For starters, things tend to break when they are at the end of their lifecycle. Everything - every product, every service - has a lifecycle. It starts off as new, unfamiliar, exciting, commanding lots of attention and premium prices. Then it becomes mainstream, then old. By this time, it is a commodity in a crowded market with dwindling sales and declining margins. It is broke, but it's neither worth fixing, nor fixable.
Even if your broken product is fixable and still has a decent lease of life remaining, there may still be some good reasons for not fixing it. Perhaps you could do something more productive with the same time and resources.
So how do you decide when something is worth fixing? Here are some useful questions.
Where is it on the lifecycle? Are you merely trying to postpone the inevitable?
What is the opportunity cost of fixing it? What new ventures will have to be starved of time, money and attention to repair this existing one?
Are you being distracted by sunk costs bias? If project A costs £1m and gives a return of £2m, you should prefer it to project B which costs £1m and returns £1.8m. The fact that you have already spent £5m on project B, and nothing on project A, shouldn't affect your decision, but it often does.
So before you leap in and fix that broken business or process, ask yourself if it isn't simply time to let go and move on.
- Alastair Dryburgh is chief contrarian at Akenhurst Consultants. Read more at www.dontyoubelieveitblog.com.