Being paranoid carries a pretty negative connotation. We imagine a fragile-looking guy cautiously meandering the streets, maybe right up against a wall, with his jacket zipped up to his throat while he constantly looks over his shoulder in every direction imaginable -- or something relatively close to that. As an entrepreneur this is not too far from reality as you build and grow your business.
It's actually quite important that you maintain a healthy dose of paranoia to stay ahead of the innovation curve and survive -- but maybe lose the crazy facial expressions and zipped up jacket.
I am not, by any means, suggesting that you lock yourself in your garage, fearful that the next knock on your door could be your last, or that you be so paranoid that you are not willing to brainstorm openly or share your ideas with others. I am, however, suggesting that you keep a healthy level of paranoia with respect to the processes and procedures that you develop as you execute your ideas, as it's the unintended consequences, or outcomes that you never saw coming, that can tear it all apart.
So, what is a healthy amount of paranoia? I thought you'd never ask.
Ask "what if" constantly. If it can go wrong, it will. So as you develop and build out every aspect of your business you must constantly ask yourself, "what if?" and realize that it's the problems that you could not possibly have imagined that will do the most damage.
Let's look at a couple of examples of "what if" situations:
You've built a visual- and audio-based book that helps kids learn to read. Everything went great with testing, your first manufacturing run is complete and you are taking your product to market. Three weeks in you discover that the high pitched audio makes nearby dogs go absolutely insane and immediately lunge at the book in the child's hands. While this may seem a bit ridiculous, it's a good example because this is an unintended consequence that could have been avoided by asking yourself and your team, "what if?"
A very timely example of the lack of paranoia and resulting negative outcomes from unintended consequences took place with the recent housing bubble and economic crisis. When banks pushed interest-only mortgage programs and qualified borrowers that couldn't typically afford a loan, a cycle started with unintended consequences that launched the country into the greatest recession since the Great Depression. There was definitely a shortage of paranoia here!
Proactively build your solutions. Being paranoid doesn't do you any good as an entrepreneur if you're not effectively using it to solve or prepare for problems. You must build your company's processes around all the potential outcomes and include solutions, with the word "proactive" at the forefront of thought. You must create solutions to the problems before they exist.
It is important that, as you create viable solutions to the "what ifs," you put yourself in the shoes of all those that could be negatively affected. In other words, think of all possible negative reactions from your customers, clients, salespeople, office staff, manufacturers and even delivery drivers. If you make a change to the production schedules to save 20 cents per unit but find that the change altered the delivery schedules of your drivers, forcing them to work an extra seven hours per week, you might have a serious and costly problem.
Remaining paranoid to identify and control unintended consequences is an exercise that will improve over time. Like most things in life, the more you practice, the better you will get at identifying these "what if" situations, and thus, better at preventing issues that have the potential to do irreparable damage to your business and brand.
Related: Is There Such a Thing as Good Greed?