Launching a new venture? Here’s how to beat the odds
By Clark Gilbert & Matthew Eyring for the Harvard Business Review
“For nearly 20 years the case study used to introduce Harvard Business School’s Entrepreneurial Management course has been Howard Stevenson’s “R&R.” It looks at Bob Reiss, an entrepreneur who launches a venture in the board-game industry. Students are encouraged to explore all the production, development, distribution, and marketing costs associated with the new venture.
A cursory reading of the case suggests that it’s a lesson in the rewards that come to an entrepreneur who is willing to take on an enormous amount of risk… but a more careful analysis reveals something else entirely… Reiss seeks to reduce his risks before making any significant financial investments or operational commitments… he pre-sells a sizable number of units to ensure cash flow… Reiss actually limits his at-risk capital to the cost of the game design and the prototype.
Rather than the high-risk, high-reward seeker he initially seems, Reiss proves to be a manager who constantly identifies risks and finds creative ways to remove them.”
Gilbert and Eyring go on to assert that the most effective corporate innovators are the ones who constantly minimise risk.
“Success comes to those who quickly identify and systematically eliminate risks in the right order, using the right level of resources and the right methods.”