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14
May
2011
Even the business of high probability of failures is not a waste

Research and development plays a vital role in today’s corporate or non-corporate business structures. It is really obvious that management of the companies like to hear about growth opportunities and areas through the research process.

 

It is indeed a valid point that no one like to fail whereby failure can not be considered as an objective of an organization. But it is not necessary that if we are not willing to get failed we can’t. So it is always required to be well trained to manage failures in business or planning something as a separate business unit that do the business of high probability of failures. This is the most certain plan B in business that we can make a plan A for our specific business vehicle.

 

Managing failures is actually a tendency of a business concern that helps her being standing even when one line or many of the business goes sunk. In this regard companies need to develop a business plan whereby they have to select a rational business area where they would have high probability to fail that they can bear by top planning. It can be 10% to 20% of corporate portfolio.

 

I am not saying that this area would be “The Whole Core Business” of a company but rather a touch diversification within or out side Core Business for learning from experiences. Uncertainty is well present in business environment. Even in core and conventional business we rather have expertise over tricks of the trade but when we do something new or we really want to be innovative, this always comes from your ability of managing failures.

 

In my view planning to do business in all brisk and relatively certain opportunities is the risk whereby the collapse can not be well managed due to a psychological anticipation of smooth running of business. It is always better for company to engage her work force in something really challenging and next to impossible. This actually develops stamina in managers to counter hard situations.

 

The failures if they mature in process can be borne whole heartedly as a research cost. The one hardest operation in which you fail actually open two doors for you being a company; First you learn where you went wrong so you can regroup to get it back and second you can take other core business operations more serious while you have certain experience of facing more superior risk.

 

Innovation is not possible when you are rigid to carry your conventional business in which your chances of success are relatively high. It is always a product of making new targets and with a will to achieve spectacular from the impossible. In this regard corporate managements have to plan the cost of their failures. If they get successful then it is an ultimate bonus. If they get failed then they were well planned to bear it.

 

Being finance professional and a practical marketer for my company I always like to diversify within my core business and unconventional businesses. I plan cash flows of my normal conventional activities to bear a discount to serve my risk or adventure objectives within corporate structure. This is how my fear factor for failure stands a little low when I do something as 10% to 20% activity that people in market do as 100% or 0%.

 

I have been coaching different business managers & entrepreneurs for last some years and I always have a feeling that many of them avoid creating business plan over endeavors that looks so difficult or impossible. It is merely because they considered management as an art of chasing for sure shot success.

 

If diversification is recognized as a way to reduce over all risk or corporate entity then we can diversify in different level of business as of their chances of failures or success. If we properly manage the cost of being a failure then we can easily play tactics to get success out of it. It is more psychological and then a managerial affair.

 

It is always better to discount your consistent and conventional ops in their cash inflows to reserve a fund for doing activities that have high chances of failure. This can add a lot of learning in your manager’s arsenal of intellect and management. Once being confident of tolerance side of transaction the managers can play it the way best. And if it get successful then the yields of innovation are always briskest than conventional or core Business.

 

It must have to be a top leader’s initiative because the subordinate managers can not take interest and zeal in adventure once they see the upper manager so fearful while doing things of high risk to enhance corporate value. Yes it is not recommended to go with it as whole but you can diversify and have some strata of business to be planned like this.


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Mr. Omer

Mr. Omer [1982 born] started  his professional career as a commercial / investment banker after achieving Gold Medal in Finance at master level from University of Karachi in 2006.

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