Risk and Opportunity

Question 1

What are the growth rings?

Answer 1

• Stagnation: low growth, low performance- e.g. Federal Government
• Order: most desirable environment, most predictable outcomes, comfort is found - comfort reduces growth
• Complexity: highest-growth state, least comfort
• Chaos: no predictability or control over inputs and outcomes, low growth, low performance - e.g. company merger

Question 2

What are the challenges of moving a business from an ordered state to a complexity state?

Answer 2

• Most existing businesses are built to maintain order at all costs, predictability and stability is desirable for shareholders and most managers will desire order to make their jobs easier
• May involve large amounts of rick and capital to move states, many businesses will not be willing to take this chance and may not appreciate the benefits of moving states

Question 3

Should a new venture aim for ordered or complexity state

Answer 3

• The key for new ventures is to grow as quickly as possible and develop as many USPs as possible in a relatively short period of time, therefore a complexity state would be desirable because it creates the highest levels of growth
• An ordered model would likely not lead to the levels of growth necessary for the new venture to thrive as it could in a complexity model

Question 4

How can we improve risk awareness

Answer 4

• Recognise what hazards exist
• Analyse the risks you have identified - constantly re-access risks
• Have a plan for if things to wrong
• Anticipate change

Question 5

How should a business or and individual improve their chances of accurate risk analysis?

Answer 5

• Try to build as accurate a picture as you can of the risks you have identified, include as much data as possible
• Create scenario-based plans and always plan for the worst-case scenario
• Constantly re-analyse risk

Question 6

How to make decisions without being fully informed (using intuition)?

Answer 6

• Decisions don’t have to perfect to work
• Intuition can be right (if you are experienced and the world is regular e.g. not stock market), and it can be wrong
• Delay intuition until as much info is collected (stop being pre-mature)

Question 7

How can we properly assess technology (given how fast it is growing)?

Answer 7

Investors might underestimated/overestimate speed of adoption of new technologies

Question 8

What are the different types of risks in a startup owner could make?

Answer 8

• financial
• strategic
• technology
• new systems and processes
• market
• competitive
• reputation

Question 9

How did Instagram take a risk when first starting up?

Answer 9

Instagram began as Burbn, a check-in app that included gaming elements from Mafia Wars, and a photo element as well. The creators worried Burbn had too much clutter and potential actions, and would never gain traction. So they took a risk and stripped all the features but one: photos.

Question 10

How did Fab.com take a risk when first starting up?

Answer 10

Began as Fabulis, as a social network targeted towards gay men. Although their social site tanked, in their side jobs the co-founders had a knack for selecting products that customers liked, so they decided to take a totally new direction with Fab selling hand-picked home goods, clothing and accessories.

Question 11

How did Pinterest take a risk when first starting up?

Answer 11

Pivoted from “Tote” which allowed people to browse and shop their favorite retailers, and sent them updates when their favourite items were available and on sale. The creators realized that the users of Tote were mostly interested in building “collections” of their favorite items, and sharing these collections with friends.

Question 12

How did Netflix take a risk when first starting up?

Answer 12

Pivoted from mail-order DVDs

Question 13

How did Play-doh take a risk when first starting up?

Answer 13

Originally used as cleaning products for coal heaters. When they became less popular, needed a new direction. Found out a teacher named Kay Zufall, that she had been using the product in arts and crafts class so the children could make ornaments with it.

Question 14

How did YouTube take a risk when first starting up?

Answer 14

• Originally a video-baseddatingservice, where users could upload short videos describing their ideal partner, and browse for potential matches. “Tune in, hook up.” After seeing the potential in becoming a wider and more efficient host of online videos, YouTube pivoted

Question 15

How did Shopify take a risk when first starting up?

Answer 15

Attempted to open their own online snowboard equipment store,called Snowdevil. They didn’t like any e-commerce products on the market, so instead, they built their own. The shop wasn’t successful at all, but they loved the storefront they built, so they decided to sell it to other businesses thatneeded a better online store.

Question 16

What are the key takeaways from applying E&I to the risk and opportunity side of a business?

Answer 16

• Focus on what you have =>If some aspect of your business isn’t working, there might be another aspect that’s doing extraordinarily well – like the one in which Groupon performed so well under The Point’s brand. Focus on the wins, and try to expand on them.
• Cut your losses =>Even if you’re in love with your business idea, you can’t keep pursuing it if it’s not striking a profit. Speck and Butterfield still lament that Glitch never took off, but they had to abandon that project if they wanted to succeed.
• Follow the money =>Ultimately, your business needs to be profitable if it’s going to survive. Throw hypotheticals and ideals out the window, and insteadfocus on where you can generate the most revenue.