From my experience, sunk-cost bias in the digital sphere seems to materialise itself in two main ways; (1) old tech in the throes of death and (2) new tech which doesn’t meet the brief.
Old tech in the throes of death
Whether it’s an ancient ERP software system or a decrepit website, many businesses have found themselves reliant on old pieces of technology that are no longer fit for purpose. The main sunk-cost for businesses in this scenario is the upkeep of old technology can be exceptionally expensive, especially as supplier choice dwindles overtime. The other sunk-cost is a little less obvious, it’s the price of improvements that don’t have a future beyond the ageing piece of technology itself.
New tech which doesn’t deliver
Many businesses have been sold a shiny new piece of technology that hasn’t lived up to expectations. In certain cases this misalignment can be rectified, but in other cases it is simply the process of throwing good money after bad (insert cliché). The sunk-cost bias occurs in circumstances where there is a vacuum of leadership, honesty and responsibility. Rather than owning the problem, individuals work hard to change the narrative, i.e. making a failed project seem like a success or provide various justification for the less than ideal outcomes. This has two very damaging outcomes for businesses. (1) The piece of technology has additional money thrown at in a frantic attempt to make it a success. (2) A better solution is never sought because it contradicts the previous established narrative that it was a ‘success’.
So what’s the remedy?
Nothing is ever this simplistic in business, but if I had to choose a single trait to act as an antidote – it’s courage. To overcome the above biases, it would require honest reflection, challenging false narratives and taking responsibility for better outcomes. All items that could meet resistance even in businesses with good cultures.
