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Look at the Worst Case to See All of Your Opportunities

Mar 1, 2008
You do better when you investigate how you will do if you face setbacks, rather than solely considering the implications of the successes you are seeking out. What question should you address?

Here's the answer: What are the worst consequences that can occur if you follow the path you are considering?

Let's assume that you are doing stock-price improvement thinking. If the action you are considering fails to work, investors may sell, causing the stock price to drop by say 15 percent. That drop, in turn, could trigger a hostile takeover bid, which would be very costly to overcome.

Here's the next key question: Is there some way to offset those negative consequences?

Perhaps the action could be taken with three partners in a joint venture so that if it failed, it would have no visible impact on the company's profit-and-loss statement. And with the right three partners, failure may be much less likely.

You can also find out what other actions investors would like you to take, and be prepared to announce one of those if the action under consideration fails. In this circumstance, you can pass the test of being at least as well off or better off if the action fails as long as the expense is not very great.

This last vulnerability can be controlled by watching the progress of the action carefully to be sure it is on track before large sums are invested. Perhaps you can arrange to have the partners fund all of the early spending so your risk is minimal until the later stages. If the program is an expensive partial failure, consider if you could sell it to a partner who will get more benefit from the results than you will. That contingency could eliminate much of the financial downside.

Here's the third key question: If you cannot offset all the negative consequences, are there other ways to generate additional solutions?

By narrowing the risk you cannot cover, you now know where your vulnerabilities are. If these risk exposures are large enough, you can afford to draw on other resources, such as meeting with people whose expertise is greater than yours in that area.

In the example being developed here, your potential partners are probably a good resource to help design a project that will have limited downside risk. If the potential partners bring substantial knowledge strengths to you, they should also be able to help you find solutions. If not, they may not be the right partners for you.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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