Adaptive Strategies Blog

You may not have noticed, but I took a week off. OK, maybe more. Went to the UK, rewrote my portion of a forthcoming book (I think you’ll like it). And I was just too tired to think. Been there? But I’m back.

I was browsing the books at my local Border’s shop and came across an interesting title, so I took my coffee and treated Border’s like a library. Anyway, the book (Inside the Mind of the Turtles) was written by Curtis Faith a former stock trader and he was writing about the mind of those people who make big bets every day. Interesting stuff.

I came across a section about managing risk and uncertainty – NOW he got my attention. His list of seven actions was nice advice and one of them (“take reasoned risks”) really caught my attention. How do you reason about uncertainty? I mean, it’s uncertain. Right? But the more I thought about it, the more I realized that instead of throwing our hands up in despair, we really do need to reason about risk during uncertain times. In fact, we need to do this more than ever.

Here are a few ways I think we might go about taking reasoned risks. I’d appreciate it if you would add to the list.

• Think in terms of ranges instead of point estimates. (I’m a small business owner, revenue for 2010 won’t be as high as 2008, but it won’t be zero. I think it’s reasonable to assume a budget built on falling into a 60 -80% of 2008 revenue. Now I can go by some equipment rather than wait for “the recovery.”)
• Learn from others. How are my competitors handling this uncertainty? What about companies in other industries? What about historical analogs?
• Focus on the future, not the past. My sales in 2008 are an interesting, but historical, data point. Who will need my services in 2010? What changes will my clients be dealing with? What trends will continue and what trends cannot continue? (Side Note: It seems to me that in 2007 and 2008 the entire building and mortgage industry assumed that housing values would escalate FOREVER. Didn’t you just know that trend had to abate?)
• Study the pressures for change affecting your industry and your customers’ industry. Which pressures might bring gentle change? Which pressures might trigger breakpoints?

By the way, I’ll tell you the other six actions if someone asks me. That way I’ll know that at least one person read this post.

Bye for now. Don’t forget to add to my list. How do you go about taking “reasoned” risks?