How To Identify The Right Risk And The Right Way To Take It

When you are successful, it’s easy to fall into the trap of doing what you’ve been doing because it’s working. It paid off before, so it will pay off again. However, business history is littered with examples of once great, industry-leading companies that have been laid low because they could not change their behavior to meet the world's evolution around them. Sears, Kodak, and Yahoo are just a few examples. This has also happened to individuals who thought they were “safe.” They believed their job would never disappear, they would never be laid off, or they would never hit a ceiling in their career. Yet disruption has a funny way of finding us when we least expect it.

One of the ways to proactively disrupt yourself or your business is to use the S Curve’s first Guardrail – Take the Right Risks.

Which brings us to Mike McDerment .

Mike is the chairman and co-founder of FreshBooks, a cloud accounting software that makes billing, organizing expenses, and tracking billable time painless for small businesses. To date, the company has helped over 30 million people in over 160 countries. A few years ago, I had the opportunity to sit down and talk with Mike on the Disrupt Yourself podcast.

Early in his career, he was a small business owner working out of his house. He became frustrated with how he was processing and tracking client invoices and bills he had to pay. So, in his spare time, he developed a way to automate the process. Which eventually led him to create FreshBooks. However, as the years went on, technology and customer expectations evolved. Mike faced a common challenge: How do we make changes, keep up with current technology, keep existing clients happy, and not tip our hat to competitors? Yes, it works – but how can I disrupt myself before disruption finds me?

“Hey, we’re having great success. Our customers are very happy. They’re the biggest driver of the growth of our business,” Mike said during our interview. “But if I look into the future, you know, five or 10 years, I’m concerned that the technology we’re built on is not going to set us up to win in that future time period and future state.”

His solution? He took the Right Risk. Mike created a second business within his business to pilot new ways of meeting his customer’s needs while still keeping up with emerging technology. He knew he needed to examine his core product and make fundamental changes. However, as a flagship company for cloud-based accounting, Mike also wanted to make sure that his team could take risks without feeling as though they were endangering the information of their hefty client list. He created a new company, with its own website, branding, and legal name, which he and his team used as their “petri dish” to take risks and set FreshBooks up for future success.

Part of the challenge, similar to many maturing organizations, was helping people let go of mental maps of how things were currently done in order to explore new options. “We started out with a very small team, and they spent two weeks away from everybody else, basically making some designs for what the new thing could be,” Mike said.

It wasn’t just a pet project, though – everyone on the team knew that the stakes were real, and the project could be scrapped if it didn’t meet benchmarks. But, the excitement was infectious, and Mike soon found himself with a new, thriving start-up that fostered internal change without building the company from scratch. It was a risk, for sure, but it was the right risk for the right time.

Using everything they learned in their mini-startup, FreshBooks made a smooth transition to their new platform, and the team discovered valuable information about their customers during the process.

This is similar to the famous Lockheed Martin Skunkworks. That’s where they set aside a group of people outside the normal chain of command to let them innovate something new without the constraints of the current operating environment.

This type of approach can be used for personal disruption as well, of course, with a twist. People often take on new assignments, side projects, volunteer efforts, or further their education—inside or outside of the office—to develop new skills, gain new insight, or build experience for the resume. The goal is to take the Right Risks that can propel you forward.

How can you create a small team within your organization to pilot a new idea? 

How can you build that team once you have initial success? 

What areas can you take a risk now to develop new skills in your career to keep you ahead of the curve?