Every project, regardless of whether it is explicitly stated, is either an investment, or a gamble. Sometimes it can be difficult to determine which project is which. Both cases involve putting your time, effort, and resources at risk. In both cases, you expect to reap the benefits of the venture. These two cases are different in that they have different odds of success. The odds of earning a profit on your investment should be reasonable. Gambling, however, has a lower chance of winning. It can be useful to view projects as an investment or a gamble.
This Project Risk-Return Matrix is worth looking at:
Certain Things. These are great if they are available. They are often funded and pursued.
Investments. It is worth considering if the return is not too high.
Gambles. It is possible to make a profit if the risks aren’t too high and the owner has a reasonable risk appetite.
Scraps. Scraps are usually not worth considering and should only be pursued if all other options have been exhausted and one truly needs it.
The project owner’s risk appetite, i.e. how willing they are to take on risks, will determine what kind of projects they pursue. How much they are willing to lose. Because of their resources, some organizations can afford to see a large project fail. Many organizations don’t have the luxury of this luxury.
What is the difference between gambling on a project and investing in a project? You are investing in a project because you are putting aside time and resources to reach a goal. This goal is to earn a reasonable return while taking on a small amount of risk. Your chances of success are high, but your returns are often modest. Gambling is very similar to investing. However, your chances of success are much lower. Investing is a good investment, but gambling is a bad investment.
Why do people gamble if the odds of winning in gambling are so low? Although the potential rewards in most gambling scenarios are higher than the actual odds of winning, they are often low. When choosing a project that you want to finance, make sure the odds of success are not too low and that the rewards are substantial. Once you have identified a project to finance, your main strategy is to increase your chances of success by improving the factors you can control. You might want to hire the best team possible, plan the project schedule carefully, and so on. All these small benefits will add up to your advantage and will tip the scales in favor of you.
It is important for the management and team to be aware of the chances of the project succeeding when pursuing a project that is considered a gamble. Some people may not be aware of the state in which they are projecting. They might not know if they’re gambling or investing. They may believe they are investing, but they are actually gambling. The management and team can mentally prepare for the difficulties and eventual outcome by knowing beforehand that your chances of success are 100 to 1. It can actually help to manage expectations for all stakeholders involved if the overwhelming odds are mentioned at project start.
Gambling on a project is a different mindset than investing in a project. You know you will succeed most likely when you invest in a project. The only thing that is uncertain is how much. You know the odds of you failing to succeed when you gamble on a project. It can be uncomfortable for some to mention that a project is most likely not to succeed at the beginning of a project because they fear it could affect their team.