In Finance, a very basic explanation of the relationship between risk and return is that the more you assume of the first, the higher the amount of the second you would expect. In portfolio theory, you learn about uncertainty, and how two different bets that today seem to have the same risk level can have widely differing outcomes. For someone building a stock portfolio, it would be good to brush up on these notions. For an entrepreneur who is looking to build one business within one industry, is this knowledge any good?

When you think of uncertainty, you think about your ability to predict what an outcome can be. Will my product take hold in the market? If you went conscientiously through the rigorous steps to ascertain the value proposition section at the heart of your Business Model Canvas, you may be able to lower significantly the risk associated with the outcome in which your product fails.

Let’s assume it takes hold. Your worries have just started. Now you pose the question: will my product take hold in the market progressively faster with new customers than a competing product already existing, or that could be launched anytime now, inspired on my initial success? It is all about execution now and about fueling your enterprise. Your business model is validating successfully, but if you don’t have the speed to leave all your present and future competitors in the dust, you will not see the exponential growth you want. The same rules that applied last century are still valid here to some extent: standardize and automate. The rules need to be followed and applied with 21st century technologies: the once-size-fits-all of 1990 needs to become fit-all-the-sizes-demanded-as-best-as-possible-without-loosing-focus of 2020. Do it at lightning speed, because then you could not, and it was not advisable, but now technology allows it at an infinitesimal variable cost. Make your investment today in processes, software and automation. Resources, paid with either capital or sweat equity, need to be fed into the fire.

Let’s assume you take off, what now? The listen-to-your-customer of 1990 turns into the embody-your-customer of 2020. Predictability is the new frontier today, and it will be the norm in more and more industries in decades to come. The customer personas of 2020 will become the deep data sets-based models of 2030, and your capacity to understand them and make predictions will set you on a path to dominate.

Will it be time to rest on your laurels then? Not so fast. The internet of 1990, which became the internet of things of 2020, will become something new in 2030. Try to predict that now – some people are trying. We tell all our aspiring entrepreneurs: we never told you it would be easy. Lacking the resources or energy to stay at the top – which history tells us that thanks to our free market and innovation driven economy never happens – you might as well realize the value of your effort, relay the baton, and head for the exit.

 

Our View from the Top – July 16, 2019