“Without risk, there is no growth.”
The Beatles enjoy a sip of Coca-Cola in the early days (photo: Mirrorpix)
By Gary Hernbroth
My dad sprang this on me when I was in high school. As a lifelong educator and administrator, he was full of lots of little nuggets like this for my brothers and me while we were growing up. Not that we always listened to him, especially as teenagers, but he sure was right about this one.
Especially challenging times like these bring risk-reward front and center to much of what we do, especially in the hospitality business. Sometimes it’s by our choice, sometimes not. Either way, it’s about letting go of something in order to try and gain more of something else.
Hospitality (and business leaders in general), along with innovators who initiate risk-reward actions put themselves out there just by deciding to take the risks in the first place. Conversely, when conditions are thrust upon them that are not of their choice, they must be strong enough to navigate their teams or organizations through the rough water so as to survive. It’s a paramount decision to know when and how to let go of something for the prospects of a greater gain.
Lessons from two world-renowned brands
Let’s look at this proposition through the lens of two iconic brands that at first glance don’t have a lot in common: the Beatles and Coca-Cola. In very contrasting ways, both world brands offer compelling lessons about achieving substantial risk-reward success. One route was voluntary, the other was by necessity. Both routes can be applied to other businesses and industries, especially hospitality.
The Lads from Liverpool accomplished something very few enterprises in any industry can do successfully. They willingly moved away from a formula that created a hugely successful world phenomenon known as “Beatlemania” and subsequently progressed into a significantly different style of their own making. In doing so, instead of losing their early fans who loved their original style, they actually grew their popularity — and gained even greater success in the process.
How did the Beatles accomplish this? They were bold, brash and confident in their musical abilities. They didn’t follow any Top-40 formula. After their initial slew of hit records scorched the charts and established them as worldwide icons, the Beatles decided to risk their early sound in favor of evolving into more sophisticated music.
Band members John Lennon, Paul McCartney, George Harrison and Ringo Starr bravely decided to evolve their artistry by writing and recording terrific new music that bore very little (if any) resemblance to their initial work. It was a pretty risky move in its day, cutting across the grain of the time-honored axiom: “Don’t screw with the formula.”
The Fab Four wasn’t interested in being stuck in their musical past. As Lennon famously said on a TV interview, “I didn’t want to be singing ‘She Loves You’ when I’m thirty.”
The Beatles gave their fans a new musical experience with each successive album, constantly challenging their own status quo. They didn’t wait for the music industry to change them. They got out in front and changed the industry. The band’s risk-reward gamble paid off handsomely. Regarded as the most influential band of all time to this day, the Beatles still reign as the best-selling musical act in history, more than 50 years after they disbanded.
Most people are risk-averse – Time for true leaders to step in
While the Beatles willfully brought about their own measure of risk, it was quite a different story when Covid-19 turned our planet upside-down in 2020. We didn’t get a choice — risk suddenly enveloped us. For at least 12 months it was risky just keeping hotels open and the lights on. Many properties were heartbreakingly boarded up and in some cases have yet to re-open.
The hospitality business was particularly rocked by the pandemic. According to The Wall Street Journal the industry lost almost 4 million people – a quarter of the leisure-and-hospitality workforce – who lost their jobs in the first 12 months alone of Covid-19.
According to the US Travel Association, travel spending declined by 42 percent in 2020 (nearly $500 billion) from 2019. Jobs and businesses tied to the meetings-travel-hospitality industry were hemorrhaging. Since the pandemic arrived we’ve all had to let go of many familiar things in the way we live, work and cope. Guests have had to get accustomed to rooms not being cleaned every day, touchless interactions, awkward spacing inside meeting and gathering areas, reduced staffing to provide previous levels of service, just to name a few. And the waves of change will keep coming, pushing the need for innovation and risk-taking.
The silver lining in all of this is that out of crises true leaders and serious innovators evolve. They know that in order to survive in tough times or create positive change you often need to take risks, as painful as that sometimes may be. This magnifies the idea that leadership is not a title or rank, but more a way of thinking, operating and grasping emotional intelligence. And risk is clearly not for everyone, which makes true leaders in very short supply. A recent study by the University of Chicago reveals that as many as 99% of people are risk averse.
“Have a Coke and a Smile!”
Remember that line? It was once Coca-Cola’s marketing slogan. But there weren’t a lot of smiles around the company when Covid-19 hit. We can learn a valuable lesson from the beverage giant in how embracing huge risks seriously tested — and also revealed — true leadership amid the pandemic. A recent business channel interview of CEO James Quincey offers an intriguing look into the elements of risk-reward, change and innovation:
“The biggest risk was riding that pandemic moment of the lockdowns, the second quarter of 2020,” explained Quincey. “We started to focus on ‘OK, this crisis is going to end. And when this crisis ends, do we want to be known for just managing through the crisis, or do we want to be known for having emerged stronger and being ready to have much more growth when the crisis ends?’”
Subsequently, Coca-Cola made the tough decision to drop one-half of its portfolio (“the weakest half”, as Quincy called it). Fifty percent of Coca Cola’s product lines were lopped off. They also changed the ways in which they worked, letting go of many longstanding procedures. They shifted almost immediately into the future.
Quincey also coined a veritable battle cry for risk-reward thinking:
“All that (eliminating the weakest products) has given the organization more belief that risks CAN be taken. We tend to over-research things and hesitate because something could have gone wrong. We forgot about the idea that something could have gone RIGHT!”
“We humans are programmed to over-weight, by far, things we lose versus things we might gain,” he continued. “Risk-taking and innovation is not to let the fear of what you’re going to lose obscure the possibilities of what we might gain.”
We can’t be so afraid to move forward that we freeze in place
While there is no guarantee that you’ll hit gold with every risk-reward effort like the Beatles and Coca-Cola did, resilient innovators pick themselves up from setbacks. Trial-and-error is a big part of taking risks for the sake of progress. Thomas Edison, who held over 1,000 patents, explained his temerity this way: “I have not failed 10,000 times. I’ve successfully found 10,000 ways that will not work.”
With the hospitality industry flipped over on its head during Covid, change by necessity was de rigueur for survival. A restaurant chef I know faced the hard realities of the pandemic. As her business began to crater under the weight of Covid-19 regulations and lockdowns, she took drastic steps to keep her business alive. She began re-working many of her time-honored recipes to accommodate the changing tastes and dining habits of her patrons. She left behind much of what made her successful in order to embrace evolving preferences and conditions. Her risk of letting go subsequently opened up a new fan base for her menus and thus became her next-wave innovation.
The chef is not alone. What is borne from necessity often ends up becoming the new standard. As a recent article in NerdWallet.com points out: “…many small-business owners have embraced pandemic-era trends for the long haul — not just to adapt to public health guidelines, but to diversify and grow revenue. Many found that changes in their business models have helped their companies grow and they are likely to continue with those services.”
Decisions like those described here weren’t taken lightly. In each case there were hurdles to overcome. The road to innovation is rarely just paved with roses and lavender. Naysayers in organizations are easy to find when it comes to laying out risk-reward propositions, and thus struggles arise between the factions of “We can’t” vs. “Why can’t we?”
Don’t make risk-reward decisions in a vacuum
Risk-reward, however, isn’t recommended as a “close your eyes and jump off a cliff” move. Analysis and consideration of the collateral fallout and the up-side/down-side potential is critical.
There are vitally important factors on several sides of an issue that need to be carefully considered such as people, planet and profits. Decisions affecting those elements can be far-reaching and thus must be a part of the innovation equation. The element of change can be a cruel teacher as much as it can be a breath of fresh air. Innovation comes with a price.
There’s a saying that “decisions made in a vacuum suck.” Smart leaders make it a habit to seek input from trusted advisors and other resources such as front-line team members and customers. Ask your “Round Table” of advisors:
• What are we risking?
• What is the reward we are trying to achieve?
• Does it make sense to do this?
• Can we do it successfully?
Input from others is helpful in the analysis, yet it’s leaders alone who must accept responsibility for the decisions and results. Leaders must lead and direct, keeping the process moving forward so as to not get mired in drawn-out debates and paralysis by analysis.
It’s very much like a professional golfer, whose sport is all about risk-reward. The golfer consults with his or her caddie before the next shot in order to get their input on the nuances of the hole being played. Though they value the strategy tips in assessing the situation, the golfer knows that the actual execution of the swing — and the result — is all their own.
What about this for your team or business?
You don’t have to be the Beatles, Coca-Cola or an established chef to make a successful go of this. These risk-reward concepts can be scaled and applied across different-sized organizations in the hospitality industry.
Start your calculation with this in mind, what I refer to as “Rule 1 and 1A of business”: The two primary goals of a business are the acquisition and the retention of customers. Everything else should support those two functions, because without one or the other you can’t have a successful business – whether it’s a hotel, a restaurant, etc. Game over.
Next, I recommend that you focus your initial efforts on these four critical components of your business: Improving your sales numbers, customer satisfaction, employee engagement and quality output levels.
Whether out of necessity for survival like Coca-Cola or the desire to diversify and grow like the Beatles, embracing risk and letting go of something for the prospects of getting more of something else is really a process, not an end.
As John Lennon once said, “Everything will be okay in the end. If it’s not okay, it’s not the end.”
Coaching questions to consider:
• What risks do you think need to be taken in your business or organization, such as ways of doing business, delivering your products/services, customer care, employee engagement, etc., in order to innovate and thrive with the ongoing effects of the pandemic and into the endemic?
• Have you assessed those risks in an analytic way such as +/- or best-case/worst-case scenarios? What level of risk are you willing to accept to achieve your goals?
• What elements or attributes of your organization do you have available that will enable this risk or pursuit of innovation to actually happen? Can your infrastructure, processes and team members handle the new changes that are expected to take place?
