2
On Risk Taking
2.1. Where is the gap?
Risk or reward? Danger lurks not only within the business route but also within opportunities. Why do we retain such a dualistic view for a single term? After all, “venture capitalism” originates from the latin adventura(literally “toward the venture, the possibilities”). But it was then renamed as risk capital!
2.1.1. Business school
Beyond the official presentations trying to portray how innovative the organization is, the sad and sordid reality is that every manager is in fact, at a personal level at least, allergic to risk, for the simple reason that an elementary cost/benefit analysis quickly convinces him that risk taking does not pay off, in terms of career development.
Moreover, traditional business school teaching puts so much emphasis on risk analysis that cautiousness easily turns into risk aversion.
Even in cases where the innovative forces of the company manage to come up with a promising new product, it is frequently rejected, based on the idea that a new product could sabotage the existing products, which characterize an organization perceiving its own innovation (and innovators) as a threat.
In traditional sectors, characterized by slow innovation, managers may never, or very seldom in an entire career, forced to decide on a major disruptive innovation. The bulk of innovation happens through small, incremental, low risk and low cost improvements.
However, even in those sectors, there always comes a time when the digital era is about to overthrow everything:
- – in the automobile industry: the connected electric car, possibly driverless in the future, if socially accepted;
- – in the media industry used to sell newspapers and magazines: the electronic distribution of content;
- – etc.
Managers wired with traditional MBA thinking often find themselves unable to deal with such revolutions, and will always find good reasons to stay away from them and even shield themselves from it with a priori arguments and solid justifications.
But in the post-modern digital age, disregarding such revolutions is equivalent to suicide.
Most traditional managers only manage one thing: their career. They condemn to death the companies they work for, yet do not care much because their own survival instinct will tell them when to jump out of the boat before it sinks. A reptilian brain is always on the watch, quick to escape through fire the door.
2.1.2. Apple
Apple has managed to introduce several products, which, as its co-founder Steve Jobs said, are of the “once in a lifetime” category: the Mac, the iPod, the iPhone and the iPad. And more recently, under his successor Tim Cook, the Apple watch.
It is easy to forget that these did not fit within any existing known product category, and initially created strong negative reactions.
The nature of the personal computer is simply not fully understood by companies like Apple (or anyone else for that matter). Apple makes the arrogant assumption of thinking that it knows what you want and need. It, unfortunately, leaves the “why” out of the equation – as in “why would I want this?” The Macintosh uses an experimental pointing device called a “mouse”. There is no evidence that people want to use these things.
San Francisco Examiner, John C. Dvorak, 19 Feb. 1984
Apple innovated in aspects other than pure technology: one of the key iTunes innovative features was the possibility to buy songs individually. A “whole product” (according to the definition of marketing academic Rogers [ROG 83]) is more than the original tangible product; it must include everything the customer needs and wants for using the product comfortably and with a positive experience.
2.2. Amplifying the gap and progressing
Many companies are afraid of sabotaging themselves with their own products. This is a classical topic in business school lectures. It has produced an obstacle of fear for decision makers. A terrible consequence is the resulting brake put on innovations. Innovating involves venturing into the unknown; it is not about dealing with uncertainty. If you don’t open up to innovation, competitors will and could steal the market from your own hands.
Uncertainty and the unknown is widely observed as confusing in post-modern business and this has devastating consequences. First, what is uncertain boils down to probabilities, is amenable to some causal reasoning and there are many applied mathematical techniques available to cope with it. Risk analysis is then processed as computing the probability of the occurrence of an event or scenario, etc.
“To boldly go where no man has gone before” was the evolved title sequence of most Star Trek science fiction episodes. Indeed, innovating radically consists in venturing where no one has gone before: going into the unknown, not quite the uncertain; no well-formed statistics have been received, and the customer may not have noticed any path going “somewhere there”. Actually, when you really, honestly innovate, you do not know where you are headed. Accepting this fact is a prerequisite to reap the benefits of innovating. Hence, you will inevitably encounter failures on your way (Part 2 will detail a reasonable number of Apple’s failures). The point is this, wherever you go, you must know why. Be traceable and transparent to yourself, following a constructive approach, detecting the “moments of innovation”, i.e. the very step where you are branching into a new direction which bears fruits.
Do not confuse the risk that comes from a low probability of success and the opportunity that arises from following a dark path. If you search for your lost glasses under the lamppost, you can compute the probability of (not) finding them. You want light, and light has already given the answer to your question. You may intensify the light and search a bit further down on the sidewalk, but are you searching in the right direction?
The “fear quotient” is a natural ingredient in human personality. But pure innovation players have no such fear. They have an inner light lighting the obscure path they’re treading against all odds. They see beyond obstacles and risk analysis is not their daily tool for calculating their next step. They use a positive approach which seems to be their fuel. And it helps them when jumping into regions which have not been lighted by anybody yet. They think using their acquired genes (of the ancestors companies and business practices) and create new ones.
We know of only one framework which is exactly designed to systematically tackle the unknown. C-K theory form Ecole des Mines ParisTech explains why and we use Appendix 4 to introduce it. Furthermore, it provides all the design properties mentioned above: it is constructive, traceable, and accounts for the “Eureka moments” which intensely sign off the unique moments when something “clicks” before us. We have used it at length for understanding Leonardo Da Vinci deeper, as well as artists as René Magritte Salvador Dali, and in new ways.
Free yourself from the probability/predisposition way and enter the free path to the unknown: there lie the breakthroughs that will change the world. Neurologists may say that this is equivalent to opening up the possibilities of the right hemisphere of the brain, since the left one is believed to measure uncertainty. This is the stunning “Stay Hungry. Stay Foolish” motto delivered at the end of Steve Jobs’ address at Stanford University in 2005. In other terms: “Dare to go where nobody has gone before”.
A risk-oriented attitude is grounded on fear. And the opposite is certainly not ignoring risk! It is opening roads in the dark. This is genuine “craziness”, in terms of the corresponding attitude that stands apart from the mainstream. But this is the way to become a master of your own future. The individuals who follow this thread participate in their own creation. Why fear what you contribute to create? Why fear if you create the ways to design desired futures? C-K theory can dramatically help in this future design field [COR 13]. It’s a way to learn to not be a victim of competition or of the mainstream, to escape the duality that reigns in competitive markets1. This liquidates what you owe as third (competitors, partners, etc.) references and you free yourself from any related accounting. You become the author of a new “truth”.
Innovation comes from within before becoming an outside artifact, so express your truth and strive. No other player is meant to dictate what you have inside. When Jobs said “I have at least another 4 to 5 products in my stomach” during the 2000s, he was surely referring to that inner drive that authors fresh new creations, not those of others, an ability to really create entire new worlds and which requires to be in a sense “unfaithful” to obsolete arrangements.
For instance, there are industrial standard ways of doing things, the ways we’ve been using so far. When Apple abandoned the CD reader in MacBooks, or added a Thunderbolt port, or removed all ports but the Thunderbolt on MacBook Airs, what was this, if not leaving current practice behind (however still possible via a device) and opening new ones that bear new performance for the user? They are not procedures, but conscious moves beyond procedures! They express a deliberate intention, which is to be sensed for the user side. And for Apple, it means the breaking of a silent contract with industry. The way of the leader is always to set ourselves as an example and not to control others! Business schools have here a case study to disseminate.
However, this also means quitting a path which was entered some time ago (the Innovation Capability Maturity Model details this mechanism, see [COR 15]).
In his book The Macintosh Way [KAW 90], Guy Kawasaki, a marketing member of the historical core team, outlines one aspect of Steve Jobs’ personality, for which he uses the term “Chutzpah”.
This difficult to translate word comes from Hebrew. Standard translations include audacity, insolence, impudence, gall, brazen nerve, effrontery, incredible guts, presumption and even arrogance. Kawasaki gives several examples of Chutzpah2:
“Calling up tech support to report a bug on pirated software.”
or:
“Steve is off the scale when it comes to Chutzpah. He used a slide in the 1985 shareholders meeting showing a mock-up of the Wall Street Journal with headline ‘Apple proposes Detente with IBM’.”
Figure 2.1. Jobs triggers chutzpah by reversing dominance in a mocked leading newspaper in the eighties
He also adds:
“The great thing about Chutzpah is that it inspires people to exceed their capabilities. Steve wanted to defeat IBM, not “achieve 18 percent market share”. Epic battles are not measured in market share percentage points, and people will fight to the death if they are led by a guy with Chutzpah.”
A well argued and solidly justified position! When we left IBM in California in the year 1981, our San Jose Research Laboratory immediately ordered 240 IBM personal computers upon its announcement on August 12, 1981. Shortly after, we were working at IBM La Gaude Study and Research Center near Nice in France: they timidly ordered two of them and locked them in a room! Were these little PCs too intimidating for the monster mainframes of the time?
Remember: Chutzpah is the trigger which unbolts the wheels of fixation.
2.3. The genes
In this particular case, we have an Apple gene directly derived from Steve Jobs’ DNA. No doubt this gene is still present in Apple’s DNA.