Is Sunk Cost Thinking Dooming Your Innovation Portfolio?
I’ve written many times that portfolio management is about change: changing attitudes, changing tactics, and changing how you invest your limited funds and focus your talented teams. We all know change is difficult, leading us away from a known environment and into an unknown future. But the issue at hand is more than a simple case of the devil you know vs. the devil you don’t.
Sunk cost thinking makes change even more challenging. Once we are working on a project our tendency, as humans, is to keep working on it. This remains true even when we are faced with mounting evidence that the project outcome will not live up to our expectations. We all have an innate tendency to look backwards (at what we’ve invested) while we look forwards (and decide how much more to invest), and this leads us to limit our options time and time again. Consider these individual examples (collected in the fantastic book Essentialism by Greg McKeown): (more…)