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How entrepreneurs manage risk

Written by Julie Meyer on Wednesday, 06 June 2012 21:16
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In a world where JP Morgan traders lose $2 billion, and European banks look shaky, "risk" starts to take degrees of nuance. What you mean and I mean may not mean the same thing.

In the world of the entrepreneur, he's got everything going against him. He's taking on the establishment; he's challenging the established order of things. And he loves it. He thrives on proving people wrong, and creating a "new common sense" - a context for his invention.

This new common sense is that sense of inevitability that the new thing is going to arrive and last. It's not a pipe dream, but just the future brought bang up to the present to help everyone out. It's not just his ego which causes him to build it. The invention has no chance of lasting unless the entrepreneur creates a circle of re-inforcing corollaries to his thesis -  some sub-ventures, partners, suppliers to his firm's new product or service. You could call it an ecosystem.

In 1898 in Achères, Yvelines, France, the world's fastest car was a battery-powered vehicle called the Jeantaud Duc. Electric cars had the advance and were considered convenient and safe. Oil companies moved more quickly however to build an ecosystem of refineries, wells and pumps, and within a decade or so, petrol-fueled cars had overtaken to become the dominant model of car.

Entrepreneurs' paranoia drives them to build alliances, secure inside intelligence, and to identify ways of making their reality become the dominant reality. They are forced to learn fast, iterate products - testing specific features  individually so that they can be confident of their theories,  and steal ideas from the market which can help them win. In short, they have no shame, but a level of obsession which causes them to be control-freaks who can pivot fast.

Companies tend to concentrate power at the top of a pyramid, and very carefully let it flow downwards. They feel that they are managing risk in this way, but controlling access and decision-making. Entrepreneurs know instinctively that power concentration is the enemy of prosperity and growth. Adoption of the new flows when the benefits are clear to the broadest group of people. Think how much poorer the world would be if we all had to go back to the mainframe computer?

Managing risk in 2012 is more about aligning interests than reinforcing the current mousetrap. One of the best ways to protect you business is to have your team obsessed with finding the future, and working tirelessly to bring it into the firm today.

Last modified on Thursday, 07 June 2012 09:48
Julie Meyer

Julie Meyer

Julie Meyer is one of the leading champions for entrepreneurship in Europe. With over 20 years investment and advisory experience helping start-up businesses, she is the well known founder and CEO of Ariadne Capital, founder of Entrepreneur Country, Co-Founder of First Tuesday and Dragon on BBC's Online Dragons Den.

Julie has recently released her debut book, Welcome to Entrepreneur Country. To purchase your copy, click here.

Website: www.entrepreneurcountry.com/blogs/julie-meyer

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0 # Rick Miller 2012-06-07 09:49
A focus on the future is paramount - interesting paragraph on entrepreneurial paranoia - good read.
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