CBI AE Update 10 Feb 03 – Why Bad Projects are so Hard to Kill

“Even at the prototype stage, experts were saying the technology was obsolete. Yet, in the face of tepid consumer response, the company stubbornly kept increasing production capacity and developing new models. By the time it was finally killed, the initiative had cost the company an astounding $580 million and had tied up resources for 14 years.

The product was RCA’s SelectaVision videodisc recorder, and its story is hardly unique. Companies make similar mistakes – if on a somewhat smaller scale – all the time.”

How do you allow projects to “fail fast” before they “fail big?”

The Feb 2003 issue of the Harvard Business Review, quoted above, contains an article by Isabelle Royer that presents research from two case studies and hypothesizes several reasons why companies launch innovations which fail in the market. A couple of highlights:

Ø The power of collective belief in a company that results in discounting information that doesn’t confirm pre-existing beliefs.

Ø The value of an “exit champion” who can be skeptical about a project’s potential for success. In the two case studies researched by Royer, the skeptics were over-ridden, and left the company.

Three comments:

n There are two types of errors – launching a failure and killing a winner. The article focuses on “Type 1 errors” – launching a failure. Hank Chesbrough and others looked at “Type 2 errors” at Xerox PARC and found there were a lot of those as well – Xerox PARC killed a lot of projects that went on to become successful companies – Documentum, for example.

n The problem of selection bias. We don’t know how many other projects had these same kinds of narratives, with successful endings. We all have heard examples of “romantic” innovation projects where the stubborn product champion prevails against the resistance of management, saving the company.

n Balancing the need for skepticism with the need for alignment. The “exit champion” will find existence within the team quite problematic because, on a daily basis, the team needs to be aligned and have everyone pulling in the same direction. In addition, an “exit champion’s” views will be discounted precisely because of the role she’s been assigned to play.

Another way of approaching the need for an “exit champion,” which is intended to serve the same function, would be creating an external review mechanism, something that Hank Chesbrough at Harvard has studied and written about.

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