“Move fast and break things” – the original motto of one of the world’s most successful and disruptive tech and social media firms – seems on the surface to sum up the attitude of the most successful disruptive companies. Many people think these dynamos throw caution to the wind and charge headlong into established industries, leaving behind a path strewn with broken business models and defunct technologies.

Actually, many of the most successful entrepreneurial companies take a more nuanced and analytical approach to risk. They identify opportunities to pursue and decide which to follow based on their knowledge of the risks each poses. Then they manage and monitor their choices carefully.

Zulily CEO Darrell Cavens, a 2014 award winner, relates to this approach. “I’m not the kind of person who likes to jump out of airplanes or bet the entire farm. What we do is quickly iterate with a lot of ideas that work and then forge ahead with the best ones.”

How to gamble responsibly

Understanding risk in this way and coming up with strategies that limit your vulnerabilities are at the core of strong, innovative companies.

One way of managing risk is to diversify – by product, business model or strategy – to avoid putting all your eggs in one basket.

Philip Romano, of Romano enterprises (which owns restaurant chains Fuddruckers and Macaroni Grill), and a 2014 award winner, exemplifies this approach. Romano founded the Dallas-based Trinity Groves Plaza, which incubates new restaurant ideas targeted specifically at millennials. Promising start-ups get USD$500,000 to develop their concept and, if successful, Trinity Groves gets 50% ownership. Tastes in cuisine can change quickly, so it’s important for established players to get in early if they are to hedge their bets against market changes. Trinity Groves is currently incubating around 20 restaurants.

Be more resilient when risk becomes crisis

However it’s done, hedging against risk is important. But, almost all companies will face a serious crisis at some point. What defines a resilient, leading company is not just avoiding a crisis, but managing and overcoming crises if and when they hit.

Dr Francois Nader won the EY Entrepreneur Of The Year award in 2013 and was CEO of NPS Pharmaceuticals before he sold it in 2015. As a board member and advisor to several businesses, he encourages them to consider what happens when crisis hits. Nader had to deal with such a crisis when he took control of NPS in 2008, as it teetered on the brink of collapse after overinvesting in a drug that ultimately failed to get approval from regulators. His leadership involved dramatically shrinking the company’s operations until it could consolidate its position and rebuild. “It amazes me how few companies have a Plan B in place in case a major disaster occurs,” he says.

All companies have to take risks, and a founder who is afraid to jump into the blue would never end up taking their company very far. “What you’re doing is risky,” says 2011 award winner Jessica Herrin, founder and CEO of Stella & Dot. “But if you’re going to ever have reward, you’re going to have to take on risk.” It’s possible to follow your vision whilst at the same time understanding where potential pitfalls may lie. The key is to take steps to insure against them.

By Marcela