FEATURE fit for future purpose , they adequately fulfil the immediate needs of the business .
But it ’ s when organisations start considering their sunk costs when determining strategy that irrational decision-making – the sunk cost fallacy – comes into play . The sunk cost fallacy is something that is typically an issue for more established companies with significant legacy infrastructure and technology that has underpinned their core processes for a long time .
There are several reasons why businesses fall victim to sunk cost fallacy . First , there is a perception that undoing old projects and integrating a new Digital Transformation plan to sit alongside all of this legacy complexity will take too long and cost too much . Additionally , it ’ s commonly perceived that the commercial benefits of making such a large , strategic change will take too long to realise and are too hard to quantify to make it worth the effort . Additionally , on an individual level , people naturally find it difficult to accept loss in any form and prefer to follow their decisions through , even when failure is inevitable .
A short-term fix
Despite this , there ’ s a growing number of applications where taking a different course of action is unavoidable . It might be an individual project , or one business area that desperately needs a quick fix to their digital needs . Short-term trading , the drive to maintain a competitive edge and the need to respond to market conditions mean that most organisations tend to opt for the fastest solution , which is to
IT ’ S COMMONLY PERCEIVED THAT THE COMMERCIAL BENEFITS OF MAKING SUCH A LARGE , STRATEGIC CHANGE WILL TAKE TOO LONG TO REALISE AND ARE TOO HARD TO QUANTIFY TO MAKE IT WORTH THE EFFORT .
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