The Hidden Dangers of Escalation of Commitment in Product Decisions
When making product decisions, we often believe we’re being rational, but the truth is, our choices are frequently influenced by personal biases. We search for data to support our decisions, and when that data is lacking, we rely on reasoning to justify our commitments. This attachment to product decisions can lead to a phenomenon known as escalation of commitment, where teams continue to invest in a decision despite evidence that it’s not working.
The Consequences of Escalation of Commitment
In the best-case scenario, escalation of commitment results in wasted resources and poor investments. In the worst-case scenario, companies can take the wrong path, lose to competitors, and ultimately go out of business. To avoid falling prey to this bias, it’s essential to understand what escalation of commitment is and how to recognize it in our decision-making processes.
What is Escalation of Commitment?
Escalation of commitment is a pattern of behavior where we continue to invest in a strategy despite seeing evidence that it’s not working. In the context of product decisions, this means continuing to pour resources into a product or feature even though it’s not gaining traction. Recognizing escalation of commitment is crucial, as committing to the wrong product decisions can be incredibly costly.
Why Do We Fall Prey to Escalation of Commitment?
There are several reasons why we fall prey to escalation of commitment bias. Firstly, when we’re responsible for making decisions, there’s a natural inertia behind that decision. We need to defend and explain our decisions to the team, and we’re reluctant to change course even when things get tough. Secondly, product managers often feel a strong sense of ownership over their products, which can lead them to commit more resources to improve the product rather than admitting it’s on the wrong path. Finally, there are legitimate reasons to double down on commitments, making it challenging to determine when to persevere and when to give up.
Real-Life Examples of Escalation of Commitment
Many successful businesses have fallen victim to escalation of commitment bias. Take Peloton, for instance. Despite facing significant challenges related to manufacturing, returns, and recalls, the company continued to expand its hardware business with the Peloton Tread and Row. These products didn’t account for a significant portion of revenue, but they cost a lot to develop, manufacture, and sell. It’s interesting to observe how Peloton doubled down on what they knew best – connected devices – despite losing on them.
Strategies to Recognize and Avoid Escalation of Commitment Bias
To avoid falling prey to escalation of commitment bias, there are several strategies you can employ:
- Leverage data to confirm or disprove your biases: Data can be useful in resolving biases around escalation of commitment. However, be aware that data can be manipulated to support your existing opinions.
- Marinate, marinate, marinate: Avoid knee-jerk reactions and give yourself time to think things through. Use this time to collect more data and recognize true patterns and trends.
- Seek to reduce risk by collecting more information: Conduct small, contained experiments to gather more data and answer important questions.
- Time block your investments: Revisit decisions once a time block is up to minimize the cost of your investment, even if you make the wrong choice initially.
- Ask for advice from co-workers: Seek honest feedback from other members of your team to help calibrate your decision-making.
By following these tips, you can truly vet your decisions before making them. Remember, it’s okay to change direction or commit further – as long as you’ve gone through the process of validating your decision-making. Ultimately, you want to make the best decisions to drive your company forward.