There are two kinds of risk in business. Multiplier risks and unnecessary risks. Let me explain both these type of risks –
This is when you take a risk which is not-existential; could be large enough, and if it plays out well (a.k.a if it works), then you get multiplier returns. ‘Multiplier’ starts with at least 2x outcomes. Anything else, according to me, is not a multiplier outcome, just an additive outcome. Now, I am not saying that a 2x multiplier effect is a great outcome — it is a barely passable multiplier. Relative to a large (but non-existential) risk, multiplier risks should aim for at least 3-5x return/outcomes.
Every other risk is unnecessary in my opinion. You may still take that risk, because you feel like it. I am just reflecting that it is not necessary. Fry some bigger fish.
Again, my opinion – great startups get built when the team takes multiple multiplier risks consistently over a long period of time. Risks which move the needle; in a big way. Risks which succeed, because the work that goes behind these risks is the best in the world. World class execution is the only way to live through multiplier risks.
Multiplier risks change the paradigm.
One word of caution though: the lowest rock bottom of the ‘unnecessary’ bucket is ‘stupid risks’. Don’t do that to your startup, that’s not cool. Not cool is an understatement. Don’t be that person — that un-thinking person who completely misread or miscalculated the downside of the risk vs the upside it can potentially produce.
In order to empower your startup team to take multiplier risks, don’t burden them with your expectations. Ask people to just live up to their own.
At Zomato, we define our culture by the term ‘multiplier risks’. There are a lot of people who are empowered to take these risks on behalf of the organisation — 4 out of 5 times they execute so well, you only witness the upside of multiplier risks. In the context of a specific problem, the people who take and execute multiplier risks are called ‘drivers’; and everyone else ‘co-drivers’. In other contexts (the roles switch or become interchangeable) the co-drivers become drivers, and others, co-drivers.