Overcoming the Adoption Barrier of Sunk Cost: Part 1
Coming up with a unique idea and building a would-be-great product is exciting! Not seeing adoption is frustrating. Understanding the sunk cost before deciding the go-to-market strategy can reduce the pain. It is the difference between stunted versus accelerated growth.
As a starter note in the series, it helps to get perspective from our daily lives:
Physical Products
Services and Experiences
Hardware
Software
The good news is that users for these products and services are also frustrated. This has created a large pent-up demand across many industries. Unlocking the existing sunk cost challenge is a massive opportunity.
Next Note:
As a starter note in the series, it helps to get perspective from our daily lives:
Physical Products
- Planes: Airlines depreciate planes over 15 to 25 years with zero to 20 percent residual value. A newborn becomes an adult during this time.
- Cars: First came the hybrids. Then the electric vehicles. There is little incentive for an owner to replace if the existing vehicle has life left.
- Homes: Most existing homes have older designs that reduce functionality. Two living rooms. Two dining areas. No ability to heat or cool a specific room. Not even a split-level air-conditioner. A small percentage of homeowners make upgrades to their homes. But most wait till their next home to buy a better-designed home.
Services and Experiences
- Real Estate Leases: Current coronavirus pandemic has resulted in companies terminating or sub-leasing. Pinterest paid $89.5 million to end their office lease which had a total liability of $440 million. A similar situation exists for individual renters. Long leases create a lock.
- Habits: Old habits die hard. How many friends do you know who were successful in losing weight and keeping it off? Catering to the old habits is a profitable business. Changing them is hard. Inertia is the sunk cost.
- Traditions: Our society cherishes time-honored traditions. The flip side is slow adoption. Even the largest consumer product companies experienced initial adoption failure in new markets.
Hardware
- Robotics: Factories and agriculture use large numbers of manual labor. But barriers remain. Regions with low labor costs and high supply have no incentive to adopt robotics. High-cost regions with low labor supply may have labor contract obligations.
- Appliances: Microwaves and refrigerators are everywhere. Homes. Offices. Public buildings. And most are energy guzzlers.
Software
- Governments: COBOL still has a large footprint in enterprises and governments. The state of New Jersey had to seek COBOL volunteers to help them.
- Enterprises: Maintaining legacy and custom software is big business for IT Services providers.
- Consumers: Navigation software in cars is expensive to buy. And it lags free software in features. On top of that, one has to pay each year to update.
The good news is that users for these products and services are also frustrated. This has created a large pent-up demand across many industries. Unlocking the existing sunk cost challenge is a massive opportunity.
Next Note:
Let's Talk: If you have a true experience that resonates, please send me an email.
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