Quit while one is behind

Quit while one is behind

A story about sunk costs, supersonic planes, and bad breath.

A few months ago I bought a 6 pack of toothpaste on special offer from Bol. The stuff tasted horrible. There’s still a long way to go, but I will inevitably make my way through the entire 6 pack – and why? Because it cost me 19 euros.

19 Euros might seem like a small price to pay to taste like hell for most of 2018, and the rational decision would be to throw the rest away. The problem is humans are hardwired to avoid loss, a condition that gives rise to the sunk cost fallacy. If you’ve ever forced your way through a dessert that you’ve paid for but didn’t want, you’ll know what I’m talking about. It’s the relentless urge to get your money’s worth, to see something through, to never admit defeat. Instead of making rational decisions based on satisfaction, we irrationally attempt to recoup our investment – something that the last spoonful of crème brûlée cannot do.

We see the sunk cost fallacy playing out across the world of innovation. The most famous example is Concorde, the supersonic passenger airline that was discontinued in 2003. From the beginning experts doubted the commercial viability of Concorde, and yet the British and French governments piled money into the venture trying to salvage the concept. Rising maintenance bills and a lack of demand resulted in sunk costs of more than £6 billion, and the project was eventually abandoned. Whether £9.98 or £6 billion, it can be hard to cut your losses: forget quitting while you’re ahead – it’s quitting while you’re behind that requires real bravery.

 

Falling foul of the sunk cost fallacy is expensive, time-consuming, and a killer of innovation.

 

Companies lose resource hand over fist trying to work a project which was never likely to be viable, and realists are often denounced as naysayers and quitters. HVMNS unique Experimental Inventing approach confronts the sunk cost fallacy in 2 ways: 

Agile Economics

HVMNS has developed a number of metrics by which the commercial viability of a project can be measured. These metrics are agile because they can be used at all stages of a project to serve the same purpose; to ensure the team isn’t sinking costs into a project which is unlikely to make money in the long run. Agile Economics de-risks investment by delivering early commercial rationale for the proposed solution. Agile Economics also helps to kill ideas which are unlikely to gain real-world traction, thereby lowering the likelihood of finding yourself in a sunk cost situation.

Falling in Love with the Problem

At HVMNS we talk about falling in love with the problem, and not the solution. When companies become obsessed with a solution, they invest millions to prove that it’s the right strategy. Instead, we’re obsessed with problem, and we use solutions as ways to learn about how that problem should be solved. By keeping our emotional distance from the solution, we protect ourselves from the unconscious bias which drives people to prove something right at all costs. For example, rather than ask, ‘how can we get Concorde to work?’ we might ask ‘how can we get people to their destination faster?’

 If you’re worried about the costs of innovation in your business, HVMNS can help. Our market-leading set of tools and behaviours are geared towards cracking innovation challenges quickly and efficiently. If you’re interested in how Experimental Inventing can help you, get in touch now.

IKEA Tests Subscriptions In Age of The Sharing Economy

IKEA Tests Subscriptions In Age of The Sharing Economy

Brick-and-mortar retailers are reinventing their business models amid changes in consumer preferences and the emergence of the sharing economy. IKEA, which is known for selling flat-packed furniture from 276 locations in 25 countries, is experimenting with a subscription offering in Switzerland. The pilot, which is set to start “as soon as this month,” is said to encompass multiple furniture types, according to a Financial Times report.

Verbeter de cashflow door de relatie met je klant te verdiepen

Verbeter de cashflow door de relatie met je klant te verdiepen

Misschien wel het allerbelangrijkste advies ter verbetering van de cashflow: verdiep de relatie met je klant. Dat zegt Johan Trip, specialist op het gebied van abonnementen. ‘In het ‘oude’ model is de relatie tussen webwinkelier en klant puur transactioneel van aard: de klant kiest een product en rekent het af. In principe is het na die ene transactie, afgezien van incidentele aanbiedingen en upselling, vaak afgelopen. De winkelier verliest zijn klant uit het oog en is alweer bezig met de volgende verkoop.’

What the "alphon" teaches us about lean

What the "alphon" teaches us about lean

Alphons are a footnote of science history. They are a reminder of the way science actually works. No concept is a fait accompli. The available data can be interpreted many different ways, and many ideas that seem so promising are actually wrong turns. Everything is a hypotheses waiting to be validated.

Being Lean is a mindset, going deeper than the build, measure, learn paradigm that is frequently referred to. It’s the concept of employing scientific thinking to problem solving.

Validate to succeed.

Why being "humble" is crucial for growth

Why being "humble" is crucial for growth

How can you stay hungry for growth when things are going excellent? Remember this: Great ideas are a dime a dozen, but great execution determines your long-term success and growth. 

To that end, the potentially unglamorous parts of building a business, from knowing your numbers well, understanding what metrics matter most to a given business, and being able to keep inertia moving are often undervalued, but can mean the difference between rocketship growth and rapid deceleration.

Mensgericht transformeren, de inspirerende visie van The Thrive (energising people)

Mensgericht transformeren, de inspirerende visie van The Thrive (energising people)

Het continu in transitie zijn is de nieuwe standaard geworden, stilstaan is achteruit hollen. Veel leiders worstelen met het vinden van een antwoord op de vraag hoe ze de resultaten een nieuwe en duurzame impuls kunnen geven. Wat is er nodig om een andere, diepere focus aan te brengen, aanpassingsvermogen te verhogen en transities te laten slagen? Hoe zorg je dat je organisatie weer gaat floreren, gaat thriven? En hoe verhoog je dan de thrivability in een organisatie?

Innovation is not about technology

Innovation is not about technology

The most significant barrier to innovation is fear. The fear of introducing your idea and being laughed at, the fear of failure and being wrong. Innovation is not about technology, it's about vulnerability.

Niet techniek maar de gebruiker gaat het verschil maken in de energietransitie

Niet techniek maar de gebruiker gaat het verschil maken in de energietransitie

De energietransitie wordt vaak in abstracte doelstellingen beschreven en technische termen als smart-grids, V2G, demand-response vliegen je om de oren. Maar veel complexer dan deze hippe benamingen is het gedrag van de gebruiker. Het zijn niet de technieken maar de gebruikers die leidend zijn in de richting die de energiemarkt op beweegt. Welke veranderingen zien we in het gedrag van de gebruiker en hoe kunnen deze verschuivingen aanleiding zijn om de energietransitie te versnellen en de energiemarkt vorm te geven.

Our Q3 2018 reading list

Our Q3 2018 reading list

Our 2018 reading list features suggestions from different segments, business, psychology, theology etc. We hope that, whether you’re a CEO or a student, you will find something to enjoy.

What matter most? On OKR's

What matter most? On OKR's

It’s no surprise that John Doerr’s latest book, Measure What Matters is already a New York Times bestseller. In it he shares the two secrets behind many of the successful businesses he has invested in and helped build over the years. His secret is that OKRs and CFRs are, in fact, what matters most.

Emerce: Abonnementsmodellen: wat doe je tegen afhakers?

Emerce: Abonnementsmodellen: wat doe je tegen afhakers?

Meer dan de helft van de online shoppers heeft zich aangemeld voor een of meer (online) abonnementen. Het grootste gedeelte van de inkomsten daarvan gaat naar digitale diensten zoals Spotify en Netflix en zeker 15 procent gaat naar abonnementen waar fysieke producten (scheermesjes, voeding, kleding) tegenover staan. Hoe ontwikkelt de markt zich, welke modellen zijn er en wat is er nodig om succesvol te zijn?

Finite and infinite games

Finite and infinite games

There are at least two kinds of games. One could be called finite, the other infinite. A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play.

Zonder kwetsbaarheid geen wendbaarheid, of waarom Agile werken zo lastig is

Zonder kwetsbaarheid geen wendbaarheid, of waarom Agile werken zo lastig is

Een groot aantal organisaties die “Agile” vormen van werken hebben toegepast komen terug op hun schreden en druipen teleurgesteld af. Allerhande coaches die teams moesten helpen de techniek onder de knie te krijgen staan weer op straat. Wat is er gebeurt en waarom gaan we voorbij aan het echte probleem?

Digital transformation: from linear transactional to circular relationships

Digital transformation: from linear transactional to circular relationships

Apart from the way the term gets thrown around by almost every consultancy it actually means something. Organisations talk about becoming a “solution provider” which is slang for saying that their hardware is just a means to an end. In other words, companies now focus on achieving outcomes for their clients, rather than just selling them equipment.

Waarom "Agile" werken lastig blijft voor veel organisaties

Waarom "Agile" werken lastig blijft voor veel organisaties

In een recent onderzoek van Deloitte gaf 94% van de managers aan dat “agility” cruciaal is voor de toekomst van de organisaties die ze leiden en komt maar 6% aan ook maar een beetje in de buurt te komen van de “wendbaarheid” die ze voor ogen hebben. Een gat is 88% is de moeite waard te onderzoeken. Waarom komen weinig organisaties verder? Wat is er zo moeilijk aan agile werken?

Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

Companies like Netflix, Spotify, and Salesforce are just the tip of the iceberg for the subscription model. The real transformation--and the real opportunity--is just beginning.

Subscription companies are growing nine times faster than the S&P 500. Why? Because unlike product companies, subscription companies know their customers. A happy subscriber base is the ultimate economic moat. 

Software is not eating the world, Agile is

Software is not eating the world, Agile is

It is not software that is eating the world. But software is teaching us an important lesson. It thought us that is is about the journey after all. Organisations are slowly waking up to the fact that, in order to be successful, a different set of skills is needed. The unit focused corporations of the 20th Century are finding themselves being overtaken by organisations that are smaller, faster and thus better able to adjust to the shifts in customer drives and needs.

Units to outcomes (on IoT and Subscriptions)

Units to outcomes (on IoT and Subscriptions)

For the past 100 years or so companies have operated primarily from a product-centric model where the primal focus point was to sell more of the same. The number of units was the key result. Be it more radio’s, cars, shoes, and tablets.