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    Failsafe Strategies: Profit and Grow From Risks that Others Avoid

     
    Risky business—how to use risk to your advantage.
    12/6/2004

    No strategy is failsafe, of course, but there is much we can do to take better risks and avoid mistakes. "The whole reason business exists is to take risks; otherwise we should be keeping our money in treasury bills," writes Sayan Chatterjee, a professor of management policy at Case Western Reserve University. To mitigate risk, he continues, executives need both clarity and choice, and to that end his guide offers expert case studies and a practical framework. Chatterjee's ideas are broad enough to encompass products and services as diverse as computer games, cars, printers, airline travel, medical imaging, and more.

    Section one focuses on designing a strategy that anticipates and avoids risk. The point he makes, through discussion and examples of companies such as Dell, Microsoft, Continental, Southwest, Sony, Nintendo, and others, is that the design of a strategy needs to be flexible and replicable, as well as clearly understood by all employees and easy to talk about at the water cooler.

    Section two explores risk in the context of growth and diversification strategies, and Chatterjee's detailed analysis uses some of the same companies. Comparing Dell and Microsoft, for example, he suggests that Dell tends to adapt to existing markets by leveraging the capabilities it already possesses, while Microsoft is proving itself more the market shaper.

    No framework should operate as a template or checklist. But if this one is considered in a thoughtful way, Chatterjee says, it might help a company devise a strategy tailored to its own opportunities and risks.

    Table of Contents:

    Introduction: Understanding risk: the real key to competitive strategy
    Section I: Designing strategies for avoiding risk

    1. How to see gold where others see risk: identify more choices to get the gold
    2. Three steps to design a low risk strategy
    3. Identifying multiple capability configurations
    4. Designing strategies with low capability risks
    5. Lowering capability risks with visible and invisible outputs
    6. Organizations that can benefit from the outcome to objectives framework

    Section II: The risks in growth and diversification strategy

    1. When and how to use differentiation entry strategy
    2. When and how to use a low-price entry strategy
    3. Strategies to shape markets: products, process and platform
    4. Develop multiple migration paths

    Appendix: Enron's incremental descent into bankruptcy: a strategic and organizational analysis
    Epilogue

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