.
If they actually start to succeed in some of these areas, are they going to collapse on themselves? So start to think really deeply around are the risks that I'm taking manageable. Do I have the support? Do I have the team? Can I responsibly do this and put my team in the best position to succeed right now?
And finally, is the risk meaningful? What have a meaningful impact on the business? Am I risking my capital and my operational infrastructure for something that will not really move the needle forward?
Is the path that I'm running down going to have a meaningful impact on the business? Is it going to do something that other risks that I take aren't going to do for the business? So for example, a meaningful risk is something that could completely revolutionize your business or open up new doors and new avenues that weren't necessarily going to be available to you in your old infrastructure.
This is going back to the Netflix example, a meaningful risk to move to a streaming service rather than a delivery service, which is essentially what they were before. That's a really, really big risk. But it was very meaningful in the business because if it paid off, it made them first market mover in a totally brand new industry.
And they could really gobble up a lot of market share in a very short amount of time. Is the risk that you're taking in the business, is it doing more of the same of what you're already doing or is it having a meaningful impact in getting you into a territory That you otherwise wouldn't have been able to explore.
Is it something that's going to have a really, truly positive impact on your business? And that could come in a lot of different ways.
Most of the meaningful risks that I think pay off really big are ones that open up new doors for revenue, new revenue streams, or they're big operational big wins. They're moving to a new platform. They're streamlining your operations with some massive move.
And they're sometimes the hardest to make because it really means getting out of your comfort zone. And it's realizing that you might be in a state of controlled chaos for a little while. But they can have the most meaningful impact on your business moving forward. We had a business where we ran down the same rabbit hole from a, a operational standpoint with the same tech stack, with the same tools for years and years and years.
And I wish that we had taken the meaningful risk to move to a different tech stack way earlier on in our journey, because by the time that the pain of staying the same. Had become too great. The move over was really painful as well And so you got to ask yourself is the risk that i'm taking going to have a really meaningful impact on the business And a lot of times if the answer is yes, it could be one of those things that could help you make really difficult decisions, especially in your operations, because otherwise you'll be really tempted to stay the same for a really long time, which can be very painful in and of itself.
So those are the three M's of risk taking measurable, manageable and meaningful.
And that's really going to help you have a conversation with yourself and your team around the risks that you're looking at taking in your business. But no matter how well we prepare, We're always going to have blind spots. There's always going to be unknowns.
So let's look a little bit deeper at what I call the four blind spots of risk taking, because these are things you want to look at up front to make sure that you're not too far down the rabbit hole when you realize that you've gone in the wrong direction.
The first blind spot that we get into when we're talking about risk is doing things out of FOMO rather than out of real calculations and data. We shouldn't be doing things in our business just because we think that we're missing out on a big trend or just because we think that all of our competitors are headed in this direction and we need to do the same.
This is really, really clear in a lot of industries right now. lot of old school media and technology companies.
They've been heading down parallel paths for the same time, making all the moves that their competitors are making really acting out of a place of FOMO. You can see this in journalism and media is probably the best one.
A really good example of this is streaming services for like large media companies, like news organizations and things like that, when streaming became really, really, really popular, a lot of the mainstream media thought. To be successful in this new era, we have to create our own paid for streaming platform.
And what they didn't realize is that people enjoyed mainstream media because it was always free.
Nobody really chose to consume the content of any major mainstream media corporation for any other reason than the fact that it was free and it was in your face all the time. For as long as we can remember, the news was the news. And then there were a couple of news channels and there became like eight news channels and you eventually found your favorite, you know, just based on who you liked the most or maybe what your views were and all that type of thing.
But when they switched to being paid streaming services, every single one of them failed, what they realized is that their target market didn't want to pay extra for their content, but when they started seeing some of their smaller competitors in the space, go to streaming and players in adjacent industries like Netflix and like their parent corporations, they thought we need to go do this or we're missing out. What really was happening was they were missing the boat entirely. They hadn't listened to their target market.
They didn't realize that people didn't want to pay for the news at all. And every single mainstream media paid for subscription service has failed.
So you've got to ask yourself similar questions in your business. Are you going down a certain rabbit hole just because everyone else is? Or is there actual data and a real investment thesis that you've come up with that justifies taking this risk?
The second blind spot is betting the entire farm on a single move. Don't do it ever. No matter how good your idea is, if you already have a healthy business, one that is cashflow positive, one that is your primary source of income, it doesn't matter how good the upside is. Don't put yourself in a position where one wrong move could take down the entire ship, unless you're prepared to lose the entire business.
You don't need to bet the whole farm. I'm not saying don't take really meaningful risks, maybe even big risks, if that's the way that you define them. But don't bet the entire livelihood of the business on one single move.
The best example of this is any one of the hedge funds on wall street that has gone belly up in the last 30 years. Every single one of them took massive levered risks on one single trading strategy. And it took down the entire organization and lost people sometimes trillions of dollars. Long term capital is probably the best example of this.
You can go in and read a book called when genius failed, which will give you a great insight into how that story unfolded. The bottom line is don't bet the entire farm on one move, especially if you already have a healthy, profitable, insulated business, manage your risks. Don't go all in on one single thing that could take the whole thing down.
third blind spot is getting married to your risks. Don't get married to the things that you think are best for your business. You need to listen to your consumer feedback and you need to make adjustments. Sometimes we think we have a great idea and then we'll really fall prey to the sunk cost fallacy, right?
We'll put a whole lot of resources into something. And if it doesn't work out, we say, we've just got to give it more time. We're too early. We're ahead of our time. Meanwhile, your customers are not adapting whatever it is that you're taking a risk on. They don't like the new strategy. They don't like the new brand.
They don't like the new thing that your business is doing. And you need to be able to just accept that and move on to the next thing. You need to have a solid idea of how long you expect it to take for any given risks to pay off.
And then a plan to take feedback around that risk and then make adjustments accordingly. Google did this with Google glass very well. I think that that's one of the best moves that they've ever made is just shutting down a project that wasn't working. It had the ability to really revolutionize. I mean, humanity in general, if it got major adoption
but they realized that they were a little bit too early to the game. People weren't comfortable yet walking around with these glasses that put a million different things in their face all day just yet. And maybe that was the technology that was best left to explore at some point in the future.
And so they really just let that project wind down rather than saying, this is the future, whether you like it or not. And we're going to continue down this rabbit hole, especially in the technology space. So many companies have fallen prey to thinking that they're so much smarter than their consumers, that when their consumers don't like something, it's the consumer's fault. And they're going to continue down this path until the consumer gets it. That's a massive risk.
And you need to know how long you're going to give something and how you're going to extract feedback and then pivot accordingly.
And the last blind spot is to have a clear exit strategy. If you are going to pivot accordingly, or if it doesn't work out the way that you think it's going to work out, how long are you going to continue to put resources into this risk? How long are you going to suck operational resources, financial resources to go down this rabbit hole?
That's a huge part of managing your risk is knowing how long you're going to manage that risk for before just cutting it loose. This goes back to not betting the entire farm on one strategy, because if you bet the entire farm on one strategy, then you're all in forever. The only way out of it is to shut the business down if it doesn't work, but if you have a healthy and profitable business, any risk that you take, you need to know how long you're going to give that risk for it to pay off before it starts to become a cancer to the rest of the company.
So before you go down any path, you need to meet with your team or whoever you really trust to help you take on this new risk. You need to have an entire plan laid out For how you're going to execute, what resources you need, what the strategy is and how long the project needs to take to see results before you pivot in a different direction.
Now that we've covered the three M's and our four blind spots, it's really important that we get clarity on one last part of managing risk. And that is addressing, acknowledging, and just overcoming our cognitive biases. Our cognitive biases are what's going to tell us that any new idea that we have, that we get excited about is right.
Just for the sheer fact that we're excited about it. And it seems like a great opportunity and it's something that we want to run for. Full speed with our cognitive biases. If we allow ourselves to believe our own BS for, for lack of a better term, what can really make the three M's and the four blind spots really difficult to understand and to implement, because if we're already coming from a place of, this is our idea.
We're excited about it, and we are doing this, especially highly driven entrepreneurs. We can get into a lot of hot water because we get excited. We get energized around things. We want to do things that are new. We want to innovate. We want to do things better. We really want to achieve something great.
And our own drive, our own motivation to change the world can really get in our way in the form of cognitive bias. So in order to make sure that we're thinking clearly and we're executing strategically on the three M's and the four blind spots, you need a person in your business who is one of their jobs is to challenge everything that you think when it comes, maybe not everything that you think, but when it comes to new strategies, new ideas and risks inside of your business,
one of your key team members needs to be your chief devil's advocate. They need to be the person that whenever you want to run down some new rabbit hole, they are the ones that have no emotional attachment to it whatsoever. They don't care how excited you are about it. They are going to listen to your proposal.
They're going to listen to you, get excited, and then they are going to pick apart everything that you're saying and challenge it and force you to defend whatever it is that you want to take a risk on. This person is integral to the success of your business. And it doesn't matter what role they serve, as long as they are a trusted partner of yours, whether they're a high level manager, whether they're your spouse, who you started the business with.
You need someone that is going to bring you back down to earth when you get excited about running in a new direction.
And they're going to force you. To construct a proposal for your new risk, just as you were, if you were starting the business all over again, they're going to make you go through the three M exercise, they're going to ask you about your blind spots. They're going to make you defend how long this risk should take to pay off.
What the plan is, if the risk doesn't pay off, what resources we need, how it's going to affect the operational consistency of your business, they're going to challenge you to look at the scenarios that could come up and If you go down this path, This is a crucial role in your business because it challenges you to look past the facade and the mirage of your own cognitive bias and think deeply around the worst case scenario, the best case scenario and everything that could happen in between.
And if you're able to justify Your risk to this person now, you know that not only are we headed in the right direction But you're going to be able to rally your team around you My team knows that if I want to head in a new direction with the business I have to convince our most skeptical partner that this risk that we're about to take is worth it and I need to justify Every step in the journey
So our team knows that when we're taking on a new challenge and we're rolling out something new that we're already in alignment and they get excited and it reinforces our culture and it galvanizes our people against the challenges that we know we have ahead. That's how you build culture. Your risks can't just come from you and you're the boss. And you say, so you've got to have someone or people in your business that you're justifying those risks to not only because they keep you more level headed.
Because they will help you build a culture of if these people are in alignment, we know that we're headed in the right direction and we're all in.
One of the last things I want you to ask yourself when you're considering taking any new risk is, is this risk going to make me exponentially better at what I currently do, or is it going to make me good or great at something we don't currently do while all other things constant, right?
I'm prepared to handle it operationally. I have a plan. I've asked myself all the right questions. I have a devil's advocate. The reason that this question is so important is because any risk that you take on, you want it to have one of those two outcomes. You either want it to make you exponentially better at what you already do, or you want it to open up a new door to something that you don't already do, but could do quite well.
The reason for this is very simple. It is insulation for your business from all kinds of volatility, market volatility, to be specific.
Companies with more than one revenue stream are 73 percent more likely to survive an economic recession. And so if you do one thing really well, you are always at risk of a downturn in your industry or in the economy as a whole That could put a lot of pressure on your business.
And so you should ask yourself, is this going to take us down a revenue path that we are not currently capitalizing? And can we be good at that? That's really important. Or can I be exponentially better at what I'm already doing? Because in times of an economic downturn or a big shift in your market, It is really important to be one of the top players in your market.
Mediocre players in any industry get wiped out during recessions. The best of the best have the resources, the staying power, the brand recognition, and the pipeline to survive. So when you're taking on any new risk, it is incredibly important to know, am I going to get way better at what I'm already doing?
Or am I going to get pretty good, if not great, something I'm not currently doing. This is going to help insulate you. If you're doing something just because you think it would be cool, everything else could be true. But if it's not going to answer one of those two questions with a yes, I probably wouldn't take that risk in your business.
So let's say you've decided to take on this new risk in your business. The last piece of the puzzle is you have to have a way to measure it, to gather feedback, to know whether it's working, whether you're moving in the right direction before you take any risk in your business, you need to know how you're going to see whether or not it's paying off.
You have to have a way to measure it. I use what's called the GPS model.
GPS in this scenario stands for ground truth. Pattern recognition and solution. Ground truth, meaning what is actually happening. What are users and customers saying? What's going on with this new thing that we've implemented? And then pattern recognition. What does it mean? Out of all the feedback that we've gathered, what does that feedback mean?
Where are the patterns that we're seeing? And then the solution is, what are we going to do about it? Is there a solution where we can continue down this path and make adjustments and succeed, or at some point is the feedback so great that we need to pivot entirely,
You need to have a regular cadence on which you digest those data points. I'll give you a great example from one of our businesses recently.
We changed our entire customer onboarding system. It was a big operational risk. Our old onboarding system was a little clunky. At scale. It didn't work very well. There a lot of errors and we changed the entire onboarding system, which was a big operational risk. Now we needed to really weave the new onboarding system into the rest of our operating processes.
It took a while for us to roll out. I was very excited about it, but when we first launched, what I really needed to do was get feedback on how well it was working. I was excited about it, but we never know exactly how it's going to be received until it goes live.
And so what we did was we did customer feedback surveys, every single customer that we onboarded, we asked them to fill out a short survey on what their onboarding experience was like and to just share their general feedback with us.
And what we found was there was a couple of really key glitches in the new onboarding system. was a form that people needed to fill out online and download and then upload into our system. And the instructions weren't very clear. People were filling out the form and downloading it and they thought it was automatically getting back to us. So what we ended up with was a whole bunch of people whose information we had on board and no documentation for their agreements whatsoever.
And through that process of gathering feedback, we realized time after time, like 30 percent of our people weren't filling it out properly. And this is in like the first 30 days. We realized very quickly, wow, we need to pivot. There's a solution here. We need to make the instructions more clear. We need to create a better, more seamless path. And we were able to make those adjustments. And now it works really, really, really well. But I got really excited about rolling out this new strategy, and I knew that it was going to create a little bit of operational risk.
But if I had just gotten excited about it, turned it on and then turned my back and gotten back to, you know, my normal business, we would have missed like 30 percent of our onboarding customers who would have given them a really bad experience. We made sure to put a mechanism in place that we were gathering feedback.
Looking for patterns and then finding solutions. So you need to have that same idea in your business, whatever risk that you're going to take. Not only do you need to go through the rest of the exercises and run it by your devil's advocate. Once you deploy, you need a way to gather feedback, recognize the patterns in that feedback, and then create a solution or that the feedback was totally different than you expected it to be. And now you need to pivot entirely. That goes back to kind of the Google Glass example. They pivoted entirely based on feedback.
They got really excited about deploying a product and they could have pivoted and they could have made adjustments and they could have come up with more solutions. But they decided. That just scrapping the entire project for now was the best solution. After gathering that feedback, you had the same type of feedback loop in your business.
So before you go down any rabbit hole, just ask yourself and have a plan for how you're going to measure the feedback.
So as we wrap up here, let's review some of the key points. The biggest risk isn't taking calculated risks.
It's taking no risks at all. Taking no risks and trying to avoid risk completely is one of the most risky things that you can do in your business. So you need to take risks, but you need to make sure that those risks are measurable. Manageable and meaningful to your business. You need to look out for those four blind spots.
You need to find your devil's advocate. The person that you are charging with challenging your beliefs around your risks, then you need to have a feedback loop to measure. Are your risks paying off? You need to be prepared to recognize the patterns in that feedback and find solutions, make adjustments and continue down that path or pivot entirely.
If that's what the feedback is giving you.
Wherever you want to go in your business. It is probably on the other side of some calculated risks where the delta between the downside and the upside is going 📍 to make you look like a genius when you take advantage. I would love to hear what type of risks you're taking in your business, how you're measuring them, who's playing devil's advocate.
Drop a comment below, get in touch with me. I really appreciate you listening to another episode and we look forward to seeing you next time.