In today's rapidly changing world, almost every industry is bound to experience, sooner or later, a time of dramatic change\u2014a shift from a familiar technology or business model to a new one that disrupts the old ways of operating and threatens companies that refuse to change. \n\nIt happened in IT when mainframes and minicomputers gave way to PCs\u2014then happened again when the Internet emerged as the dominant source of software and data. It happened in the steel business when old-style integrated mills were replaced by mini-mills, in photography when film was supplanted by digital technology, and in movie rental when storefront outlets gave way to online home-delivery services. Fortunately, there's a proven technique for surviving such transition upheavals. It's called double-betting. It's a large-scale variant on the familiar strategy from games like blackjack and horse racing where a gambler hedges his bets by putting money on two or more outcomes, thereby boosting the odds of a winning payoff. Or, as Yogi Berra said on more than one occasion: "When you come to a fork in the road, take it." Microsoft double-bet in the wake of Bill Gates's famous Pearl Harbor Day speech in 1995, when he announced that it was time to take the advent of the Internet seriously. Microsoft didn't jettison Windows\u2014it continued to develop products and services in support of the operating system franchise\u2014but it double-bet by investing heavily in Web-based applications as well. Why doesn't every company facing transition risk employ double-betting as its insurance policy? What stands in their way? Two contrasting stories provide a big part of the answer. In 1997, Motorola faced one of those critical forks in the road. The company faced a simple question: "Should we stick with analog cell phones or shift to digital?" Nokia, which had just shed all of its non-cell phone businesses (lumber, rubber, hotels, etc.) to focus on cell phones, was shifting to digital and doing it very quickly. Many people at Motorola knew they had to make the shift, but the leadership of its cell phone business resisted. They'd invested too much money in analog (where Motorola was the big leader), and perceived too much uncertainty about digital. These factors made it tremendously difficult for Motorola to double-bet in 1997. Moreover, by any measure, Motorola was looking extremely successful. From 1993 to 1997, the company was on a tear. Sales, earnings and stock price were all growing rapidly. Everyone was productively busy\u2014and when you're really busy, you don't have much energy to think of other things, even if they're the things that matter most. So the managers at Motorola who knew that they should make the double-bet didn't raise enough of a ruckus to force the issue. And when you don't raise enough of a ruckus, inertia wins. Inertia won and Motorola lost. By 2000, Nokia was the world's cell phone leader. The Motorola story shows that strategic risk is highest when your success is greatest. That's precisely the point where you are least able to see the risk and least inclined to do anything about it. Lotus was in a similar position in 1992. After a tough spell in the late 1980s, Lotus was back. Its new version of Lotus 1-2-3 was taking the spreadsheet market by storm, grabbing 70 percent of the global market. Revenues, profits and stock price could not be doing better. Exactly the moment of maximum risk. The risk came from Windows. The world was shifting from MS-DOS to Microsoft applications that ran on Windows. And because Lotus had failed to double-bet on a Windows version of 1-2-3 five years earlier, it was in no position to respond. Jim Manzi, CEO of Lotus, understood what was happening. As insurance against exactly this turn of events, Manzi had funded a skunkworks effort to develop Lotus Notes, the first major collaborative software program. Customers loved it and it grew very quickly. However, in 1992, Notes was still a tiny business compared to Lotus 1-2-3, and the organization strongly resisted putting its efforts behind Notes. At Motorola, dozens of managers saw the double-bet problem clearly, but the leadership of the cell phone business resisted. At Lotus, it was the opposite: Manzi saw the company had to double-bet, but most of the management team didn't. Manzi argued, persuaded, cajoled\u2014all to no avail. People were just making too much money and having too good a time in the current business to think about investing in what was seen as an insignificant startup. In the summer of 1992, Manzi organized a series of lunches with each of his company's top managers. At each lunch, he made the case for an urgent investment program in Lotus Notes, and he asked the manager to make a decision: Either back Manzi on Lotus Notes or leave the company. Most left. Manzi had to change most of his senior management team, knowing he needed a cohesive group to make the double-bet work. The new Lotus management team did make it work. While Borland, WordPerfect and other software makers that had failed to anticipate the discontinuity caused by the Windows juggernaut had lost 90 percent of their value by 1995, Lotus's value rose from $1 billion to $3.5 billion by 1996, thanks to the explosion of interest and revenues created by Lotus Notes. These two stories illustrate the several factors that stand in the way of the double-bet. One is failure to face reality. The human tendency to turn a blind eye to risks leads companies to fail to act in time. Sometimes the threatened company simply can't believe that the new technology is for real. Louis B. Mayer of MGM said that television would never amount to anything. Ken Olsen of DEC said the PC was a toy. Motorola's executives believed that analog telephony was just fine\u2014who needed digital? This is human and understandable. If you've devoted your whole career to developing, marketing and defining a particular technology or business design, how can you see its weaknesses or understand how some upstart might swiftly replace it? \nThe second stumbling block is misplaced strategic logic. Sometimes the threatened company recognizes the power of the new technology but wants to avoid the cannibalization of its old product. Unfortunately, this logic often produces the curious result that everyone else invests in the new technology except for the threatened firm. It's painful to cannibalize your own business. But is it any better to have someone else do the devouring? If you do it yourself, you can at least handle it in a way that optimizes the transition for your people from yesterday's business to tomorrow's. The third factor is fear of spending. The threatened company believes in the new technology and wants to invest in it. But it also believes it can't afford to invest because it's expensive and would blow the company's R&D and capital expenditure budgets. Some go so far as to claim, "You can double-bet your way to bankruptcy." Yes, you can. But the good news is that you can detect the false threats, usually fairly quickly and cheaply. In the early 1990s, everyone was swept up in cable frenzy. The phone companies thought they had to overbuild the cable companies to protect themselves. But four months of research (actually done independently by several different organizations working from the same fact set) showed that there weren't enough new video applications, that there wouldn't be for years (because the developer community was just too small), and that in any case consumers wouldn't pay enough to cover the cost of the overbuild. Most companies got the message, and didn't waste billions on the cable overbuild double-bet. As this example shows, double-betting doesn't have to be\u2014and shouldn't be\u2014performed in the dark. Perform your due diligence first, and then double-bet only when circumstances demand it. These three psychological factors explain why companies are reluctant to double-bet, even when their survival depends upon it. It's perfectly understandable\u2014and completely inexcusable. If you're in a managerial role, you should be scanning the horizon today for the next big shift that will rock your industry. And once you identify it, you should ask: How and where can we double-bet to ensure that our company will be one of the survivors? Adrian J. Slywotzky is the author of the bestselling The Profit Zone, Value Migration, How to Grow When Markets Don't and The Upside. He has also been published in the Harvard Business Review and The Wall Street Journal and has been a featured speaker at the Davos World Economic Forum, the Microsoft CEO Summit, the Forbes CEO Forum and the Fortune CEO Conference. See www.crownbusiness.com or www.mercermc.com for more info.