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Beating The Odds When You Launch A New Venture by Clark G. Gilbert and Matthew J. Eyrin

The document discusses three types of risks that innovators face when launching new ventures: deal-killer risks, path-dependent risks, and high ROI risks. Deal-killer risks could undermine the entire venture if unresolved, while path-dependent risks arise from pursuing the wrong strategic path. High ROI risks are those that are cheap and quick to resolve through experimentation. The document also recommends that innovators judiciously test risks through targeted experiments designed to identify deal-killer and path-dependent risks, as well as integrated experiments that test the full business model. Managing experiments efficiently and being willing to terminate those that do not provide useful results can help innovators maximize their chances of success.

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158 views

Beating The Odds When You Launch A New Venture by Clark G. Gilbert and Matthew J. Eyrin

The document discusses three types of risks that innovators face when launching new ventures: deal-killer risks, path-dependent risks, and high ROI risks. Deal-killer risks could undermine the entire venture if unresolved, while path-dependent risks arise from pursuing the wrong strategic path. High ROI risks are those that are cheap and quick to resolve through experimentation. The document also recommends that innovators judiciously test risks through targeted experiments designed to identify deal-killer and path-dependent risks, as well as integrated experiments that test the full business model. Managing experiments efficiently and being willing to terminate those that do not provide useful results can help innovators maximize their chances of success.

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© © All Rights Reserved
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Beating The Odds When You Launch A New Venture

By
Clark G. Gilbert and Matthew J. Eyrin

Name : Vipin KRK Enrolment no : 6010090913157 HBR CODE 31811


Most innovative corporate innovators are the ones who follow
the discipline of managing their risk.

Recognize that not all risks are created equal


New ventures fairly bristle with risks. If managers attempted to
eliminate all of them, the products or services would never get
to market. Innovators need to think in three broad, sometimes
overlapping categories: deal-killer risks, path-dependent risks,
and easy-win, high ROI risks.

Deal-Killer Risks
As the name implies, these are uncertainties that, if left
unresolved, could undermine the entire venture. Such risks
may be less obvious in the moment that they appear in
hindsight, after catastrophe has stuck.

Name : Vipin KRK Enrolment no : 6010090913157 HBR CODE 31811


Path Dependent Risks
Rare is the new venture that never has to confront strategic forks in the road
to success. Path-dependent risks arise when pursuing the wrong path would
involvewasting large sums of money or time or both.

High ROI Risks


Even after entrepreneurs have considered both deal-killer and path-
dependent risks, many uncertainties will remain on the table. If everyone
were addressed, they'd never get their products to market. But the more
risks that can be eliminated, and the faster they can be removed, the greater
the odds of success. Accordingly, successful entrepreneurs also lok for risks
that are quick and cleap to resolve, applying cost benefit approach that can
be thought of as 'enterpimental ROI'-the amount of risk that can be reduced
for each dollar invested in an experiment designed to resolve it.

Name : Vipin KRK Enrolment no : 6010090913157 HBR CODE 31811


Be Judicious with Capital

All other things being equal, a large corporation's deep pockets should give it
an advantage over bootstrap entrepreneurs, when it comes to financing a
new venture. But in practice, a parent company's funding procedures are
often a major responsibility. Corporations typially allocate money for a new
venture all at once, hoping for a large payoff fairly soon.

Name : Vipin KRK Enrolment no : 6010090913157 HBR CODE 31811


Targeted Experiments
There are designed to pinpoint a deal-killer or path-dependent risk.

Integrated Experiments
These are designed to test how various experiments - the actual business model and
operations - work together. In essence, they involve launching the business, or some part of it,
in miniature. Although pilot programs are nothing new, our experience suggests that
entepreneurs rarely give them sufficient time to play out.

Managing Experiments Efficiently


a. Limit the duration
b. Test one thing at a time
c. Apply the lessons learned
d. Be willing to turn off experiments

Name : Vipin KRK Enrolment no : 6010090913157 HBR CODE 31811

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