How to Make "Smart Bets" and Experiment With Confidence

Excelling in business means taking a series of risks that pay off. If success was a sure thing everyone would be achieving it–and as we all know, not everyone is. But placing a bet is far from a sure thing, and the risk grows when times are tough. All of a sudden, every decision for your brand matters.

If you’ve been following the macroeconomic climate of late (with clenched teeth and white knuckles, if you’re anything like me) it’s safe to say times are tough–and getting tougher. So does this mean it’s time to batten the hatches, slash the marketing budget and hunker down until the storm passes? Only if you’re willing to miss out on opportunities.

You see, when uncertainty looms, your competitors are apt to play it safe. Perhaps too safe, keeping their eyes to the ground instead of seizing the advantage. That advantage could be yours if you’re willing to make smart bets.

Here’s what you need to know to weather the storm and continue experimenting with confidence by making smart bets.

We’ll discuss:

What do we mean by “Smart bets”?

The DIBB Framework for experimenting

What to avoid when taking a calculated risk

Examples of when smart bets paid off

What Do We Mean by “Smart Bets”?

I’m going to advocate for taking some risks in this piece. Trying anything new, or at least continuing to spend when everyone else is tightening their belts is, in fact, a bet—you’re betting on both short term gain and long-term outcome of projects that will pay off down the road. Would that we could stare into a crystal ball and know the future for certainty. But in lieu of that, you can make “smart bets”.

There are a few ways to think of a bet as “smart”. Are you trying something that has never been attempted before with no data or track record of success? That’s a risk for sure, but is it a calculated one? Are you doubling down on something that has traditionally and is currently working well? That seems like a smart idea, but it’s not a bet.

When we refer to smart bets, we mean doing your homework before trying something new. Leveraging available data, looking at historical examples of success, and working with experienced partners who can offer guidance – these are all good ways to add a little intelligence to your gamble.

The DIBB Framework for Decision Making

One excellent approach to making smart bets is the DIBB Framework. Developed by Spotify as part of their evolution of agile methodology, the DIBB framework looks like this:

Functionally, DIBB is a great approach to making smart bets. It starts with information that is analyzed before decisions are made. But those decisions rely on belief, and a forward-looking approach. Then, finally, a bet can be made with the best possible odds of paying off. Here’s how it works:

Data: This is the stuff you do know. The hard numbers you can track and, hopefully, the revenue attached to them. How did that campaign resonate with your target audience? What’s the reach of your sales channels? What are the costs associated with your performance marketing campaigns? Gathering the hard numbers will help inform your approach.

Insight: Numbers are all well and good, but you need to be able to read them like tea leaves to see the full picture. Consider the insights you can draw – are their patterns that can be replicated? Can you use predictive analysis to identify trends (good or bad)?

Belief: Now’s the time for a little faith. Even the best data-driven insights can’t reveal what the future holds. It’s up to you to create a hypothesis based on the insights you can draw from the data, and a plan to take advantage of it.

Bet: By this point, it’s time to take action. By drawing insights from the available data and building out a theory based on it, you’re ready to make a smart bet. You don’t need to go all-in: creating a smaller-scale test is perfectly acceptable. Prepare to be flexible and adjust your bet based on new data gathered, but be sure to start with solid expectations of outcome and clearly defined success metrics.

3 Mistakes to Avoid When Taking a Calculated Risk

It’s important to remember taking a risk inherently involves exposing yourself to a negative outcome. You can increase your odds of success by following a framework, like the DIBB model. But there’s a few potential pitfalls to be aware of too, before placing your bet.

1. The odds of failure are way too high

Risk and reward tend to balance each other out. But even if the potential reward for success is unbelievably good (like a new product launch that instantly catapults your company to unicorn status) if the odds of you pulling it off are too low, it’s not worth swinging for the fences. It can be tempting to dream big, but you need to reign yourself in with realism, and not only think about the reward, but the odds of success.

2. The consequences of failure are too dire

It’s one thing to fall short on a bet. It’s another thing for that failure to have consequences that are unrecoverable. When making a smart bet, consider the outcome you don’t want. If it pans out that way, will you be able to handle it? When able, conducting smaller-scale tests of your bet is a good idea so you can manage the potential impact.

3. There’s an inability (or unwillingness) to pivot

Part of what makes a smart bet smart is a built-in level of flexibility. Any project you start that you won’t be able to adjust along the way carries a great deal more risk than one that you can adjust to better target your goals. Luckily, these are few and far between: far more common is an unwillingness to pivot. People can get stuck on the specific hypothesis they originally had and the goal they set. This can lead to an experiment being run for too long without tweaks, which can expose you to outsized risk.

Examples When Smart Bets Paid Off – Big

Now that we’ve taken a look at what a smart bet is, how to make one, and what to avoid, here are some examples of when smart bets paid off. And yes – these were BIG bets. Yours don’t have to be quite as earth-shaking. But if you’re going to emulate a characteristic of these bets, think about how they were calculated, the long-term play, and the eventual payoff.

Salesforce had its head in the cloud

The SaaS CRM giant Salesforce (a client of ours!) is so ubiquitous in business these days that many forget its humble beginnings. In 2000, salesforce.com was an upstart business challenging Oracle and other major players who dominated the CRM field.

At DEMO 2000 (a major product launch rally) Salesforce organized a fake protest that called for “an end to software”, loudly decrying the need for physical installation and promoting a move to the cloud. Salesforce was, and remains, a cloud-only subscription which was revolutionary at the time. They saw an opportunity, and bet that they’d get ahead of the curve. It worked: in 2009 Salesforce hit a $1 billion valuation, the first cloud computing company to do so.

Airbnb went toe-to-toe with hotels

What started as a couple of budget-conscious San Francisco residents looking to cash in on overbooked hotels during tech conferences led to the revolutionary home-sharing platform Airbnb. At first, investors balked at the idea of a teched-up take on vacation homes. People had been renting beach houses for decades, why would people let strangers stay with them (and what kind of person would room with a random stranger)? Didn’t hotels already solve this problem a century ago?

The founders of Airbnb took a big bet, but it was one they had the opportunity to test themselves. By renting out their own apartment in San Fran, they got a real feel for how the experience would work. The second well-placed bet involved taking AirBnb to a start-up accelerator, where they gained valuable insight and support and allowed them to scale to the behemoth they are today, worth more than Wyndham and Hilton combined.

Google was thinking long-term when they bought YouTube

In 2006 Google bought a two-year-old money pit for $1.65 billion dollars. YouTube didn’t just cost a fortune to purchase, it also cost a fortune to maintain. Bandwidth costs to stream so many videos were ludicrously high – even as late as 2009, people were calling YouTube “doomed” as it lost close to a half-billion dollars annually.

But Google stayed the course. They pumped money into the platform, tightened content policies and courted advertisers. YouTube was the video platform. If they stuck with it, they could turn a profit. And to say that bet paid off is a ridiculous understatement. In 2020, YouTube made $182 billion in profits for Google’s parent company Alphabet, or about 11% of its total revenue. The smart bet here was looking toward the future, and not being overly concerned with short-term gain. Make sure you give your bets enough time to play out so you can accurately gauge their efficacy.

Google’s not the only one who bet on YouTube – at Superside we’ve bet big on video marketing. And guess what? It’s paying off. You can check out my last post where I dive into the return on our investment here.

Smart Bets Start With Smart Partnerships

I know it seems odd I’m telling you to think about the risks you should take when everyone else is looking for ways to operate more safely. But fortune favors the bold – even more so during a downturn when the bold are harder to come by.

When times get tough, remember: You don’t have to go it alone. Whether it’s scaling up your performance marketing when your competitors are looking to cut it back, or ramping up a video strategy to start a long-term play, Superside can help you make your smart bet.