Think Customers: The 1to1 Blog

If a good idea, properly researched, turns out to have a 92 percent likelihood of success within four quarters with continued predicted success at the three-year point, then it still has an 8 percent chance of failure. Even conservative investors could find that attractive, when presented with a fair and honest predictive model, but it means they must be willing to accept an 8 percent failure rate.

Not taking any risk at all is possible, but deadly to returns, the economy, and likely the morale of a citizenry in a country where the Dream is based on the wild success of businesses started in garages, winning the lottery, and more patents per capita than any other country on earth. While we agree that throwing all consideration of the future out with the bath water is folly, we need to bear in mind that progress, productivity, and indeed success depend on failure - or at least the calculated possibility of it.

Is it the role of the FAA to ensure that all airline passengers - every single one - arrive safely at a destination (which would be possible, if we didn't mind an intolerable cost)? Or does it make sense to keep flyers safer in the air than in any vehicle through any mode of transportation on the ground and still affordable?

Is it the responsible role of a financial services institution to make sure every single loan will be paid back perfectly, or that the great majority will, building in a modest risk to the cost of all the loans?

This is at its heart a philosophical question: Is it better to prevent all possibility of death from a cure of any kind even as some who are sick are allowed to die from lack of treatment, or to encourage the saving of many lives even knowing that a tiny percentage of those who receive a treatment will be adversely affected?

Leaving aside the very few situations where zero tolerance must be the watchword (terrorists on planes, correct surgical procedure), we are generally better off to run a calculated risk in order to prosper than we are to sit tight and bite our fingernails.

During this period of quiet belt-tightening, some companies (and governments) are developing agoraphobia - fear of venturing forth - afraid to take any chance at all. While it's good that we've learned some painful lessons from Bernie Madoff and AIG and Ameriquest, we need to watch for signs that some companies will emerge from the Bear Period stronger than their competitors for several key reasons:

• They will take this opportunity to build stronger relationships with customers by deliberately understanding and helping their own customers through the downturn.
• They will build trust by doing the exact best thing for customers. (We'd like to see a cell phone company that sends notices to all their customers telling each one which of the company's subscription plans would be best for each, and offering to switch them.)
• They understand that no business has a 100 percent guarantee, but use careful predictive modeling to minimize risk by focusing on customers who are the most valuable now and in the future (high actual and potential value customers) and meeting each of their needs better and better.
• They balance the short-term revenue that provides cash flow with the long-term equity creation that ensures future success for shareholders, customers, and employees - and they build that balance into the metrics and management of the organization.