Don’t place all you bets on one horse

One of the greatest AHA! moments I had when I started to spend time with VCs and PEs some years ago was that they did not look at the path to success the same way I did. 

In a large corporate we would determine our capability gaps and then, using relatively precisely defined projects, work to close close them. Typically using the latest thinking and methodologies but eventually ending up throwing whatever amount of resources at them until they succeeded – because a lot was riding on the individual project’s success. It was a rare event when a project was closed down ahead of time and even more having two projects trying to solve the same problem.

In the investment world it is different. The earlier in the process you get, the more difficult it is to predict which investments will be successful. You can predict failure with 90-95% accuracy by rejecting all of them…the problem is of course that this approach does not make any of any richer monetary or experience wise 🙂

Instead they take a portfolio approach. 1-2 in 20 will be successful, and their success by far outweigh the costs of the others. Of course, bringing down the acquisition costs and exiting when failure is almost certain, helps the overall return of the portfolio, which you can afford to do when you look at it as a portfolio. 

There are many reasons good reasons why corporates act as they do, however, some are starting to combine the two ways of thinking, as illustrated by in an interview in Børsen, where Søren Skou talks about how Maersk is letting the customers decide which platform will “win”. Their own Maersk.comTwill, which was developed semi-internally by Damco and Boston Digital, or Ship.MaerskLine.com, which is “powered by” Kontainers.com as they like to say. 

In essence this is running a mini-portfolio of initiatives on how to best serve the customers going forward. It may be a race with just one winner, but it is more likely that they each start carving out segments that they serve better than the other solutions. Because they are hooked up to the same digital platform it really doesn’t matter to Maersk Line who wins, as long as it is chosen by the customers.

We are likely to continue to see this kind of thinking more and more carriers become increasingly digital and want to drive innovation. The days of being able to pick the winner every time are long gone, as are the days of trying to do everything internally. 

CMA-CGM’s Ze Box is another example of this, as is Maersk Growth, although both are still too early to call and too far away from the core to impact the customers here and now.

It will become easier going forward as the digital infrastructures will improve, but it is actually less about that, and more about the business risk. The opportunity to deliver what your customers want much faster and cheaper than sticking with the traditional one-horse bets.

Of course, if you did pick the winner and put all your money on that one. Well…nothing beats being lucky 😛

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