A Simple Strategy for Deciding Which Risks to Take

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Human beings are naturally risk-averse, meaning they like to control the amount of risks they take and avoid them if at all possible. It’s what helped our ancestors survive.

But in the business world, risk aversion is a dangerous thing. You don’t succeed without taking risks. The world’s most successful companies were all built on risk. And the most successful leaders are those that know which risks are worth taking, and when.

So if you are someone that is not comfortable with risk, does that mean that all hope is lost? Should you pack up your desk and find a new job, one that does not force you to take any risks (like that exists)?

Obviously, the answer is no. There are ways that you can train yourself to see risk differently. You can become more comfortable evaluating, and taking, risks in your company.

Here is a simple strategy for helping you decide which risks to take:

1. Write it down.

The best way to start to evaluate risk is to clearly define it. This is helpful for you, and for anyone else you are working with. By clearly defining the decision that you have to make and what the risks associated with it are, you set the stage for clear thinking. Without this step, you might approach the problem more vaguely and end up scaring yourself out of making a decision.

2. Describe success.

Next, you’ll want to clearly describe for yourself what success would look like. Approach this as if you have already decided to move forward and the project succeeded. This helps you understand what a positive outcome will look like. Too often when we are risk-averse, we spend all of our time thinking about the potential failure and do not focus nearly enough energy planning for success.

3. Describe failure.

Now, only after you have defined what success will look like, will you turn to the opposite track. Write down in detail what failure will look like. The advantage of doing it this way is that you can create a more realistic version of failure. Often, we approach risk by immediately going to the worst-case scenario. But the truth is, more often than not the worst-case scenario is one that is unlikely to happen.

4. What are the odds?

Next comes the most difficult part – the part that trips up a lot of people. But it doesn’t have to trip you up.

You want to try to estimate the odds of success (the version you defined in step 2) and the odds of failure (the version you defined in step 3). The temptation is to say the odds are 50/50. But most decisions, if we are being honest with ourselves, don’t have 50/50 odds. Sometimes a risk is more likely to pay off, sometimes not. And sometimes there is an in-between outcome, somewhere in the middle of the success and failure you’ve described.

The closer you can come to the odds of each version coming true, the more comfortable you will be with the final decision.

5. What are the alternatives?

Lastly, there is a step too many of us leave out entirely. In most decision-making scenarios where we are weighing the risk of moving forward, we ignore the alternatives.

Usually, if you decide to move forward and take the risk, you are giving something else up. There is only so much time in the day, only so much money in the budget, and only so many priorities we can work on at any given time.

Additionally, if you decide not to move forward because there is too much risk identified, you may end up asking yourself what to do next. Identifying the alternatives to this risky endeavor may make it easier to say yes or no.

6. Make a decision.

When you are all done defining the risk, describing what success and failure look like, calculating the odds and identifying the alternatives, it’s time to make a decision.

Don’t let perfect be the enemy of the good. If you have a tendency to stagnate, to get paralyzed by the decisions before you, commit yourself to a deadline. Don’t let yourself ruminate. If you need to, bring in one or more trusted stakeholders to help you forward. Because the truth is, any decision is better than no decision at all.

Do Something Newsworthy

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You want to make news, take market share, and make your competitors feel uncomfortable. You want your competitors wondering, “What happened to all our customers?” You want them researching your brand, trying to figure out what makes you so special.

The question is, how do you do that?

One way to do it is to become the kind of company that the media and the public love to talk about. Most successful brands have a PR strategy that rolls up into their larger marketing strategy. They know that to accomplish the kind of growth and market leadership they aspire to, or to keep whatever advantage they already have, it takes others (read: outsiders) talking about you.

But what if you’re not a big brand? What if you can afford the kind of multi-million dollar a year PR strategy that the big brands deploy?

Don’t worry. There are ways that even the smallest, and newest brands can do to make news. Consider the following ideas a starting point, a way to get your creative juices flowing:

Mission Tie-in

Brands that get talked about are often the ones that stand for something that resonates with people. Whether it’s TOMS Shoes giving away thousands of pairs of shoes to people in the developing world, or Starbucks working in support of fair trade coffee, or Apple building a new headquarters that relies on 100% renewable energy, brands that find a way to serve the greater good find a way to get press coverage.

What does your company stand for? How do you plan to make the world a better place? The impact doesn’t need to be massive to make it important. Connect your mission with something larger than just your company, and you’ll turn heads.

Events

Events are a great way to generate excitement around a brand or product. Despite the digitalization of everything these days, live events are having a moment. From music festivals to TED Talks to developer conferences, live events bring a group of people together around a mutual passion.

Your company can develop an event on their own, or they could partner with an event that already exists. By offering a real-life experience to people, you are giving them a chance to connect with your brand in a new way.

Celebrities

We can rattle off a hundred or so celebrity spokespeople. The trouble is, most often they’re being paid large sums of money to promote products on radio, television, and Instagram.

But that’s not always the case. Consider what Vitamin Water did in the early days, before they sold to Coke. They recruited celebrities to promote their products, but instead of paying them, they offered stock in the company.

Not every company can afford to do it, but there are creative ways to tap into the celebrity marketplace. And if you can find a brand name willing to get into business with you, you just found a surefire ticket to the media.

Tap an Existing Network

Communities – both online and off – abound. Who says you have to go build one yourself?

You already know who your target audience is, so go and find them. Chances are, there are groups of people out there coalescing around a shared passion that you can be a part of.

A new video game title might tap into a gaming community. A new learning tool might tap into teachers. A ride sharing startup might find a Facebook group for angry commuters.

Whatever it is, by leveraging the power of an existing network, you can associate your brand with an established movement. And that gives your message a better chance of getting out there.

Conclusion

Too many of us assume that since we don’t have the biggest budgets, the PR game is hopeless. The truth is, the only reason you’re not making news is you.

Get creative. Try something new. Make headlines.

Is AI Coming for Your Job?

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When you read anything about artificial intelligence or machine learning these days, you can sort it into one of two buckets: either it’s the greatest innovation ever and will make all of your dreams come true, or it’s the end of work as we know it.

The truth is, it’s probably a little bit of both, and a little bit of neither.

We already wrote a few months back about how machine learning will impact marketers from a process and performance standpoint. But what about jobs? Everyone wants to know – is AI going to make me obsolete?

Like so many other things, the answer is that it depends.

It depends on what role(s) you are playing in your company today. It depends what systems or processes you use. It depends how willing you are to learn and to grow your skillset. And it depends how willing your company will be to invest in both the technology and your career.

Let’s break those each down a bit further.

Your Role(s)

AI and machine learning have the potential to do many of the tasks that human beings do today. And depending on who you ask, that potential is either right around the corner or a decade or two away. Both scenarios are scary, because it means that the tasks we train for today might not exist in ten years’ time.

So the key to understanding how to proceed is to learn as much as you can about what role AI will play. We already know that computers can do simple tasks better than we can, whether it be straightforward data entry, normal mathematical calculations, etc. AI and machine learning will quickly become good at more complex processes, like statistical analysis and prediction.

In the marketing world, roles like media planning and buying, campaign management, pricing, promotions, content, and more will be threatened. If nothing else, the nature of those roles will change.

Human beings will still be necessary, at least in the near term, for strategic planning, as well as the development, installation, and maintenance of those systems that will be set up to improve marketing processes.

Systems and Processes

The roles that are most likely to be eliminated in your organization depend a lot on the types of systems that get developed. Until marketing programs are designed and trained on how to take over your role, your role is safe. And unless you work at a large organization with a huge R&D budget, odds are you are going to have to wait for another company to create the systems that your company will end up adopting.

So the reality is, the smaller your company, the less likely it is that AI is coming for your job anytime soon. Because the systems that get created in these early days of AI adoption are likely to be more expensive, and more complex than what will come later.

Learn and Grow

Either way, the time to adapt is now. Stop thinking about your job, and start thinking about your role. Each of our jobs is made up of a number of different tasks. AI will eliminate certain tasks, but it will also create new ones.

Start training now for the new tasks that your company is going to need you to work on. You can make yourself indispensable by learning the skills that no one else in your company is capable of.

Learn how to work with and manage data. Learn how to design the formulas and train the programs that are going to be used to implement these new technologies. And learn soft skills like people management, strategy, and communication that will always be in demand.

Your Company

Much of what comes next will rely as much on your company as it will on you. Some companies will invest in new technology early because they feel that it will give them a competitive advantage. Others will wait for the technology to prove its effects before they take the time to deploy it themselves.

Similarly, some companies will invest in retraining and preparing their workforce for the coming change. Others will be eager to downsize their teams and take advantage of the promised savings and efficiency that the next technology revolution will bring.

You can get a head start on that future reality by talking to your manager today about what it will mean for your organization. And the choice will be yours to either take the necessary steps to solidify your role in your current organization or prepare for a new role at the next organization.

Where Do Your Sales Come From?

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Do you know where your sales come from?

Companies with physical storefronts do. They know how much product they sell at each of their locations. And they can judge the relative success of each location by comparing it to past performance and to all other locations.

For example, Starbucks knows that the storefront at 29th and Park Avenue in Manhattan serves 75,000 customers per day at an average order value of $4.50 per order, for a total daily haul of $337,500.

But what about companies that sell by phone? Or online?

One might think that it doesn’t matter as much for these companies with a more global strategy and reach. Unlike local stores, online stores don’t have to rely on physical locations to drive sales. And so where people are coming from matters less.

Here’s why that’s wrong:

Being able to determine where your sales are coming from is critical for a number of reasons.

First and foremost, it is critical for marketing purposes. Even in a digital-first world, location matters in marketing. Companies can spend their entire advertising budget in one state, or one city, if they want to. Location is a targeting feature in almost any kind of online advertising one can imagine.

When we know where our customers are coming from, we can better determine the return on our advertising campaigns in progress. We can also optimize our marketing budgets so that we can capitalize on those regions we’re most likely to succeed.

Second, it matters for logistical purposes. Let’s say you manage an online storefront that ships physical goods. In order to optimize your shipping processes, you need to know where most of your customers are located. Back when Netflix was selling DVDs by mail, the number one reason for their success was how well they were able to predict and model their logistical operations, placing fulfillment centers right where they were most needed.

And lastly, where your customers are located can affect how you communicate with them. If your customers are mostly on the west coast, would it make sense to keep call center hours in the early morning in the east? If your customers are big city dwellers, does it make sense to include imagery of wide open spaces on your product pages and promotional materials?

The more you know about your customers, the better off you’ll be. And that includes where they live.

How to Compete

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You are likely to find that most businesspeople are competitive. Especially in marketing, people want to win.

Business has always been competitive. That’s one of the expectations of a free market system. Businesses compete with one another for customers.

And despite most typical assumptions, there are a number of different ways to compete. Most people only really think about two ways to compete:

  1. Quality
  2. Price

But there are many more, often obvious, ways to compete. So let’s review those here.

Compete on Quality

Everyone knows you can compete on quality. If you have a better product or service than your nearest competitor, you are likely to take market share from them.

Choosing to compete on quality means three things. First, you believe that you can consistently outperform when it comes to the quality of your product or service. If you didn’t, you would find another way to compete.

Second, it means that you believe there is a demonstrated desire by consumers for this higher quality. And third, you believe in your ability to communicate your higher quality to those consumers.

The key is, if you compete on quality, you must always be one step ahead of your competitors, those that already exist and any potential newcomers.

Compete on Price

There are always companies in every industry that will compete on price. It is the oldest form of competition. If I think that I can offer the same thing that you offer, but for a lower price, I will. I know that all other things equal, the lower price will always win.

But as successful as many companies have been focusing on price, this form of competition comes with high risk. Why?

What happens if your competitor lowers their price? What happens if a new competitor figures out a way to market an even lower price? Price wars are never fun and often lead companies out of the market entirely.

If you decide to compete on price, you must make sure that you can always offer a lower price than your competition.

Compete on Audience

To compete on audience means that your target market is going to be different in some way from that of your competitors. Perhaps you have recognized that there is an under-represented part of the market, one that is not currently being addressed by your nearest competitor. Or perhaps there is an alternate use for your product that you think will appeal to a new group of consumers.

Competing on audience requires you to focus your efforts, designing your marketing and product for a specific subset of the larger market. If you can serve them better than your competitor, you might either steal market share or create a new slice of the pie that is yours and yours alone.

Compete on Brand

Branding is a way to establish your company in the market – a way of connecting with customers beyond just your products or prices. Large companies love to compete on brand, and we’re seeing it more and more for well-funded startups.

Competing on brand is an attempt to register your company’s name in the mind of prospective customers, so that when they have a specific need, they think of you. If you are successful, it can lead to success even when your price isn’t the lowest, or your quality isn’t the best.

The problem is that this strategy is often very expensive, and only rarely does it succeed. If you can’t compete on one or more of the other options listed here, attempting to out-brand your competition is incredibly risky.

Compete on Service

Sometimes people just want to do business with a company that is going to treat them well. When your price is not the best, and when the quality of your product is not discernibly better than your competition, you can compete on service.

Companies that compete on service focus on being a pleasure to do business with. This means they make it easier to get support, going out of their way to make their customers’ lives simpler.

Companies that successfully compete on service have grown in recent years, focusing on customer loyalty through a more personal touch.

Compete on Location

We often think of competition on a national, or global scale. But companies can and do compete locally. And you don’t have to have a physical presence to do so.

Using any of the above criteria, you can focus your efforts in one market or another that gives you the best chance to win. This is just like an alternative version of the Compete on Audience concept, except that in this case the distinct criteria about your target market is where they live or work.

Conclusion

To sum it all up, it is important that marketers and business managers of all stripes are aware of the many different ways to compete and succeed in the marketplace. You don’t always have to be the best, or the cheapest, to win business. Your company can succeed if you know what you do well, and focus on making that your competitive advantage.