With the threat of potential disruption, many companies today face pressure to change. As a result, companies may lean toward relatively quick action. Their actions may be driven by a fear of ending up like Kodak, whose lucrative business with photography was brutally disrupted by mobile phone picture taking capability.
Some time ago, I wrote about the importance of not panicking when faced with disruption. However, although companies should not panic, they also cannot completely ignore the risk of doing nothing.
The risk of doing nothing was an important point mentioned by a CEO panelist during a January 22, 2020 World Economic Forum session “Davos 2020: Disrupt Thyself” hosted by Fast Company magazine and available as video online. During this session, the CEO of Stanley Black & Decker says that “in risk management, often times the risk of doing nothing is the biggest risk of all.” “And, it’s not intuitive to people.” He goes on to explain the value of thinking through various scenarios and the probabilities that those scenarios might actually happen. He points out that one of those scenarios is doing nothing.
As I see it, based upon my 25+ years researching business success and failure patterns, his approach of thinking through various scenarios is a good one. And, he’s right that doing nothing can be a serious risk. After all, companies succeed by improving their business on an ongoing basis and by doing so in a way that builds upon where they have been before. Doing nothing and essentially letting the business stagnate is not a wise choice.
However, the downside of doing nothing should not be used as an excuse to do something ill-fitting. It is important to think through possible actions and to eliminate what fits poorly. Really poor fits typically will never succeed or, if they can succeed, they will require many more years of large losses than the company is willing or able to incur.
Unfortunately, it is not unusual to see companies pursue transformational efforts that fit poorly and end up as major disasters. When this occurs, the risk of doing nothing would have been a much better alternative than the major money loser that the company chose to pursue.
So, in conclusion, remember that doing nothing during changing times can be risky. But, when striving to do something, be sure that the alternatives pursued are a good fit. Pursuing areas too far afield from what fits the business can be far riskier than doing nothing.
If you’d like a workshop to enlighten your group about taking the right risks, just contact us.
