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When Doubling Down Can Be a Successful Business Move

Posted: November 14, 2017 at 10:16 am   /   by   /   comments (0)

There are many different ways of achieving success in the business world. For example, plenty of company leaders are drawn towards the compelling nature of classic strategies that have stood the test of time. Yet, at other times it pays to be innovative, using ideas and methods that are inspired by other aspects of life. This can mean trying out that things that have been proven to work in other areas.

A good example of this comes with the “doubling down” strategy. While it is most associated with playing cards, this can also be a useful technique for business dealing as well. Indeed, many people have used the phrase in a business context.

What is Doubling Down?

If you look online for a definition of this phrase you will see a variety of results mentioning things such as becoming more tenacious, increasing the stake, and making greater efforts to get results. Not everyone who uses this expression captures its true meaning, so it may help to get back and look at its origins. “Doubling down” come from a certain type of bet that can be carried out in blackjack. In this case, the player chooses to double their initial bet but will only receive one more card after doing so. This means that they are happy with the strength of the hand that they hold or feel that there is a high probability of getting dealt the perfect card. There is a lot of fairly complex strategy behind this seemingly simple move. Doubling down can typically be done on any two-card hand, although some game rule variations only allow it on specific hands.

Overall, the best way to describe this move’s business version is that it refers to taking a calculated gamble by increasing the stake on something that has already begun and that shows promise, although there is no guarantee of success. You could make a 50,000% return like Julian Assange claims to have done with bitcoin. or you could lose more than you originally stood to lose. Bearing this in mind, it is clear that the term is often used incorrectly in business matters these days. However, there also some great examples of genuine uses of doubling down that make perfect sense and show the power of this strategy when someone is sure about their product offering.

Interestingly, you might also see “doubling down” or “a double down” also referred to in the case of pushing the main element of one model in order to get the benefits there and in another model. The move to create a People’s Choice Award at the Toronto International Film is given as an example of this type of strategy, but it isn’t really related to the original blackjack meaning.

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Successful Examples of Doubling Down in Business

A good example can be found if we go back to the period after the initial public offering of Facebook in 2012. The share price was struggling and the heat was on CEO Mark Zuckerberg. However, he came out in an interview and used gambling terminology to increase confidence in the company’s stock. He did this by saying that the fact that relative newcomer Facebook was being underestimated in the stock market allowed them to “go out and make some big bets”. Zuckerberg added that it was the perfect time to “double down” on the company. This gave the impression that investing in Facebook was a gamble offering big rewards; a suggestion that proved to be correct.

Facebook shares fell from their original $38 to a low of $17.55. Anyone bold enough to have doubled down at that point would have made a huge profit, as they are now worth over $178. Another classic example came when Microsoft project manager Peter Orullian said that they would be doubling down on PC games, as Kotaku reported back in 2010. Given the success of PC gaming since he said that in 2010 it is clear that it was a pretty good bet. There are now 1.8 billion gamers in the world and it seems that Microsoft felt they were in a strong position to exploit a growing market.

When Doubling Down Can Go Wrong

Sometimes the use of this phrase can lead to less impressive results. This is particularly true when the gamble fails and the loss is higher than it would have been. Apple CEO Tim Cook has been known to use the doubling down expression regularly. Most famously, he said that they were going to “double down on secrecy”. While this wasn’t strictly speaking a gamble, he was later ridiculed for this expression when details of the latest iPhone were widely leaked online.

This phrase also came back to haunt HP senior vice president Brian Humphries. He proclaimed that his company was going to be “doubling down on webOS” after buying Palm. Yet, the results proved less than exciting when the products were disappointing and the webOS hardware division came to a sudden end.

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How to Double Down Effectively

It probably isn’t right for someone who is just starting a new business, just as newcomers to blackjack tend to be wary about this type of bet. Just like experienced blackjack players, business leaders can learn when it is best to double down. A card player will do this by having a strategy in place and knowing when the time is right to take a calculated risk.

In the business world, the idea is pretty much the same. Doubling down effectively isn’t about blindly gambling. It is about wisely choosing the moment to raise the stakes, knowing that a potentially larger reward is a definite possibility. To do this well you need to understand your business, your cash flows, and your expectation levels. Above all, you need to know exactly what the gamble involves and what the risks are.

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