In an earlier post, we talked about the how important it is to ‘fail fast and often’. While Mircosoft is by no means considered a startup, failing fast on projects that don’t meet specific milestones is one of the best ways to fight another day.
While the exact details of the decision are as yet unknown I think it’s clear that Microsoft had a detailed set of milestones for the Kin project and they stuck to them. Despite the recent launch and high-profile offering aimed at teens and young adults, sales didn’t meet expectations and the project was shelved. The employees who worked on the project will be folded into a team working on a forthcoming operating system for cellphones – presumably a project that continues to meet internal milestones and one with a higher expected ROI.
There are those who probably take great joy at seeing Microsoft fail here, but I would argue that Microsoft did the right thing. They didn’t let sunk costs factor into their decision and they ‘failed fast’ in order to allocate resources to more promising products. This is one of the toughest decisions any product manager has to make, but one that is absolutely necessary for the overall viability of the firm.
Despite the textbook reasoning for following milestones and ignoring sunk costs, Microsoft’s early exit of the Kin project remains one of the exceptions. The new product battlefield is littered with disasters that have become the stuff of legend:
Apple Newton – Apple was way too early into the PDA game and despite early indicators as to the same, they plowed through $100 Million before the plug was pulled.
Webvan – Groceries on demand was supposed to be the killer app of the internet in the late 1990s. Loss: $800 Million.
Sony MiniDisc – Despite early indications that product was not nearly as popular in the US as it was in Japan, Sony spent over $500 Million trying to market the product in America before ending the project.
Motorola’s Iridium satellite-based phone system cost the company $5 Billion before they finally pulled the plug on the project.
Here’s the takeaway. Sticking to a set of milestones and ‘failing fast’ is the best way to fight the next battle with a war chest full of resources and cash. Being stubborn and focusing on sunk costs is about the fastest way to bankruptcy. It’s your choice.
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