“Why, It’s the way of thieves to risk their lives” answered Arsène Lupin to the Lady Clarisse de Cagliostro (Hayao Miyazaki, The Castle of Cagliostro, 1979).
Lupin the 3rd could be a great example for every entrepreneur for taking the risk.
But what is it that famous “risk”?
The word share the same root of a word of my language, risicare, which means to dare (and a notorious phrase in Italy is “chi non risica non rosica” which means who doesn’t dare doesn’t gnaw made me think about my country, but maybe I’ll speak about it in another post). The term’s meaning, of course, has evolved since ages, and now its proper meaning is difficult to determine, because it means different things to different people, because a key component of risk is choice. (Khan, Zsidisin, 2012)
That is easy to understand, moreover if we consider that usually we see risks as something dangerous for use: we see them like something more related to loss than to gain. But, as the risks are strictly connected to the choices, we can always choose.
To manage a sustainable and and efficient business, we will need a strong business model, and every business model does consider the risks, how to handle them, and how to make them profitable.
As Karan Girotra and Serguei Netessine wrote in their How to Build Risk into Your Business Model – Smart companies design their innovations around their managing risk (HBR, May 2011), many companies redesign their business model to reduce their risks. They also underline that “it can also reveal unsuspected opportunities for creating value by adding risk”
Alan Hall defines it as a synonymous of the concept of entrepreneurship. He also presents, according to the data provided by the US SBA (Small Business Administration), the fact that more than half of the startups is supposed to fail within the first three years of existence. “Of those that remain, about one third will make a profit, another third will break even, and the balance will continue to lose money. After ten years, only a handful of companies will be in business.” (Hall, 2011)
So it is a really negative perspective.
But let’s think about it. I mean, let’s think about the reasons which make him saying this,
Why so often the startups encounter a failure, and which is one of the most important risk to face?
Hall lists the possible reasons which could be: not enough customers, insufficient revenues, formidable competitors, a shortage of cash, poor execution of a business plan, uncontrolled expenses and minimal gross margins.
Regarding the competitors, Girotra and Netessine (HBR, May 2011) write that companies create value by being better at managing risk than their competitors are, and so if an entrepreneurship could manage the risks more than the others, it could even earn something from those risks. They also say that the only way to win is to identify where the risks are in the value chain of the business model, determine whether it’s possible to reduce them, shift them to other people, or even assume them.
The major risk you should keep is that your product or service is not even better than the other ones, but it is just different. This is the point. You cannot be 100% sure of it, but you has to believe that – and, even more important, your employees have to believe it, too, because all the company in this way could demonstrate it just with its behaviour- .
Of course you’d like an example, would you?
Well, I work as a waitress for Franco Manca, the one in 76, Northcote Road, London.
Since I made my trial, all the colleagues I met they were absolutely sure of the importance and the originality of the product we were going to sell: a proper Napolitan pizza in London, of an honest price, and, more than everything, made with the original recipe, natural ingredients and a sustainable way of cooking. That was enough for me, even if being a waitress is not my dreamt job, otherwise I should not attend my MACE at Kingston University. And this is why I could be proud of working for the Franco Manca company.
Now, after a few years (the first restaurant opened in Brixton Market Row 4 years ago) the label is famous all around the UK, and I found also customers coming there from outside the Country, just for its name. And, what is more impressive is that that Franco Manca doesn’t have a huge marketing department, so basically its fame is just based on word-of-mouth.
I really don’t want to write a fake advertising post (at least I’m not paid for that!!), but I am writing what I learned from my master and my working experience in London, and I am just trying to link them: the company I am working for is just one of the examples which I know could make you understand that taking the risk for a product you think is a winner it is definitely worth it.