Beating the Odds When You Launch a New Venture

In: Business and Management

Submitted By nitafantasy
Words 3885
Pages 16
Harvard Business Review
May 2010

Beating the Odds When You Launch a New Venture by Clark G. Gilbert and Matthew J. Eyring Smart entrepreneurs aren’t cowboys—they’re methodical managers of risk. For nearly 20 years the case study used to introduce Harvard Business School’s Entrepreneurial Management course has been Howard Stevenson’s “R&R.” It looks at Bob Reiss, an entrepreneur who launches a venture in the board-game industry. Students are encouraged to explore all the production, development, distribution, and marketing costs associated with the new venture. A cursory reading of the case suggests that it’s a lesson in the rewards that come to an entrepreneur who is willing to take on an enormous amount of risk. Reiss capitalizes on what he correctly foresees is an ephemeral opportunity to ride the coattails of the Trivial Pursuit craze before me-too products flood the market. But a more careful analysis reveals something else entirely. At every turn, Reiss seeks to reduce his risks before making any significant financial investments or operational commitments. For example, he presells a sizable number of units to ensure cash flow. As students come to understand, Reiss actually limits his at-risk capital to the cost of the game design and the prototype. Rather than the high-risk, high-reward seeker he initially seems, Reiss proves to be a manager who constantly identifies risks and finds creative ways to remove them. Tackling the Right Risks First (Located at the end of this article) Over the past decade we have participated in the development of a dozen or so corporate ventures and served on new-venture boards at a host of companies, including Johnson & Johnson, the Scripps Media Center, and Landmark Media Enterprises. Although many of the ideas in this article come from our direct work with new ventures, they also reflect more than 10 years of collaborative…...

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