Chapter 1: Understanding Failure

In the world of business, aiming high and falling short is not something to be embarrassed about.

The notion of "failing fast" is a prevalent concept among entrepreneurs. The idea encourages organizations to take bold risks that could lead to significant rewards. To effectively implement this approach, businesses must establish mechanisms to detect early signs of whether their risky endeavors are successful or not.

In many narratives, the hero's journey illustrates that a protagonist must confront and overcome challenges before earning their victory. This framework is often applied by biographers of successful entrepreneurs to highlight how failures contribute to their eventual triumphs. For instance, while Bill Gates may lament the infamous Clippy, which debuted in Microsoft Office 97, most individuals who haven’t reached his level of success should be cautious about showcasing their own failures.

During job interviews, hiring managers typically seek insights into how candidates have learned from their past setbacks. Candidates who can extract meaningful lessons from their failures may present a more favorable image. Ideally, quick failures are better than prolonged ones, although the definition of "quick" can vary. In some contexts, a year might be viewed as a short failure, while in others, three months could be seen as lengthy.

Most job seekers are astute enough to avoid overly emphasizing their past failures in interviews. Nonetheless, perceptive interviewers may delve into these experiences to understand the lessons learned, which can be a sensitive topic, despite the popular mantra of "failing fast."

Many business failures unfold gradually, akin to observing a tomato seed sprout without time-lapse photography. Organizations that adhere to a Waterfall methodology might initially evaluate a new concept critically but ultimately proceed based on projected profit margins.

However, the drawback of the Waterfall method is its absence of interim checkpoints to identify potential cost overruns, unexpected development challenges, or shifts in the market that could affect a project's profitability. Since the final product is not available until the end of a Waterfall project, the realization of failure often comes too late.

In contrast, Agile methodologies promote shorter, more manageable sprints. A team may choose to follow one sprint with another, but this decision is made consciously, rather than being automatic. Occasionally, development teams face unexpected obstacles that hinder their progress. Before deciding to continue with subsequent sprints, product management revises the completion estimates for the features. If the time or costs escalate, the feature may be deemed unfeasible and subsequently discarded or postponed after the initial sprint.

Acknowledging failure after one or two sprints is not something to feel ashamed of. Minor failures are relatively easy to overlook, but realistically, recognizing failure often requires more than just a couple of iterations.

A sunk cost mindset can cloud judgment in the slow failures often seen in Waterfall projects. Managers may rationalize that since they have already invested considerable resources, it’s best to continue pouring money into the failing feature. Attempting to buy one’s way out of failure can lead to even greater issues.

Chapter 2: The Impact of Sunk Cost Mentality

The first video, How to Overcome and Use the Sunk Cost Fallacy, delves into strategies for recognizing when to cut losses and make rational decisions in business.

The second video, Don't Let the Sunk Cost Fallacy Control Your Decisions #Psychology, explores psychological insights on avoiding this common pitfall in decision-making.

Are you curious to learn more? If you are, you’re in luck! My new book elaborates on these concepts. Check out The Agile Enterprise in both digital and print formats to gain a deeper understanding of how to apply Agile principles throughout your organization.