Why I’d Rather Make Money Than Always be Right
Late Night with Larry: Volume 5
A lot of people would rather be right than make money.
For me, it's the other way around. Because if I'm always right, then I'm probably not taking enough risk. And risk is what it takes to grow a business and hit ambitious goals in the long run. From spending on new technology to making sizable investments on the best and brightest talent to implementing a bold ad campaign to acquiring another company, meaningful growth (and the ability to scale) requires it.
But the difference between success and failure hinges on whether or not the risk is calculated with the right inputs. The best leaders do their homework so that they’re making informed decisions. This is true at any time, but 2020 -- with all of its uncertainty -- reinforced just how important it is to take the appropriate amount of risk in order to survive and thrive.
As we look to 2021, I am sharing the four most important lessons I’ve learned about smart risk taking. These are the things marketing leaders need to know -- and subscribe to -- in order to take risks, especially ones that could have major implications on your organization’s financial wellbeing.
1. Be OK with losing in the short-term.
Sometimes, the results of a risk take time to materialize. The best marketers practice patience, giving their ideas and actions time to breathe -- and become profitable. Leaders must recognize that trial and error is an important part of the process.
At Rise, it’s our job to help brands understand that marketing tactics must be tested so you can learn what is resonating with your audience and what isn’t. Having a strong level of conviction and comfort in knowing that not all bets will pan out applies to risk taking more broadly. Contrary to popular belief, you should constantly be experimenting with new and different platforms. Only then can you identify the next area of opportunity. If you panic because you’re not seeing early returns and pull the plug before the results of your new strategy can become statistically significant, then you may lose out on something that can have real impact.
I coach my team to define milestones or checkpoints when they will evaluate success prior to testing a new idea. These milestones may be based on a length of time, an amount of spend, or a volume of results captured.
2. Back your decisions by math.
In order to assess if a marketing risk is worth taking, CMOs and other decision-makers can and should crunch the numbers to estimate the probability of success and the potential impact of testing new ideas. CMOs have access to more measurable data points than ever before and have the capacity to make decisions based on actual performance metrics rather than instincts or impulses. Digital marketing, of course, is a large contributor to the variety and depth of available data. Having this information at your fingertips means marketers can be smarter about predicting the impact of a successful risk and the trade-offs for ideas that may not work.
What’s more, when you’ve implemented a tactic that is experiencing high levels of engagement and ROI, you can cite this data to make a strong case for scaling up -- and investing more money in something that yields real results. It is also important to remember that risk taking and testing should be a dedicated portion of your ongoing budget, and trying new ideas should complement -- rather than replace -- your proven core strategy. In reality, not all test investments will generate a return. The math still works because over time the upside you will see from your handful of winners will outweigh the cost of the losers.
3. Be savvy with how you get buy-in from stakeholders.
Your marketing program is only as strong as the people behind it. It’s critical to have conversations with your Board or C-suite upfront to ensure they are on board and in support of your planned course of action. Approach the conversation with powerful data, as mentioned above, that defends your position and compels people to listen. It is important to articulate the risk-to-return ratio to prove that the risk is worth taking. This may sound obvious, but I have seen smart marketers overlook this step. Investing $100 in a new idea that is projected to make $101 is very different than risking $100 to make $1,000. If leadership isn’t comfortable with the risk -- or, even worse, doesn’t agree with it -- they’re more likely to 1) pressure you to perform faster and 2) abandon the risk prematurely, before it has the chance to pay off. Conversely, by earning trust and having the tough conversations early on, you’ll empower yourself to deliver on your promise.
4. Become an early mover.
Believe it or not, many years ago at Rise we had a conversation about whether or not we should form a social media practice. At that time, the monetization roadmap of social platforms was less clear. We invested in building a team anyway. The rest, as they say, is history. The point is: There’s an advantage for those who recognize market trends and make a bold move before others. With the right bets, that early move can be the difference between hockey stick organizational growth and stagnation.
More recently, we saw this opportunity when Amazon was in the very early stages of building an advertising capability. We had a strong sense based on consumer behavior trends that Amazon Advertising had the potential to be huge. We took a bet to launch a pilot program and ran campaigns for our first clients at steep discounts to prove out the channel. The impact of that risk on our organization’s growth has been enormous.
As I’ve said, not every early move you make will have a financial windfall. Listen to the market and keep a pulse on trends. Shifts in consumer behavior are some of the best harbingers of what’s to come for marketers. 2020 has made that abundantly clear. At Rise, there are a lot of nascent platforms and tech that have us excited: programmatic Out-of-Home ads, stories and full-screen video on almost all social channels, Twitter’s release of Fleets, and the growth of video-making social app Triller -- just to name a few.
While some may consider risk-taking to be irresponsible -- or in my experience, lack the stomach for it -- in reality it is a necessary component of innovation and upward mobility. Without it, businesses would never evolve; they would continue to accept the status quo and stay stagnant. Recognizing that risk is healthy and that being wrong sometimes is okay, marketers should continue to push the envelope -- and make calculated moves in order to stand out in a digital marketplace that’s becoming more and more crowded.
Let’s keep talking. I’d like to hear about your digital marketing efforts: What are you trying, and how is it panning out? How do you decide what to move forward with -- and what to put on the back burner? Message me so we can keep the conversation going.