Microsoft, Apple, Others Smack Themselves with Sunk Costs, Bad Decisions

Just as it killed off its Money product this last summer, Microsoft is now putting the axe to Office Accounting. It only took, what, four years for this to happen? That’s certainly better than the decade for Money. But it’s far better than some decisions to keep marching because of all a company has invested, even if that march is off the end of a cliff.

In the theory of making wise decisions, sunk costs is a shark in the water. Whether putting yet another repair into an old car, trying to give mouth-to-mouth to a failing relationship, or propping up a bad business venture, people often keep investing time, energy, and money into something that is never going to succeed. But they soldier on because of all the time, energy, and money they’ve already poured into it. But the costs are sunk — money already gone and never to return. In such cases, the wise decision is often to cut your losses and move on. Only, people don’t. And there have been some notable recent examples in the tech industry.

• Apple TV — I feel a smidgen badly about bringing Apple into this. After all, it’s had one product triumph after another. Except Apple TV, which shows that near product genius isn’t enough to guarantee a smart decision. Even ZDNet’s Sam Diaz, who owns a unit, says that the latest version doesn’t offer much past an updated user interface. Apple keeps trying to keep a foot in the door, even though Steve Jobs has been known to call the product line a hobby. You have to wonder what strange compulsion keeps them toiling so blandly in the fields.
• Windows Mobile — It’s clear that Microsoft wants to own all operating systems everywhere. But Windows Mobile has become an industry joke. Once again we have a CEO, Steve Ballmer, admitting that Microsoft had screwed up getting Windows Mobile 7 on the market. But things will be different, he has vowed. Here’s an idea: How about a product so good that people feel compelled to use it? The company might do well killing the mobile product and putting the money into something else — like making sure that people trying to install Windows 7 actually can.
• Delphi — No, not the automobile parts manufacturer. The online service. Yes, that’s right. Guess what? It’s still around. Surprised? Someone keeps putting money into a set of forums that should have been shuttered a long time ago. But, it’s still around … and on the Friday evening when I’m writing this, the front page notes that there are 74 people in 26 chat rooms. Yes, 74. As in under 100. As in, you could get a high school student to write software to handle that kind of traffic.
• Digital Picture Frames — What, are you saying that people don’t have computers and monitors? Lovely in the living room, at least so long as you don’t have to deal with getting photos on and off.
• WordPerfect — A word processor that was dominant in its day, beaten by Microsoft, and still sold by Corel. Why? It has nothing better to do with its time.
• Zip Drives — A super-thick proprietary floppy that could hold a few hundred megabytes. Never that clever a concept in the first place, and now really dumb, but still coming off the production line. Why? Because Iomega was smart enough to sell itself to EMC and EMC was dumb enough to buy.

Got your own nominations? Feel free to add on.

Image via stock.xchng user johnnyberg, site standard license.