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How Sunk Costs Prevent Companies from Switching Vendors

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How Sunk Costs Prevent Companies from Switching VendorsContinuing the discussion on sunk costs, it is important to point out that “costs” are not always hard and fast about the monetary bottom line. Cost can also be about the emotional investment that has been made in something (or someone) that doesn’t quite seem to be working out.

This can be a direct cause of why companies are afraid of change. Sticking to their old, outdated guns and growing beyond the barriers of their systems…simply because they already spent so much time, energy, and money on getting accustomed to them.

But…accustomed to what? Something that doesn’t work for you? What is the benefit of that?

Transitions can be easier than companies think, especially if there is merit in the long run.

How Do You Know If There Is Merit?

Consider your frustrations, weigh your options, talk to people who already have new systems in place…and remember DO NOT factor sunk costs/emotions/investments into the picture.

Take this extreme example – the successful and accomplished businesswoman who still carries around a Filofax paper planner. (How analog.) It works for her. She prefers writing things down with a pen, she’s been doing it forever, it’s the same one she’s been using since she started the job, she’s attached…she left it at a restaurant where she had a lunch meeting and they can’t seem to locate it for her!  Before running into a problem, she saw no reason to change. After running into a problem, it might be apparent that she has no choice but to change. She could have had some foresight. Everyone around her uses a digital calendar system. It makes sense, it’s accessible from anywhere, it cannot get lost, it reminds you when you have meetings. Her planner circa 1997 does none of these things. Not one. Yet still some people, when faced with a similar situation, will continue to shirk change.

Why Accept Anything Less Than Maximum Efficiency?

If businesses did not take the time and energy to update as new technology became available, they would become obsolete, regardless of how much time and energy they spent on the old technology. The investment in change is a commitment that’s worth it because of the time, energy, aggravation, and money saved as well as the forward trajectory of your business.

Don’t let sunk costs cloud your judgment when choosing to upgrade from paper to digital, old software to new software, hardware-based to cloud-based, or whatever it is that seems to work best for other businesses in your industry that you’re not doing.

Time and time again, we see companies utilizing old payroll methods, navigating non-user-friendly software, viewing mistake-riddled reports, and spending more money than they should be for unsatisfactory service. This is true for so many industries. Take the time to do some recon in order to avoid making mistakes. Then let it go.

Don’t stick with what doesn’t work.

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