Harvard Business Publishing

Who would ever have believed that a commodity item, like chicken, could become a branded, premium-priced product? Perdue Farms was a very successful breeder and reseller of chicken, and it could have easily continued on this path -- a path that involved little risk but steady and manageable growth prospects. Observing the technological advances in automated chicken raising that evolved in the 1960s, Franklin Purdue (CEO from 1953 to 1988) saw an opportunity to transform his family’s company. Bucking a family tradition of avoiding debt, Perdue borrowed $500,000 and set about to fundamentally change his operation from a chicken farmer and reseller to a fully automated chicken raising and retail operation. Through his bold investments, he changed the company’s process of raising chickens, their distribution network, and ultimately, their market position. Perdue is most well known for his quirky, yet extremely effective advertising campaign, a campaign that successfully differentiated his chicken from the rest of the flock.

While he did not “bet the company” on this transformation, Frank Perdue took a tremendous risk -- leaving behind the security and steady income that the company had achieved for almost three decades. The image of Frank Perdue that has been indelibly engraved in the minds of millions of Americans as the silly, almost pathetic evangelist of chicken is not the typical image of a bold risk taker. Like Allen Neuharth of USA Today, Perdue saw a vision for what his company could become and took the risks to achieve that vision. Perdue did what others considered impossible. He branded a product that was historically thought to be a low-end, unmarketable commodity. Perdue, like other successful CEOs and founders, did not take risks that were foolhardy or overly dependent on luck. He took prudent, calculated risks based on a concept or vision of a future end state.

For the most part, it is not surprising that many great CEOs and founders had a strong propensity for risk -- for without taking at least some calculated risks, their businesses would not have flourished and more importantly lasted. This is especially true for many entrepreneurs that I have studied. For some, they had nothing to lose, but for others, like Perdue, there was a tremendous amount at stake -- both personally and professionally.

Like vision, an appetite for risk taking is considered almost a prerequisite for success. Knowing when to be a risk taker and opportunistic is critical to being able to successfully take advantage of the times. It can also be disastrous when the context of the times changes sharply. Sociologist Orrin Klapp once wrote: “The same act performed too soon or too late or in the wrong scene may make a person a fool rather than a hero.” That sentiment aptly applies to risk taking in business.

Read all of Tony Mayo's posts.

MORE ON RISK MANAGEMENT:
Strategic Risks: How to Embrace Them for the Growth Opportunities They Afford (Collection)
Risk Intelligence: Learning to Manage What We Don't Know (Hardcover)
What Are the Risks You Should Be Taking? (Newsletter Article)
How Risky Is Your Company? (HBR Article)