One cliche cautions us to look before we leap, but another warns that he who hesitates is lost, while a third cautions that if nothing is ventured, nothing will be gained.
Therein lies a puzzle to be solved by business owners and executives on a daily basis: when to plunge ahead and when to hold back. In short, how to manage risk.
Ken Rosenfeld, president and CEO of eHealth Technologies Inc., co-founded and heads a firm whose business—health information technology—demands constant innovation and thus constantly poses risks.
Early in the decade-old company’s history, Rosenfeld said, the company plunged ahead with a project to develop systems that would let radiologists send X-rays, MRIs and other medical-imaging scans directly to physicians’ offices and hospitals.
When eHealth Technologies agreed early in its history to supply software that could do that job to the Rochester Regional Health Information Organization, the company had not yet developed the technology and had no guarantee it could.
Success was not guaranteed, but the firm took a leap, Rosenfeld said.
“We took the money,” he said.
Would he do it again? Without a doubt.
The firm took a chance, but transfer of medical imaging files among providers is now a keystone of U.S. health care, and eHealth Technologies has a big slice of what has developed into a large and lucrative market.
Still, Rosenfeld added, the company is more or less constantly faced with similar dilemmas. New software development requires heavy front-end investment in time and money. And new product development is needed.
Rapid market and technology shifts make standing on past accomplishments a recipe for failure. At the same time, said Rosenfeld, failure is not all bad. Past mistakes are a guide to what not to do in future attempts; knowing when to quit is key.
“We’ve actually fired clients,” Rosenfeld said.
By fired, he explained, he meant that on some projects eHealth Technologies saw that it would not succeed and needed to throw in the towel. Admitting defeat can be preferable to pressing on and making a bad situation worse.
Dominic Genova, owner of Genesee Valley Motors Inc. in Avon, runs two Livingston County new car dealerships. His Ford and Chrysler Dodge Jeep franchises sold some $65 million worth of vehicles in 2015, earning the firm the eighth-place spot on the Rochester Business Journal’s most recent list of the area’s largest car dealers.
Starting the dealerships was the biggest risk he ever took in business, Genova said.
To start the Chrysler dealership in 1994, Genova, a married man and the father of then two young daughters, quit a comfortable Chrysler Corp. executive job paying nearly six figures. He sold most of the family’s possessions and their home and moved into rented quarters in Livingston County on Conesus Lake.
Assuring him that the only thing the family was risking in the move was money, his wife backed his decision, Genova said. Her support helped him formulate a criterion he has used since then to assess risk, one in which the financial upsides or downsides can sometimes take a back seat.
“My wife said: ‘If you fail, we’ll just start over,’ ” Genova recalled.
Staying in a secure job that paid well might seem to have been the wise choice. But in the corporate position, Genova felt that that he was accomplishing little of lasting value.
“I started the dealership because I wanted to be relevant,” he said. “I wanted to leave something behind.”
Going against accepted industry wisdom at the time, Genova gambled again when he decided that his sales people would be paid straight salaries instead of commissions and forgo the then customary negotiation rituals attendant on new-car sales. Offering vehicles at a no-dicker price, Genova promoted the dealership as a no-nonsense shop.
The move turned out to be prescient. Similar practices have come to be accepted by a widening swath of U.S. car dealers, who are finding many buyers prefer a straightforward deal.
Asked in a Top 100 survey to name business risks they have taken, several managers mentioned making unconventional hiring decisions as a risky move that paid off.
Many business owners see a resume chock-a-block with impressive credits in their particular industry as not only desirable but a precondition for hiring a new employee.
William Foster is president and CEO of BioWorks Inc., a Victor-based seller of environmentally safe garden and agriculture products. In hiring, he often prefers taking a chance on prospects whose backgrounds fall outside of his industry rather than going with an ostensibly safer choice with more of the right experience but fewer of the qualities he considers essential.
Transparency in dealings and an interest in learning new things are two things he looks for.
“You can teach a lifelong learner the job. You can’t teach someone how to be a learner,” Foster said.
Randolph Henderson Jr., president and owner of Henderson Ford, has a similar take.
“I’ve taken a couple of risks with key personnel who others felt weren’t the right fit or had reservations about, and they turned out to be outstanding team members and assets to our organization,” he wrote.
Among other responses from executives on risks that paid off: acquiring companies or divisions in different industries or industry segments than their own, taking on debt to finance growth or investing in new, not yet proven technologies.
“Success requires taking risks,” eHealth Technologies’ Rosenfeld wrote in the CEO survey.
If a single lesson can be drawn from his and other Top 100 executives’ responses, it might be this: Knowing when to leap ahead and when to hesitate in business is at least as much art as science.
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