Leaders, marketers, and change agents have to make choices every day, often with imperfect information. When you're launching a new product, it's easy to get stuck catering to past decisions that no longer serve you.
We all know to ignore sunk costs--a cost that's already happened and can't be recovered--but it's harder said than done. Below is a framework for thinking differently about your past mistakes. It's called "new situation, new decision."
Sunk costs remind you of everything you've wasted. "Sunk" reminds you of the Titanic, a sinking ship, and sunken eyes. Who likes "costs"? It's a reminder that you already spent money and time on a failed attempt.
Instead of "sunk costs," reframe the concept in a positive light with "new situation, new decision." Here's why "new situation, new decision" is better:
1. It's forward looking. It reminds you of your own agency.
Sunk costs are backward-looking. "New situation, new decision" is forward looking. It's about what the new situation is, and how you will make the most of it.
If you can still influence a situation, that's a great place to be. It means you can use your smarts, resourcefulness, and grit to figure something out. You're still in the game.
2. There's an implicit acknowledgment that situations change.
"That was such a stupid thing to do. I wish I had handled it differently."
It's tempting to kick yourself for an outcome you couldn't predict. But this is a misleading narrative swirling in your head. Remember: You did the best you could, given the information you had. You were operating on limited information.
When you have new information, you can update your decision to do what's best going forward. This applies to both micro and macro decisions. The focus is on your current reality--whatever it may be--and the decision you still have control over.
For example, you could say something like this to your team: "We thought things were a certain way, but things changed. Now we are updating our approach. New situation, new decision. What should we do now that will give us the best chance of getting to where we want to go?"
3. There's a built-in trigger to make a new decision.
Sunk costs sit still. Even if you acknowledge them, it's this thing just sitting there.
On the other hand, "new situation, new decision" has a bias toward action. The structure is, "if this, then that."
If there is a new situation, then we need to make a new decision. So you build a habit of focusing less on what went wrong and more on what you should do next.
The next time you feel guilty about needing to update your strategy or change direction, don't kick yourself. Remind yourself of "new situation, new decision." You're constantly learning and improving, and making new decisions is a sign of forward motion.
Try this framework when you or your team feel guilty about sunk costs. I'm curious to see how it works for you.