We still often hear that taking more and bigger risks is the key to achieving business success. We are told to do this even though there is evidence that high risk does not lead to high reward. Success comes from selectively choosing the right risks, which are not high risks, but are prudent risks with higher likelihoods of turning out well.
An example of attributing success to risk taking appeared in the July 22-23, 2023 Wall Street Journal article “She Invented Barbie. Her Bigger Invention Was How She Sold It” by Ben Cohen. Spurred by the popular new Barbie movie, the article discusses Ruth Handler’s success, as a founder of Mattel, the company that sells Barbie Dolls. The article reports that Handler took a big risk by contracting to advertise Mattel toys on the Mickey Mouse Club Show throughout the entire year, not just during the Christmastime toy buying season. This innovative advertising move paid off well for Mattel.
The Wall Street Journal article quotes Robin Gerber, who wrote Handler’s biography, which is a book titled “Barbie and Ruth”. The quotes about Ruth Handler say, “She was willing to do things that no one else had done.” They go on to say, “The key quality of hers as a leader was her ability to take risks.”
However, the article also points out that Handler made use of data to guide Mattel business decisions. In fact, the article says, “She was a glutton for data.” She even “enlisted her own private army of employees who would pop into stores around the country and track sales in real time.” So, it may be the data, more so than the risk taking that drove Mattel’s success. The data can help insure that the right risks are taken.
In my 25+ years researching business success and failure patterns, I have found that taking big risks does not bring high rewards. Taking calculated risks that have a pretty good chance of going well are what leads to success. Data can help guide decisions to improve the chances for successful outcomes. If Handler had data suggesting that advertising might boost non-Christmas season toy sales, Mattel’s innovative advertising approach may not actually be quite as risky as it might otherwise seem. Depending on exactly what data Mattel had, there may still have been some risk with the innovative approach to advertising that the company took. But, the data can help minimize the risk, suggest possible paths that might have good potential even if there is still some uncertainty, and help drive business success.
In conclusion, data can be a powerful element behind business success. Risk taking generally only fuels success when it is not excessive. To protect against disastrous outcomes, the right precautionary steps must be taken if and when a company chooses to exercise a preference for a greater degree of risk.
