Overcome the sunk cost fallacy and change direction even after investing significant effort.

How to change direction after you've already invested much effort? Change seems to be inevitable now more than ever. We start down one path, but then circumstances are different, and we're unsure if we're still on the right path.?

If you've ever known you need to make a change, but you're feeling the weight of how much work you've already put in, this article is for you as we discuss:

How do you navigate a change when you've already invested a lot in the current plan?

Because if you don't do anything and keep moving in the same direction, it will only get worse. Let's explore the sunk cost fallacy and see how to understand our emotions' impact in this situation. Then we'll walk through the steps for making such a change.

What is the sunk cost fallacy?

The workday is over, and you're swiping through Netflix to find something to watch. You pick a movie you haven't seen and start watching. It's terrible. The acting, the plot and the cinematography all leave much to be desired. But you keep watching because you've already invested over an hour, and there are only 35 minutes left. This is the sunk cost fallacy.

It's hard to let go when we've invested a lot of work, money, or time into something. Even when our mind knows we should cut our losses and move on, our emotions keep us from moving forward.?

We like to think of ourselves as intellectual agents making rational decisions, but research has shown that we're not that different from mice or rats in the sunk cost fallacy.?

It's hard to let go when we’ve invested a lot of work, money, or time into something.

It has to do with the regret of making a wrong decision, and to change requires accepting a bad decision. The sunk cost fallacy is strengthened even more by a culture that makes us more sensitive than ever to shame and failure.

How to avoid the sunk cost fallacy?

Avoiding the sunk cost fallacy is easier said than done, but here are two strategies to help you.

1. Keep short cycles of review.
2. Name the past and move to the future.

Keep short cycles of review.

The more we've invested in something, the harder it is to shift away from it. Holding regular reviews helps you evaluate where you are frequently, thus minimizing the needed change. Short review cycles also may mean you have a series of iterative changes rather than one significant change.?

I've seen numerous teams benefit from implementing Scrum because it allows the team to evaluate and adjust regularly. Whether through daily stand-ups or sprint retrospectives, the team always keeps things visible, evaluating and replanning.

It's the difference between minor adjustments to the steering wheel to keep a car on track versus the sharp overcorrecting turns of a new driver.

Short review cycles also may mean you have a series of iterative changes rather than one big change.

Keeping the cycles short reduces how much has been sunk into the current course. The sooner the change is made, the less power the sunk cost fallacy has.

Name the past and move to the future.

While you can and should learn from the past, you cannot change it. The effort, time, or money you've invested is already spent, and taking ownership of this reality is crucial to moving forward.?

Sometimes it's simply saying aloud to the team, "When we started the project, we looked at factors X and Y and decided to do Z, but now things have changed, and Z is not the right strategy for reaching our goal."?

The sooner the change is made, the less power the sunk cost fallacy has.

So often, bringing the truth out into the light disarms all the lies we're tempted to believe. All of the "you should've…" and "if only…" statements shame us into submission and keep us stuck on the same path.?

But when you take ownership of the decisions and the outcomes and call them what they are, you can set them down and turn your attention to what's ahead.?

Putting the past behind you is the biggest challenge to changing direction. Now we'll look at how to lead in a new direction.

How do you lead in a change of direction?

Once you and your team have identified a new direction, now comes the next big challenge, making the change. Some of this will depend on the size of your project or organization. It's easier to turn around a canoe than a cruise ship.?

Here is a checklist for making a change of direction.

1. Clearly state the new direction.
2. Create a communication plan
3. Identify strategies for the change process.

Clearly state the new direction.

One of the top tasks of a leader is to create clarity for your team. Once a new direction is set, outline how to communicate it.

• Where have we been??
• Where are we right now?
• What is now the destination we are heading towards??
• How will we get there from here?

It’s easier to turn around a canoe than a cruise ship.

Changing direction requires a new destination. Without clarity on the goal, the new "direction" will feel preferential at best. In a change process, people don't know what has changed and what has stayed the same, and you must communicate this explicitly. Another set of questions to answer include:

• What are we doing now?
• What will we keep doing?
• What will we change?
• What new things are we now doing?

Create a cascading communication plan

If you're in a large organization with layers of leadership, you need to cascade the communication down. Leaders need to know first what is happening so they can be a part of leading in this new direction.?

Now we all know people talk, so I recommend a shorter cycle of time for the communication to move from leaders only to everyone. Otherwise, you will be battling gossip and misunderstanding.?

Leaders need to know first what is happening so they can be a part of leading in this new direction.

Hopefully, you involved these leaders in the evaluation and problem-solving process, which will also make the cascading of communication easier.

Your middle managers are essential, they aren't the decision-makers, yet they interact with those doing the work being scrapped.?You want to empower your leaders to lead their teams through these three points.

• This is what is happening.
• This is how it affects our team.
• This is what we're going to do.

What you want to avoid is someone asking their leader a question about the change, and they answer, "I don't know what's going on, this is all news to me." That answer will kill trust in upper leadership and confidence in the new direction.

Keep very short (daily) cycles for communication during change. If you take a few weeks without updates so you can "get it all figured out," you've likely lost everyone before communicating with them again.

Identify strategies for the change process.

Once you have clarified the new direction and established a communication process, you can look at strategies to facilitate the change.

Change can be tricky, and it's not always clear how to implement change. The book Switch is an excellent resource for understanding how to bring about change, and it uses a metaphor of a man riding an elephant to illustrate three areas to cultivate change.

1. Directing the Rider. The rider represents the rational, logical mind of people. Appealing to the rider is usually the default approach but will have a limited effect on its own.
2. Motivate the Elephant. The elephant represents our emotions, and if not properly engaged, it will steamroll our rational plans every time.
3. Shape the Path. How can you change the environment in which the change is being made? Can you make the new behavior extraordinarily easy and the old one difficult or impossible?

Next Steps

Change is inevitable, and leading in change is hard, but you're not alone. I hope this article has helped you identify strategies for changes ahead of you.

This post is part of an upcoming Design Sprint Guide, where I walk through how to run design sprints and share lessons learned from facilitating them both in-person and online. The Design Sprints Guide will release in 2023.