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Each C-Level Advisor contains one article on executive level management
practices, which applies to all companies, and a second article
focused on early-stage company development.
Past .
Essential
Resources For CEOs and Entrepreneurs at Startup and Emerging
Growth Companies
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Key Ideas
"If I had six hours to chop down a tree I'd spend the first four
sharpening the axe."
-- Abraham Lincoln
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No problem
can withstand the assault of sustained thinking.
--
Voltaire
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The Risk Assessment Landscape Map
A Method For
Evaluating And
Managing the Risks of A Business
Developed by
Bob Norton
Too often, managers focus
solely on the probability of a risk or problem happening and ignore far more
important factors such as the cost of failure and the ability to actively
manage each risk as more is learned. To
properly manage a business risks must be evaluated and monitored constantly.
Steps can usually be taken to adjust the three main risk factors before and
during any project. The three main factors that
should be evaluated and tracked are: 1) The cost of a failure, 2) The
probability of a failure and 3) The controllability of the risk. Each of these
factors must be taken into account to properly manage any risk at the
beginning of any project and each time major new pieces of information
become available that impact those risks. Because human beings tend to be
able to think in only three physical dimensions in addition to time, it is
important to clearly communicate to people who only spend a small fraction
of the time you do on a subject, by clearly showing complex concepts on two
dimensional paper or slides. Sometimes a very complex concept can be broken
down into several layers, or several two dimensional graphs, so that each
accurately addresses two or three of the possible five or six dimensional
problem. This allows people to both grasp and focus on certain issues.
I have developed the following risk assessment diagram specifically for this
purpose. Used in conjunction with a
Market
Landscape Map, it can be a very powerful tool to evaluate a market entry
strategy, a new business opportunity or even a business as a whole. What is
important, although sometimes hard to do, is to develop it in the context of
specific assumptions that are fairly narrow. For example, you must do this
for a specific product or service against a single vertical market or niche,
not against several, as the risks will almost always be vastly different
from niche to niche or market to market.
Frequently,
identifying and managing risk is the major way in which a company can avoid
disasters and achieve success. Larger risks, can generate larger
rewards, and can be taken when those risks are very manageable or when the
cost of failure is not too high. Larger
risks can also be taken when these unknown factors will be revealed more
quickly and the task can be abandoned earlier and at a low cost, based on
certain risk milestones. Typically young companies can alter course easily,
while larger more established companies often have too much momentum and
overhead to be agile. Therefore, large companies need to look out in time
further and change course much sooner. The diagram is a great tool for
accessing risks and watching them closely. It can be easily updated over
time and will help people understand the three major dimensions of risk, not
just the probability of failure because taking risks should not be viewed as
just a binary yes or no decision. Expected milestones, or deflection
points, can sometimes help limit the risk and allow you to take larger risks
without necessarily incurring the full cost of failure. In other words,
manage these risks closely as you learn more and make changes when new
information becomes available.
To finish
this article click here
Product Showcase
The Startup Manual
Learn new ways to
design, launch, hire, and
manage your startup for rapid growth. This 267
page binder and CD
will show you the proven
methods that will take
you from the raw idea stage to
a significant company.
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Job Scope In Early-Stage
Companies
In any
startup company EACH employee MUST wear many hats. In a large
company, job specialization is the rule.
However, job specialization does not make for a successful
startup, as it requires too many people and both costs and risks
greatly increase with the added levels of communication.
It is a well know fact that there are diminishing returns with
each layer and additional employee on any project. This is even
more pronounced in knowledge intensive areas and professional
services like software engineering and other knowledge and
design intensive areas. (Read The Mythical Man-Month). In
early-stage and smaller companies, each employee must
provide a broad range of value added responsibilities that might
encompass several jobs at a large company.
Therefore, employee selection in
early-stage companies is not only more critical because there
are so few people, but also more fraught with danger because
each person's "scope", ability and attitudes must be
exceptionally broad.
This means that each employee must ideally be someone who is
always improving and pushing the envelope of their own
abilities. Intelligence and flexibility are far more critical
than they are for an employee at a big company where additional
people with specific narrow skill sets could fill a role and
employees having trouble can easily bring in additional
experts. Large companies are much less demanding of their
employees because the same type of thing is repeated over and
over again and there is more redundancy in the people. In a
startup, there are new surprises every week and one must be
ready, willing and able to accept and tackle new problems that
they may have never seen before. These might be considered
"someone else's problem" in a larger company but can be life or
death, do or die, situations for a startup that can not draw on
other resources.
This chart shows
this concept graphically: . . .
For the Rest of This Article
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Bob
Norton is CEO of C-Level Enterprises, which provides CEO level
advice, mentoring, coaching and consulting, as well as interim
CEO services to companies. He has been a full-time CEO since
1989 and now works with companies to develop and refine visions,
maximize performance, and design businesses for long-term
strategic advantage. He can be reached at
Bob@CLevelEnterprises.com.
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