How knowing the Birthday Paradox influences business risk

You’re at a party when a stranger approaches you and challenges you to solve a problem. 

How many people have to be at a party before there is a greater than 50% chance a pair of them share the same birthday?

What’s your guess?

80?

150?

This question is referred to as the ‘birthday problem’ or ‘birthday paradox’.

As humans we tend to dramatically overstate or understate the probable chances of an event occurring. 

This inability to accurately estimate the probability of an event occurring also extends predictably to business owners.

The answer to the Birthday Paradox is 23!

Yes that’s right. Just 23 people in the same room. I won’t go through the math but you can check wiki to see the numbers. There are 253 possible pairings of birthdays from the 23 people. 

Interestingly, a 99.9% chance of a shared birthday is reached at just 70 people.

The Birthday Paradox is not a paradox in the sense of leading to a logical contradiction, but it is referred to as a paradox because the mathematical truth contradicts your intuition. An intuitive guess by most people of the probability of how many birthday pairings are shared between 23 people would be much less than 50%.

So what can the Birthday Paradox teach us about business risk?

Next time you are assessing a start-up opportunity, a new division or a new product/service line – conduct the following analysis.

1.    Estimate the percentage chance of the opportunity succeeding. For example, an App might be a 5% chance, a new division might be 20% and a new product/service might be 50%.

2.    Estimate the amount of sales revenue you might generate if it were a success – not blue sky or bust – best guess on balance. This might be say $100,000.

3.    Multiply the estimated percentage chance of the opportunity succeeding by the estimated sales revenue generated. For example, 20% chance of new division succeeding X $100,000 sales revenue = $20,000

What to do with this calculation of $20,000?

Using this example, I suggest that you consider not spending more than $20,000 (make sure you include time and money) on your R&D, due-diligence or cost of production in relation to this business opportunity.

This is a baseline calculation of your risk threshold, expressed in dollars, for that project.

The idea is to try and overcome the notion of blindly spending time and money on an opportunity without assessing risk. In applying a guiding formula you at least objectively assess business risk without regard to the commercial question being ‘what is the comparative likelihood of future sales revenue exceeding time and money spent on the opportunity’.

I accept this calculation is far from perfect (being based on estimates) but it at least forces you to consider the components and the risk/return play on any opportunity beforehand.

The Birthday Paradox reminds us of our failings in stopping to assess risk objectively in comparing costs and returns before we naturally launch ourselves into action as entrepreneurs.

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I really want you to start creating sustainable success in your business and life. Simply check out my FAQs videos HERE on what business owners most commonly ask about sustainable business success. If they help you, simply sign up and get the other 20x videos free.

Claim your Giveaways now, find out what the Fourth Moon is and reach your goals sooner!

Cheers, Darren K Bourke

Adopt a handful of simple forever disciplines to Leverage sustainable success

In this final *-Part of this Four-Part Series on Sustainable Success, I introduce the Fourth Moon of Leverage. 

In The Fourth Moon, I talk about the Fourth Moon of Jupiter, Callisto, having an ancient crust and a thin atmosphere of carbon dioxide. Scientists believe the atmosphere on Callisto is constantly replenished by the slow sublimation of carbon dioxide ice.

The ancient crust of Callisto represents establishment and maturity. 

Callisto’s replenishment of its atmosphere might be compared to the successful business owner. With a proven and established model for success, the Fourth Moon business owner can replenish their reserves should they need to. They are confident that they have the self-sufficiency to sustain and achieve success and have freedom in their life choices. 

So embrace the Fourth Moon metaphor and adopt a handful of simple forever disciplines that can leverage sustainable success.

But be patient in your expectation around change and business improvement. It took you years, if not decades, to adopt the habits and views you hold today. There is some serious re-engineering of your hard drive (your head that is) to change this significantly. There will be obstacles and setbacks. Not everything will work out, I assure you.

“The sun, with all those planets revolving around it and dependent on it, can still ripen a bunch of grapes as if it had nothing else in the universe to do.”
Galileo Galilee

If you are lucky enough to reach the Fourth Moon, don’t become complacent. Continue to focus on the development and improvement of your Strategy, Implementation of this Strategy and Maintenance of this Strategy. If it needs tweaking or changing up, proactively re-orbit the first three moons before returning to the Fourth Moon. This discipline will create the ultimate Leverage you seek by allowing you to return to your activities of choice on the Fourth Moon, confident in the knowledge that you are in total control and that you have created a model for sustainable success. 

If you haven’t signed up for your free Giveaways that include videos on Leverage, sign up in the top right hand corner here www.darrenkbourke.com and you can log in (orange Login button) to access them under “My Content”.

That concludes this initial Four-Part Series on Sustainable Success. I hope I’ve managed to introduce The Fourth Moon metaphor to you clearly. If you haven’t already purchased The Fourth Moon yet, you can buy the book here http://www.darrenkbourke.com/shop 

I hope you now have a basic understanding of The Fourth Moon metaphor and are aware of First Moon thinking on Strategy, Second Moon thinking on Implementation, Third Moon thinking on Maintenance and importantly Fourth moon thinking on Leverage.

Future blogs and social media posts will widen into a broader range of content aimed to challenge your thinking, play a bigger game and propel you towards sustainable success in your business and personal life.

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I really want you to start creating sustainable success in your business and life. Simply check out my FAQs videos HERE on what business owners most commonly ask about sustainable business success. If they help you, simply sign up and get the other 20x videos free.

Claim your Giveaways now, find out what the Fourth Moon is and reach your goals sooner!

Cheers, Darren K Bourke

Does your Niche Message Suck?

Have a look at the photo for this post. Planning a lunch?

The photo depicts a man eating what appears to be cantaloupe. He looks happy.

Take a quick Pop Quiz. What is the target market for this advertising, what is the business and what do they sell? 

You may have guessed the advertising was aimed at people planning to prepare a lunch for family or friends

You may also have guessed the business might be a supermarket or a greengrocer. Maybe a deli.

And it would be logical to think that the business sold fresh fruit and vegetables.

Sound logic.

Right?

Wrong?

The photo attached is a billboard advertisement placed on the side of a petrol station. Yes that’s right. A petrol station.

I was so curious I walked in to find the typical drinks, potato chips and emergency toilet paper. 

But no fruit or anything fresh. 

I asked the checkout operator if they sold any fruit or vegetables. He shook his head. No. 

I asked him if they sold anything I could prepare for lunch. He shook his head again.

“There’s some pies in the warmer” he pointed. 

I asked him about the big ad on the side of the station that referred to ‘Planning a lunch” with a guy eating fresh fruit. He looked surprised and said I’d have to ring head office marketing and ask them.

So here’s the thing.

Think of your guesses to my earlier question.

Target market - People preparing or cooking a lunch. The business – fruit and vegetable grocer. What do they sell – Fresh fruit & vegetables.

Now let’s look at the REAL answers.

Target market - People buying petrol. The business – Petrol station and convenience store.

What they sell – Petrol, cigarettes, soft drinks and potato chips.

A very different picture to our happy cantaloupe eating friend I would suggest.

So what can we take away from this?

Don’t get lured by misleading advertising and hope to buy fresh produce at a petrol station.

Yes but there’s more than that.

The niche message sucks. Doesn’t it?

So let’s pretend we are the marketing department for the petrol station and look at it with fresh eyes

The target market are predominantly people that are refueling. These people have been on the road and are tired. Perhaps thirsty or hungry. They are in a hurry and want to get home. 

The business is a petrol station AND a convenience store. So let’s stick to these two offerings.

What they sell. Petrol and convenience store items.

So here is the two pitches for any advertising.

Petrol offers. Discount fuel or bundled discounts on fuel plus in store purchases of convenience items.

Convenience Store offers. Discounted items. ‘Treat yourself’ teasers for ice creams, chocolate or drinks. Discounted ‘emergency rations’ for tea, coffee, milk or staples.

Don’t confuse your niche market by confusing them with mixed messages and offbeat communication.

It will confuse them, annoy them and send them packing.

So stick to these simply three steps.

1.    Identify your niche market (target market)
2.    Understand what your business is
3.    Have clarity around what you sell to your niche market

Then make sure all your marketing messages and communication is bang on in communicating a clear, concise and consistent message to your niche market.

And don’t expect to buy fresh cantaloupe next time you’re refilling!

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I really want you to start creating sustainable success in your business and life. Simply check out my FAQs videos HERE on what business owners most commonly ask about sustainable business success. If they help you, simply sign up and get the other 20x videos free.

Claim your Giveaways now, find out what the Fourth Moon is and reach your goals sooner!

Cheers, Darren K Bourke

The troubled Orphan Maintenance

In Part 3 of this Four-Part Series on Sustainable Success, I introduce the Third Moon of Maintenance - Ganymede. 

In The Fourth Moon, I talk about the Third Moon of Jupiter, Ganymede, being the largest moon in our solar system. Ganymede is even visible by the naked eye from earth. Its surface can be divided into two types of terrain: dark and light.

It is appropriate that the Third Moon of Maintenance is the largest, because Maintenance must be visible. 

Most business owners that reach the Third Moon waste their time there and actually cheat in not maintaining their Strategy. Having developed it on the First Moon, and implemented it on the Second Moon, they don’t honour it by maintaining it on the Third Moon. They hide in the dark terrain of Ganymede rather than having the discipline to be visible in the light terrain.

Third Moon thinking is about visibly maintaining the commitment to your strategy, agreed actions, disciplines and procedures. It is about creating a culture to not occupy the dark hidden terrain of Ganymede in cheating, but rather committing to visibly maintaining your strategy in the light terrain.

Only Third Moon visitors that occupy the light terrain of Ganymede can continue on their journey to the Fourth Moon. In The Fourth Moon, as Tom and the crew found to their frustration when reviewing the status of Dylan IT’s Maintenance, Maintenance is the most challenging aspect to delivering on your Strategy. 

So why does Strategy fail without Maintenance? 
Put simply, business performance cannot be optimal, sustainable or leveraged if your Strategy is not alive and being maintained.

The only worse thing than ‘no strategy’ is ‘some strategy’. 

Without Maintenance, you don’t know what disciplines have been followed within your business. A culture of ignorant bliss can set in. Without established disciplines, stakeholders do not own Strategy. You are in no-man’s-land, which is dangerous in business. Instead, create a culture of ownership and accountability within your team around Maintenance. 

Maintenance is not particularly alluring; so it is often an orphan with no-one willing to claim parentage for the troubled child of Maintenance.

Accept that Maintenance can sometimes be boring. But understand that it is the final passport check on your mission to the Fourth Moon. 

“Measure what is measurable, and make measurable what is not.”
Galileo Galilee

If you haven’t signed up for your free Giveaways that include videos on Maintenance, sign up in the top right hand corner here www.darrenkbourke.com and you can log in (orange Login button) to access them under “My Content”.

Next is the final blog and Part 4 of the Four-Part Series in which I will introduce the Fourth Moon of Callisto where you will ultimately Leverage your strategy. This is your pay-off for adopting the forever disciplines of The Fourth Moon metaphor and things get really interesting on the Fourth Moon I assure you.

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I really want you to start creating sustainable success in your business and life. Simply check out my FAQs videos HERE on what business owners most commonly ask about sustainable business success. If they help you, simply sign up and get the other 20x videos free.

Claim your Giveaways now, find out what the Fourth Moon is and reach your goals sooner!

Cheers, Darren K Bourke