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1835 : STEP THREE – EVALUATING AND SELECTING IDEAS

completely to eliminate risk. You need to identify the major risks
associated with your venture and assess their combined impact and
likelihood.

33 per cent of business start-ups in the
UK cease trading within three years

risks exist to be managed, not eliminated You should consider
plans to manage, reduce or eliminate the major risks highlighted by the
analysis. Howard Head, for example, learned from the quality control
problems encountered during in-house manufacture of his
revolutionary skis that he should eliminate the complex technical risks
which the own-manufacture of his outsize aluminium tennis rackets
might entail. He achieved this by out-sourcing their production to
third-party experts, namely Kunnan Lo in Taiwan.

But residual risks will inevitably remain. As we will see later, your task
is to assess what level of risk you will accept.

a step too far with sock shop Under City pressure to expand her
UK-based Sock Shop empire, Sophie Mirman launched Sock Shop into
the United States. Locating outlets in inner-city stations was a formula
which had succeeded in the UK but which did not translate to the US,
where high levels of drug-related theft contributed to the launch’s
failure.

The costs of the high level of debt incurred to finance the expansion
were exacerbated by the doubling within one year of interest rates.
Sock Shop went into administrative receivership. With the glorious
benefit of hindsight, it was a risk which should never have been taken
because the company could not afford to lose.

real life keeps intruding In addition, some external eventualities
cannot reasonably be foreseen. As we saw in Chapter 1, Trevor Baylis
had to abandon his battery-powered shoe concept following the alleged
‘Shoe Bomber’ episode. Karan Bilimoria had just launched the high-
budget ‘Curryholic’ advertising campaign with Team Saatchi to
capitalise on Cobra beer’s dominant market position when an article in
the Tandoori trade magazine which Bilimoria part-owned but over
which he exercised no editorial control severely antagonised the Indian
curry houses which accounted for the majority of Cobra’s turnover. The
Cobra business almost went under.