At Via Technology, we love a good success story. However, sometimes the most significant learning moments come from taking a look at what went horribly wrong.
Today, we are sharing a real-life horror story from one of our rescue projects: a client whose digital transformation went off the rails when sunk cost fallacy took hold of their CEO.
If you are not familiar with it, the sunk cost fallacy is a tendency to keep investing time, money, or effort into something, even when it becomes clear it’s not working out, because you are too invested and too far down the road.
It happens everywhere: careers, relationships, as well as in business, where mistakes are part of the game - and so is understanding when it’s time to reassess, accept any losses and take a new course of action.
And it happens to all of us: that’s why it’s important to talk about what happened, what we learnt, and practical steps you can take to avoid falling into the same trap without realising it.
Buying a promise
When our client originally set out on their digital transformation journey, we were not yet involved. They met the CEO of a well-known software platform at an industry event, and he made big promises. The two CEOs hit it off, and excitement for the project was high.
What did not happen? A proper strategy to map the actual business needs to the platform and assess fit-for-purpose.
The software they bought was shiny and promised innovation, but was inadequate for their operations. It could not handle the complexity of their workflows, had inbuilt business logic designed for a different industry, and the handful of features that the sales team could fully demonstrate had just been developed and had not yet been stress-tested by actual users.
Lesson Learnt
Relationships are important, but strategy must come first. Yes, it’s essential to pay attention to the people behind the technology, and build true partnerships with the vendors…but not at the expense of product fit.
One Practical Thing You Can Do Right Now
Be clear on what the purpose of the digital transformation is, and the outcomes you want from it. Then, write a non-negotiable needs list of features that will get you there, before you even start looking at vendors. Bring it to every meeting, and if a product cannot tick those boxes, no matter how charming the salesperson, move on.
Throwing good money after bad
Fast forward twelve months: we came into the picture, engaged to rescue the failing implementation.
More than $150,000 had been “invested” - against an initial estimated budget of $30,000.
The platform was still not fit for purpose - despite the ambitious promises and ongoing commitments to partnership from the CEO.
The client team was frustrated and disengaged - left to fend for themselves, dealing with the same issues technology should have solved for them, and then some. To top it off, a number of their A-players decided it was time to move on and seek better working conditions.
At first, our advice was met with incredulity; the leadership team, led by the CEO, kept pushing forward. Why? Because they had spent so much money, time, and pride on it. They hoped that if they just kept going a little longer, had yet another meeting with the vendor’s development team, all would eventually work out.
Lesson Learnt
Cutting your losses at the right time is not failure: it’s a sign of leadership. When you run the numbers, if you realise there is more to gain by stopping the project, resetting and starting fresh, do it. Your team will thank you for it, and eventually, so will your board and your mental sanity.
One Practical Thing You Can Do Right Now
Before kicking off a major project, set clear kill criteria. These are the hard lines you agree upfront: "If by six months we have not achieved X, we stop and rethink." This way, emotion does not cloud decision-making when things get tough.
Hope is not a procurement strategy, and it’s a terrible project manager.
Forcing a broken system
As the problems mounted, leadership blamed ‘change resistance’. But here is the thing: resistance is something to pay attention to and learn from, not dismiss.
The new software genuinely made their work harder, and we could demonstrate that with data and numbers. It created more steps, more manual workarounds, and the feelings of frustration expressed by the team were justified.
This experience completely eroded the team’s trust towards a product that was not performing and a vendor who was constantly backtracking on its promises. The product was simply not fit-for-purpose for this particular client, despite the vendor teams’ efforts to uplevel the platform.
After a (overdue) frank conversation, our client’s leadership team and board found the confidence to kill the project and return to the strategy board. This move was the necessary, painful first step towards finding an aligned vendor and a fit-for-purpose solution.
Lesson Learnt
If your people are pushing back, they might not be resisting change. They might be resisting a bad solution.
One Practical Thing You Can Do Right Now
Set up an anonymous feedback loop during any major change. Make it safe for people to be honest. If the same issues keep popping up, take them seriously. Resistance to change is real, we work with teams experiencing it often, but honest investigation is necessary before assuming the problem is "just resistance".
Everyone makes mistakes, sometimes very expensive ones. How quickly we spot them and how bravely we course correct is a mark of our leadership.
Sunk cost fallacy thrives when we let pride, fear, or hope overpower facts. But when we put a clear strategy first, define exit points, and trust the insights of our team, the guardrails for a safe Digital Transformation journey are created.
At Via Technology, we believe good systems are built not just with the right tools, but with the right mindset and intentionality. If this resonates, lets’ chat.
