Sunk Cost Bias In Product Development

Why Hiring Experts Makes Sense

Tell us if this sounds familiar:

After months of defining your new product, gathering the right resources, long meetings with stakeholders, and late nights which led into mornings where the world couldn’t possibly contain enough coffee…your project is finally greenlit!

Here’s the rub: you spent more time talking to internal stakeholders than you did to customers who might buy your product, and your customers expressed differing levels of interest in your new offering. All of those meetings and internal communications were such a pain to get through, though, and if you never hear the word “free intercontinental breakfast” again, it’ll be too soon. If you can just build the product, then people will change their minds and they’ll want to buy it.

Or, after all that, will they want to buy it? They must want to…right?

If you’ve worked in large organizations or in regulated industries, like healthcare or education, this pain will seem very real. Often, these sorts of organizations spend more time seeking internal approval than they do seeking customers and creating innovative products that win hearts and change minds.

What grows in the Valley doesn’t always make sense in other climates

Now, tell us if this also sounds familiar: move fast and break things.

The mantra of all those Silicon Valley unicorns sounds great, but when you’re an executive responsible for millions (or billions) of dollars and thousands of livelihoods, the risk/reward ratio becomes less attractive.

Rapid iterations and constant customer feedback mitigates costs over time, re-aligns incentives regularly, and provides the data required to justify future expenditures and avoid the sunk cost fallacy. The design process improves development efficiency between 10x and 100x, depending on who you ask. Since feedback comes on a regular basis, all those stakeholders clamoring for meetings can review progress incrementally, help adjust the project’s course, and executives can explore untested waters efficiently and effectively.

Understanding the Product Development Lifecycle

BLDG-25 offers many services, including design and development, that help exemplary companies achieve outstanding success. We also provide rapid prototyping workshops that help with ideation, solution advocacy, product feature prioritization, and other things that sound really good but need more context to really make sense. Asking questions, giving space to consider solutions, and following formal processes are effective ways to achieve goals.

If you’re an executive championing innovation in your organization, some of these questions should resonate:

  • How do I engage my team and give them opportunities to explore new ideas while balancing that professional development against deadlines, KPIs, and some not-so-enthused partners at my company?
  • My business is focused on regularly delivering results and tangible progress, and an executive workshop or embedded design team sounds great, but how can I justify this expense to the CFO?
  • Other stakeholders aren’t sure about whether we should proceed: how do I find the right words to craft the perfect story?

Let’s dissect the above questions. There are three primary concerns covered:

  1. How do I keep my team on track?
  2. How do I show value?
  3. How do I convince others that this is important?

If we were writing a value proposition based on these central questions, it’d go something like this: “How might we explore, define, and champion this idea so it succeeds?”

Leveraging the design process to minimize costs and maximize awesome

When I’m in a design sprint with the rest of my team, I feel alive and extremely engaged. Creative energies synchronize with the freedom to explore options in a time-pressurized environment. Since we move fast, none of us are married to our ideas which means that we largely avoid the sunk cost fallacy.

One of the problems most large organizations face is a lack of real pressure. Intrapreneurship comes with a safety net, and in the words of Bane in Christopher Nolan’s The Dark Knight:

“Peace has cost you your strength! Victory has defeated you!”

Rapid iteration and testing means that peace is never an option, and victory lives week to week. We aren’t, after all, fighting the battle so much as we’re winning the war.

Let’s return to the story at the beginning of this short article. If you’ve spent quarters of your life trying to win influence in your organization, articulate customer priorities, and/or introduce a culture of rapid innovation, you’re probably looking for better data to justify your efforts.

At BLDG-25, we use best-practices for design sprints as established by thousands of hours of practice, dozens of client projects pushed through conceptualization to implementation, and we’ve managed to have fun and make a difference along the way.

Interested in learning more? We’d love to hear from you.

Talk with Us

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