top of page

The Risk Function

Risk is a function of the number of customers that you have and their own risk function.

You can easily measure the number of customers that you have.

If you're a budding, early-stage startup, likelihood is that you're serving a non-critical use-case for customers with linear risk functions. Your own risk function therefore remains linear at this stage. This gives you breathing space and time to set up your risk reduction processes, whichever they may be. (Think bug squashing processes, product reviews, etc.)

Until the day comes when you have to pivot or focus on a different audience. "Focus on upmarket" ring any bells to anyone?!

Different types of customers have different levels of averseness to risk. A bank does not have the same risk as an e-commerce shop selling "Birds aren't real" t-shirts (yes that exists!).

A risk averse customer's risk function is no longer linear - it's more likely an nth degree polynomial, sometimes even exponential. 🤓

What I mean is, that all of a sudden, the risk you're undertaking is much higher than you thought and/or anticipated. Each customer now expects more from you. MUCH more!

To make matters worse, reducing risk isn't linear either. It's an 80/20 kind of thing, where reducing risk to an acceptable level for your risk averse customers will take significantly more effort than you think.

Such pivots are never low-hanging-fruit that rain money - they come at a cost. Whether that's the cost of prioritising more foundational investments over new features or a structural re-org of the product function.

If you're a product leader in an early-stage/scaling start-up you need to be aware of this and be ready to prepare a strategy that sustains such a shift. The success of the product org depends on it!

Recent Posts

See All
bottom of page