In a recent post, Seth Godin advices on taking that first small risky leap that will give a fair amount of reward. I liked the model and the graph. In fact, I think the graph is a great way to understand why companies that use agile methodologies have been able to reap higher rewards with much less risk.
Risk is in direct proportion on the invested amount plus lack of insight. An agile approach to strategy breaks a strategic initiative into small incremental initiatives. Each initiative requires a smaller investment and results in extra insight that decreases the risk of the next increment.
You can apply this model to almost anything you do inside an organization. Some examples:
1. Do you want to hire a top executive to lead a core area of your company? In the latest hire I have done, I flew the top candidate for one full week to headquarters. I changed the schedule of all other executives to spend quality time with this guy. Short of having him manage the team, I simulated almost any situation he could face. Was it expensive? Yes, but much less expensive than making a blind hiring mistake and having to restart the process in 9 months. The risk of actually hiring became smaller.
2. Do you want to move into a new geographical market? If you would have done it in the bubble years you would raise 20 million, staff yourself with top sales executives and start selling. Very high risk, high reward (if you're lucky). The Agile model however demands that you first send a couple of top executives to feel the new market, start initial sales and understand what to do next. Then you staff with 2/3 sales execs, have them reach quota and get to the next level.
The only tradeoff here is time. If you do it incrementally, it will probably take longer than taking the high risk, Big Bang plunge. The tradeoff however works for me. I don't want to burst. And it is probably working for you too.
Besides my daily job as CEO of 
Paulo - I like this model and the connection to Agile. Another issue that seems to be discussed a lot in the Twitter/Blogsphere is Trust (e.g. does Agile build real trust?) Do you think Trust plays a part in risk-reward as it relates to Agile?
I have seen the issue of Trust being discussed in the context of Agile Methodologies being applied to IT projects. Agile provides a way for Business to minimize the risk they _feel_ on how an IT project is doing. Why? Because they see results frequently and constant progress. Through this they are able to gauge better the risk of an IT solution being adopted, the core features being delivered and all of this being done in time.