What do some businesses have in common with supersonic transportation? Let me tell you a story.
In 1956, the Supersonic Transport Aircraft Committee met in England to discuss building a supersonic airliner in a partnership between British aircraft and engine manufacturers, and the government. Planning and development for the project – named Concorde – moved forward, and in 1962 France joined the group.
When the wheels came up on the first Concorde commercial flight in January 1976, the enterprise was already plagued by prohibitive cost overruns. By the last Concorde flight in 2003, the Anglo/French financial misadventure had become legendary.
The good news is this story produced a handy term that covers valuable business lessons. Evolutionary biologists coined the term, “Concorde Fallacy” as a metaphor for when animals or humans defend an investment of time and resources – a policy, product, business, or nest – when that defense costs more than abandonment and starting over in another direction. Four centuries before Concorde, in Part One of “Henry IV,” it turns out that Shakespeare’s Falstaff proposed a handy bit of wisdom for when we find ourselves with a rude decision about something in which we’re heavily invested financially and/or emotionally: “The better part of valor is discretion.”
Here are two lessons associated with the Concorde Fallacy: one technical and one Biblical.
1. The “sunk costs” lesson. When the financial viability of an enterprise is looking questionable going forward, any decision about its future should not be based on past investment of time or resources. The Concorde partners learned this lesson 27 years – and lots of investor/taxpayer money – too late.
Here’s what sunk costs denial sounds like out here on Main Street, “We’ve got too much invested to stop now …” or “If we just work harder …” or “We just need more time …”
If a project has sub-par performance, pulling the plug must be one of your top two options.
2. The “Pride goeth before destruction” lesson (Proverbs 16:18). Stakeholder emotional attachment to Concorde, and sovereign pride of the English and French governments, caused their willing suspension of economic reason.
In a small business, pride can be a productive as a key component of tenacity, without which entrepreneurship cannot exist. But it can also become its own problem. Once when I was facing a go/no-go decision, a wise mentor posed a handy question to me that I’ve since termed the “Concorde Question. He asked me, “Do you have a fighting chance or just a chance to fight?”
Perhaps the hardest decision a small business owner ever faces is when to end a business pursuit, whether about a new product, an acquisition or – and this is the mother of Concorde Questions – if it’s time to close the business.
The reason for the anguish is because for every 100 entrepreneurs who succumb to the Concorde Fallacy and stay too long at the dance, there is one who – against all odds – pushed on, one more day, and emerged successfully.
Such big decisions are why being a small business owner is not for sissies.
Write this on a rock … When faced with a Concorde Fallacy decision, remember to ask yourself the Concorde Question.