During the English Civil War, Cromwell’s own troops often fell out amongst themselves, and they were never more troublesome than on 15 December 1647, at the first rendezvous of the New Model Army. On that day at Corkbush Fields, Ware, two regiments led by Robert Liburne and Thomas Harrison, mutinied.
Many of the soldiers were unhappy with the idea of a compromise with the king, agitating for the creation of a republic, and no deal. Some had formalised these thoughts into a political agenda, and called themselves ‘Levellers’ – their aim ‘to raise parity and community throughout the kingdom’.
The Levellers manifesto, ‘The Agreement of the People’, was published, and many of the soldiers wore copies in their hats, much to the annoyance of Cromwell. He in turn had his own army manifesto, ‘The Heads of the Proposals’.
Negotiations opened with the mutineers of ‘England’s freedom’, and Thomas Fairfax, commander-in-chief of the New Model Army persuaded Harrison’s regiment to accept the ‘Heads’. Liburne’s men were not so easily swayed, and it took direct intervention from Cromwell, riding amongst them brandishing his sword, ordering them to take the Levellers manifesto from their hats, before they complied.
Now, like any leader at the end of a mutiny, Cromwell was in a difficult situation. Whilst there are always casualties of war, it is generally considered poor form to shoot your own troops. There was no point in punishing an entire regiment that was now back on his side and offering to fight for the cause.
Equally, letting the leaders of the Levellers go free could create problems in the future. Cromwell’s answer was to arrest and try the ringleaders in a hastily convened court martial and then let fate play a role. There were three identified instigators, and each was summarily convicted and sentenced to death.
Cromwell needed to make only one example, so he made the three men play a deadly game. Each in turn threw dice to see who would live and who would die. The lowest score fell to Private Richard Arnold. He was shot on the spot.
What an outcome from the roll of the dice! Whilst the situation wasn’t one in which he had much time to consider the probability of certain scores, it would have been useful for Private Arnold to know the odds of success or otherwise as he stepped up to throw the dice in the ultimate game of chance.
We don’t know Private Arnold’s score, but seven (17%) is the most common combined result when you roll two dice, and 2 and 12 (3%) are the least probable, and you will likely roll a pair of doubles one out of every six rolls. I suspect Private Arnold rolled the dice and hoped for the best.
Unfortunately some business owners just roll the dice and hope for the best too, not evaluating risk or assessing uncertainty, they simply ignore the odds. Decisions are either made at random, or left to chance. Often they get the same outcome as Private Arnold.
However, successful entrepreneurs are masters at managing risk and uncertainty. On most days, before they finish that first morning brew, they have already considered several scenarios they anticipate will confront them that day. The risk involved in these scenarios has been quantified and assessed. Contingent solutions have been formulated and plan A and plan B are ready to implement as required.
Uncertainty, which is different to risk, is the possibility that an event will happen in the future. Whilst risk can be evaluated with an assortment of financial decision making tools and sensitivity analysis, uncertainty presents a more challenging problem.
Most business owners do consider uncertainty. Unfortunately it is usually in the middle of the night when they can’t sleep and they lay awake wondering. Mitigating uncertainty requires forward thinking and actions to be taken in order to be prepared for a future possible event. All entrepreneurs take risk, but it is the successful ones that manage uncertainty. They recall the sleepless night and do something about it.
Back to the dice. Let’s play a game. It costs you £1 to play. We then roll a dice once. If it comes up 6, I pay you £10 otherwise you lose. Do you want to play? Most likely you will agree to play. You have a one in six chance of winning £10 for a £1 bet.
Now let’s make it £1m to play. Once again we roll the dice just once. If it comes up 6, I pay you £10m. Do you want to play? The probabilities are exactly the same and so it should be an easy decision. But most people would decline. Would you risk £1m for a one in six chance of winning £10m?
Now imagine you are the CEO of a business with turnover £50m and £2m profit. You have £2m cash in the bank. Katie, your Marketing Director comes to you with a proposition to enter an exciting new market with an innovative product. It will cost £1m to develop and launch the product. There are many imponderables but if it is successful she estimates it will add £50m in turnover and £10m in profit over the next three years.
You cannot forecast what the competition will do, but taking a cautious approach you estimate of the chances of success are 1 in 6. Should you go ahead? Let’s assume that you have no better uses for your cash and there is no cheaper way of testing the market. What would you do?
Most CEOs would make the decision based on how they felt about the product idea, how much they felt comfortable with the Marketing Director’s judgement, how much they trusted the numbers. Let’s say you go ahead and after one year the product has failed. Some unforeseen difficulties with the technology meant that you could not make it a success. You learn what lessons you can and move on.
Now Katie comes to you with a different idea. Strangely the figures are exactly the same as before – £1m investment gives a 1 in 6 chance of a £10m return in profits. You examine all the assumptions and they check out. Would you agree to the request? The probabilities are exactly the same so you should make the same decision, but most CEOs would hesitate. You decide to go ahead and unfortunately the product flops.
What happens when Katie comes to you a third time? In theory you should expect failure 5 times out of 6 and keep faith with her. However, it becomes very difficult to keep placing bets after a string of losses. Most likely you would say Sorry, but your track record on these projects is poor. We cannot keep risking that kind of money again.
Of course, Katie leaves to set up her own business with her new idea, and makes her first million!
What are the lessons here? Innovation is a risky business and often involves many failures. Even with the best market intelligence and research it is impossible to forecast how things will turn out. Should you roll the dice, risk your scarce resources and face the pain of failure?
It is important to recognise that you cannot avoid risk. Doing nothing is risky; you will get left behind. Courageous leaders keep taking calculated risks even after a string of setbacks. Eventually you will roll a six.
What are the odds that your new idea will succeed? If it does, what will the return to you be? One of the problems that we have in business is that we can’t know the answer to questions like this in advance. This means that if you want to innovate successfully, you not only have to deal with uncertainty, you must seek it out. We can’t use not knowing as an excuse to not act – because we never know.
Of course, there are companies that beat the odds. What distinguishes these ‘wizards of odds’ from the pack with business strategy bets that beat the odds time and time again? Here are ten effective habits for rolling the dice and winning every time.
Future Focused: they spend more time than their competitors developing new insights and strategically positioning themselves for that next big opportunity. They make future bets based on market and customer insight, not discovery by chance.
Fresh Thinking: their company story, their value proposition, products, services and even the way they do business with you is different and memorable. They bet on their own future and invest in it with conviction.
Invasive Strategies: their strategies and actions are ‘growth focused’, they bet they will win more business from existing and new customers and set the future trends to counter any complacency from current success.
Customer-Connected: they have high performing sales people who have best practice processes to find, win, keep and grow customers. They don’t leave sales success to chance, they have discipline, focus and clarity.
Co-Creative: they have deliberately identified and engaged with key external individuals and organisations to collaborate and help them make the winning difference. They remove the uncertainty from not having the right skills.
Financial Backbone: they will not allow their growth aspirations to be constrained by inadequate investment, their financial risk analysis of growth opportunities seeks to ensure that they are funded appropriately.
Boringly Ingenious Offerings: they create and launch irresistible new customer offerings on time and within budget to make the competition irrelevant. They manage the risk of new product development.
Own It: they protect, defend, brand and maximise their most precious ideas through rigorous IPR processes and procedures. They remove the risk of copycat replicas disrupting their innovation strategy.
Aligned Minds: they recognise high growth can’t be achieved solely through the contribution of individuals, so they create virtuoso teams. They remove the risk of being exposed to superstars by creating super teams.
Culture Shock: The personality of the business is characterised by a set of core values and an ethos that pro-actively creates the organisation dna and cultural norms. This mitigates the risk of recruitment and secures high retention.
There are risks and costs to every action, but they are far less than the long-term risks of inaction. As Peter Drucker said, People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.
Although luck is involved and factors into the outcome, strategy rather than chance plays a more important role in the long-term of managing the odds from the roll of the dice. So play for the long-term, don’t try to beat the odds, even if you’re on a losing streak. Following the odds will pay out in the long-run regardless of short-term losses. Odds will always even themselves out, but that process may be longer than you anticipate.
In a changing world full of uncertainty, the only strategy that is guaranteed to fail is not taking risk. So take calculated risks, be a wizard of odds. That is quite different from being rash and just rolling the dice and leaving everything left to chance. Take control of your own future, before someone else does.