Risk and Reward

We spoke with four alumni CEOs of high-performing companies about their approach to risk. Get inspired to step outside your comfort zone.
Amanda Chalifoux and Simone Silverbush; Photography by Don Hamerman |  April 22, 2014
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Successful leaders are thoughtful risk takers. They understand that placing studied bets on an uncertain future — identifying innovative ways to do things and breaking new ground — is the only way their companies will grow.

“What sets great leaders apart is not always the risks they take but how they take them,” says Daniel Ames, the Ting Tsung and Wei Fong Chao Professor of Business. “They move ahead with their eyes open, monitoring the world to see if it unfolds in the way they had anticipated. When it doesn't, they adjust accordingly, rather than let ego and momentum drive them to double down on a losing course of action.”

Columbia Business spoke with four alumni CEOs of high-performing companies about their approach to risk taking — the unconventional decisions that paid off, the risks they avoid, and why a willingness to take chances is critical for success. Here’s what they had to say.

Julie Chapman ’83
CEO, 501cTech

Julie Chapman helped build 501cTech into one of the only nonprofit technology service providers in the country by convincing her board to take a risk. Although Chapman was confident from her background in technology that 501cTech could fulfill nonprofits’ critical need for tech support, board members questioned whether charitable organizations would pay for its services — and if 501cTech, a nonprofit itself, could even deliver them. “I told my board, ‘We have to jump off this bridge, but I’m not doing it alone,’” says Chapman. “I made them all stand up and say that they would jump, too. I would go first, but they had to come with me.”

Since that leap of faith in 1999, 501cTech has helped hundreds of nonprofit organizations fulfill their missions through technology assessment and planning, outsourced IT services, and other tech initiatives. “Now we’re moving from building technology infrastructures to optimization, like making the most of cloud computing,” says Chapman, who received the prestigious Exponent Award from the Meyer Foundation in 2008 for vastly increasing the impact of her organization’s work. “We’ve been successful, but in the technology world, nothing ever stays the same.”

On Not Always Being Likable:
Being a leader is inherently risky. You have to put yourself out there, and if you’re not comfortable with that, then you’re not going to be a very good boss. You’ll be too focused on making sure everyone likes you. At some point, you have to go outside your comfort zone. I don’t think you can perform at a high level in any part of your life if you’re not willing to take risks.

On Risk and Ethics:
Your personal integrity and your organization’s integrity are really critical. If those are compromised, they’re extremely hard to repair. Ask yourself, does this conflict with my values? Am I compromising my agreement with my users or customers? You should avoid any risk that’s ethically questionable.

On Being Bold:
When I moved from the Bay area to Washington, DC, I didn’t have a job. I had about a month’s worth of savings and a friend I could stay with. I got a job in three weeks. I went to business school without a full understanding of exactly what was involved, but I knew I wanted to do good, and I had an interest in technology. I never would have predicted that my life would come together the way it has. But following your passion pays off.

Michael Diamant ’93
Cofounder and CEO, Skip Hop

Michael Diamant has never been afraid to try something new. He had already started two dot-com businesses (with no background in technology) when he and his wife — new parents frustrated by the glut of overly cute, poorly designed baby gear — decided to create a functional and attractive diaper bag. “We looked at companies like Dyson and Simple Human that were making everyday items like kitchenware and vacuums more functional and contemporary,” says Diamant. “We wanted to bring that same ethos to baby products.”

That first bag — which looks more like it totes iPads than Pampers — generated more than a million dollars in sales the first year. Nine years later, Skip Hop is a global business encompassing crib bedding, activity gyms and luggage for toddlers, a bottle-drying rack that won an International Design Excellence Award, and more — with each product embodying the brand’s signature modern aesthetic. “We were among the first companies [in baby gear] to recognize this contemporary and more functional component,” Diamant says. “We’re never afraid to take risks.”

On Breaking New Ground:
In the consumer products business, a lot of companies make one thing really well but don’t extend their brand. Early on, we decided to apply our design approach and philosophy to as many products as we could. That said, we only make something if we are confident it will sell. Going into new categories is scary because there’s so much to learn—it’s the harder way to grow your business. But those are the risks that we take a lot.

On Going Global:
For a relatively small company, we have quite a global operation. We have eight full-time people in China and a distribution center in Shenzhen as well as two in the United States. Our suppliers in China are critically important members of our global team. While other small companies that make things in China are comfortable staying far away from the actual production, we feel it’s critical to have our own team on the ground and available at all times. We embrace globalization.

On Being the Dumbest Person in the Room:
There are entrepreneurs who are intimidated by smart people and need to be the smartest person in the room; I like being the dumbest one, where people are talking circles around me — that’s how I know we’re getting somewhere. If you want to do something complex that requires expertise in many different areas, team up with as many people as you can who are smarter than you are.

Jennifer Vaughan Maanavi ’00
Cofounder and CEO, Physique57

Within a week of finding out that her favorite exercise studio — an Upper East Side venue featuring a barre-based workout developed by a professional ballet dancer — was closing, Jennifer Vaughan Maanavi ’00 modeled out the finances of opening a new studio, secured a loan, and teamed up with a top instructor. “I knew that so many more people could benefit — and that I had the skills and the passion to build the business,” says Maanavi, who left a successful career on Wall Street to focus on the new venture. “It was risky, but in my mind it was a no-fail opportunity.”

A year later, in 2006, Physique57 opened at 24 W. 57th Street to rave reviews, overbooked classes, and celebrity clients. Today the company also has studios in Scarsdale, the Hamptons, Los Angeles, and Dubai; a popular book, The Physique 57 Solution: The Groundbreaking 2-Week Plan for a Lean, Beautiful Body (Grand Central Life & Style, 2013), award-winning DVDs, and, most recently, accessible-from-anywhere online Physique57 classes. “The good thing about a client services business is that people vote with their feet,” Maanavi says. “We know very quickly if something is working, so we can be nimble.”

On Hiring Risks:
I love taking risks — that’s how companies grow — but I’ve never taken a risk with hiring. If you hire someone who you aren’t sure upholds your core values, they can wreak havoc on the whole culture, especially when you have a collaborative, teamoriented company like ours.

On her Unconventional Team:
We have a nice blend of traditional business people and creative people—dancers, singers, musicians, even a comedian. I believe that performers, or anyone who likes to perform, have natural empathy and are intuitive about client service. We wouldn’t be the same company without them.

On Inviting the Risk of Change:
I love this Charles Darwin quote: “It’s not the strongest of the species that survives nor the most intelligent that survives; it’s the one that’s most adaptable to change.” Every boss wants to hear, “How can I help?” and “I’d love to be involved.” Period. End of story. We all know that change is inevitable, but for some reason it’s often hard for everyone to accept.

Michael Gould ’68
Former Chairman and CEO, Bloomingdale’s

Michael Gould attributes his remarkable success at Bloomingdale’s to a willingness to take one risk in particular. “I took chances on people who were maybe not quite ready for a job, but I hired them and gave them the support they needed to grow,” says Gould, whose 22 years as chairman and CEO marks one of the longest CEO stints in retail history. (He stepped down in February.) “There’s not much you can’t get within 10 city blocks of Macy’s or Bloomingdale’s or Saks,” says Gould. “Ninety-five percent of it you can get somewhere else. The only real difference is the people.”

Gould led Bloomingdale’s through its greatest period of transformation and growth, taking the helm just after the company went bankrupt in 1991. He expanded Bloomgindale’s from 16 stores mainly in the East to 37 stores across the country — and approximately $3 billion a year in revenue. But looking back, it’s the educational training programs offered to all Bloomingdale’s employees that makes Gould most proud. “I really believe I gave people here the opportunity to be more than they thought they could be,” Gould says. “That’s what being a CEO is all about.”

On Going With His Gut:
When you’re looking at merchandise that’s coming out, there’s no research; you just need to have a gut feeling about it. I think Steve Jobs put it best: “The customer doesn’t know what they want.” The same is true for new business — you do as much research as you can about a new location, but the rest of it is your gut feeling. I think taking prudent risks is one of the most important things a CEO can do.

On Always Moving Forward:
There’s a Chinese proverb that says that even if you’re on the right track, you’re going to get run over if you just sit there. In business, you’re always evolving, and some businesses evolve faster than others. But it’s about newness, it’s about nurturing things, it’s about taking risks on both people and products.

On Which Companies New MBAs Should Risk Joining:
Pick an organization that you’re passionate about that really believes they have a responsibility to help you grow in scope. I think that’s what Bloomingdale’s stands for and what I’ve always believed in, and I think that’s why we continue to get the best talent.

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