FOCUS ON REDUCING THE RISKS ASSOCIATED WITH A POTENTIAL FAILURE
There tends to be a general belief that entrepreneurs are somewhat like Don Quixote: They fearlessly go forward, at tremendous peril to themselves and in the face of overwhelming odds. In fact, the idea of the entrepreneur as a bold, swashbuckling risk-taker is a modern myth. Yes, there are flamboyant entrepreneurs who may repeatedly risk everything, but they are the exceptions, not the rule. In general, today’s successful entrepreneurs are a surprising mix of prudence and courage: They aren’t afraid to try new things, but they first do everything they can to reduce all costs and risks.
Go-it-alone entrepreneurs are optimistic but realistic. Though they recognize that risk is an essential part of business, they are constantly asking themselves, “Now how can I limit the damage if this does not work?” By limiting their risk, they work to ensure they will still be in business even if a particular initiative doesn’t work.
In March 2001, eMachines (www.eMachines.com) was in dire straits, and Wayne Inouye was hired as the new CEO. Most analysts assumed that Inouye would head straight for bankruptcy court. Instead, Inouye engineered one of the most stunning turnarounds in recent memory. After eMachines overtook Gateway (www.Gateway.com) to become the nation’s third largest desktop PC company, the two companies chose to merge, with Inouye becoming CEO of the combined company.
Inouye echoes this generally unrecognized aspect of successful entrepreneurs: “We are used to thinking of entrepreneurs as people who embrace tremendous risk. In my experience, successful entrepreneurs do everything they can to limit risk. They may take a risk on a new business model or a concept that has not been tried before—and they are not afraid of risk, but within