Be wary of upgrading

Whenever a major decision is made, corporate executives are actually gambling, either going to glory or going down. Once the “mobile overlord” Nokia missed the Android system because of the Saipan system, it eventually fell to Microsoft’s acquisition; 42.3% of the BlackBerry, which had a global share in 2009, was officially released in mid-December 2017. Announced the death of its mobile operating system, the BlackBerry OS. Now, the companies that have repeatedly closed down in the sharing economy have made people reflect on whether the concept of “sharing” is right or wrong. As an outsider, we seldom pay attention to companies that have disappeared or are disappearing into our vision. If one day, inadvertently, the media will revisit the company, we will not have to go beyond the sigh. After re-examining these declining companies, we found that their failures were so similar: they all began with the commitment of corporate executives to upgrade.

Why are you committed to upgrading?

The commitment to upgrade in management science refers to the phenomenon that policy makers still insist on investing resources in a project in the face of the negative consequences of the previous investment. The amount of resources that policy makers continue to invest reflects the degree of commitment to upgrade. In behavioral finance, commitment to upgrade is an irrational decision. Because in decision-making, decision-makers do not make objective decisions based on the principle of utility maximization, but under the influence of certain psychology (such as decision-making framework), it may not be correct to choose to irrationally insist on maintaining consistency with previous decisions and behaviors. path of. Many people may say that you are all “after the event,” and if you fail, you will blame it. If it succeeds? Decision-making, especially the decision-making involving the significant development of enterprises, has its own gambling characteristics of “winning and losing, splitting yin and yang”. But why are people still like the new stock investors, the market is sluggish, the stocks in the hands are falling more and more, but they never thought about stopping losses? Here, we can analyze the five psychological influence factors of commitment to upgrade from the psychological level:

Sunken cost misunderstanding. This is the most common psychological impact factor that we can think of every day, that is, the greater the initial investment, the more we can’t help but invest more in the later period. Some people will say, “Why don’t you give up earlier? This may result in less loss.” I believe everyone will say this, but if it happens to yourself, it is another matter. Because when people decide whether to do something, they will not only look at the income that this thing can earn in the future, but also see how much he has invested in this matter in the past. In the interview with the outside world, Ding Wei, the founder of the Machimachi bicycle sharing bicycle field, said that if he could continue to invest, the Machimachi bicycles would not be defeated by Moby and ofo. He hopes that by continuing to invest, the cost can be recovered to prove that the original decision is correct, but the rational decision is to focus on the future cost, not the cost of the past. Another simple example of our daily life: You spent 70 bucks to buy a movie ticket for “Interstellar” directed by your favorite director, Christopher Nolan, but when you go to the cinema to watch the movie I found out that this movie is really boring, and even you can’t understand it. At this time, would you choose to leave the cinema? No, you will stay in the cinema, even if you have been playing with your phone. Because the movie ticket worth 70 pieces is the cost you have invested in, and the time you spend playing in the cinema to play with your mobile phone is the “cost” that you add later.

Self identity. Self-identity originally means being able to think sensibly and accept yourself and the outside world. It can be energetic, love life, not immersed in lament, complaint or remorse, but also strives for progress, positive and independent, has clear goals in life, and In the process of pursuing and gradually approaching the goal, we will experience self-worth and social recognition and praise. However, both psychology and sociology studies have shown that people’s self-identity and social identity are all related to their own commitments, and people need to find self-confidence and self-esteem in this sense of self-identity. In the first headhunting industry drama “Hunting Field” starring Hu Ge, the failure of Chen Xiufeng of the “Finance Wizard” by Yuan Hui, who specializes in hunting, is the phenomenon of commitment escalation caused by typical self-identity. In order to maintain his personal image and industry status, he constantly promises to the company’s leaders and clients, even at the expense of prostitutes to adopt the “beauty plan”. In the real workplace, some executives are reluctant to admit their mistakes in decision-making, but instead increase their bets and take risks, just to keep their identity with themselves.

Superstitious authority. Ma Yun once bombarded the economist and said: “If entrepreneurs want to listen to economists, half of these companies have already died.” He said that entrepreneurs can not listen to economists in the future, Chunjiang Plumbing Duck Prophet, entrepreneurs most Can feel the changes of the times and the economy. Nowadays, many SMEs have become self-confident after their success, and they have become superstitious. The more they operate, the more they believe in the so-called “authority.” Remember the giant building of Shi Yuzhu? In 1992, at the beginning, Shi Yuzhu’s plan to build the Giant’s Building was to cover 38 floors, which was used internally by the Giant Group and did not expand. However, because a central leader said to Shi Yuzhu after the visit, “The location of this building is very good, why not build it higher?” Shi Yuzhu just listened to these words and changed his mind. He will initially design the 38-story building of the Giant Building. It rose to 54 floors. Later, I heard that Guangzhou is preparing to build the tallest building in the country, which is about 63 floors. Because the construction of the Giant Group is in Zhuhai, local leaders claim that Shi Yuzhu is vying for Zhuhai and competing for the highest national title. So two years later. It was changed to cover 70 floors. In the end, the giant group led by Shi Yuzhu eventually broke the corporate capital chain because of the superstition that the “authority” from the political circles continued to increase.

Fortunately. The fortune in psychology is to ignore the nature of things, to violate the essential laws of the development of things, to violate the rules that are formulated to maintain the development of things, and to act according to their own needs or likes and dislikes to make things develop according to their own wishes. Until you get the results you want. In the enterprise, because the midway stop of a project will inevitably make the previous investment a loss, therefore, the decision makers will only be lucky if they see some opportunities to change the situation, even if the expected return after the calculation is low. Psychology continues to invest more resources to follow up on the project. However, not all of the luck will definitely bring bad results. If used properly, it is also a good strategy. For example, the doll machine, the consumer knows that the probability of catching is very low, but still thinks “If you catch it?” Merchants use the consumer’s luck to make a fortune, perhaps it is this positive The example will give luck to the “soil” of survival.

Blind and confident. It can be said that all blind self-confidence comes from the success of past success stories or similar events of policy makers. Nokia is not without the funds to carry out research and development of cutting-edge operating system technology, but in the past Saipan system was too successful in the function machine, and even let it climb to the throne of “mobile phone overlord”. Thus, when Android and IOS systems began to appear, Nokia chose to turn a blind eye and believe that Saipan system is the best mobile operating system. The painful lessons of reality tell Nokia that it is wrong, but the BlackBerry does not think so. BlackBerry’s BlackBerry OS is similar to Apple’s IOS and is only available on your own mobile phone. The advantages of the BlackBerry OS are a bit like Nokia, but in many places it is more than Nokia at the time. In addition, the BlackBerry signal is good, the radiation is low, the call voice is clear, the keyboard is very fast and very user-friendly. The SMS interface has achieved the bubble chat mode at that time. The full keyboard input method is much faster than the nine-square grid. . And its five-stroke input method, whether it is a meeting or a record, you can immediately write down the main points like a small computer. In the end, it is absolutely secure, running fast, and relying on hardware is minimal. With so many advantages, it’s no wonder that it’s so confident, no wonder it ignores Nokia’s “ready lessons.” I did not expect the Android system’s “open source” to delineate the “dual” world of mobile operating systems.

How to prevent commitment to upgrade?

In modern enterprises, more and more professional managers are beginning to control the enterprise. In the past, there were fewer and fewer “parental” entrepreneurs, and the decision-making became more democratic and transparent. However, the promised upgrade phenomenon has risen from time to time. In order to prevent the phenomenon of commitment to upgrade, we can solve the following four aspects:

Standardize decision rules. In the past, most of the promised upgrades we have seen and heard are often dominated by leaders with higher positions and greater influence. Such subjective decisions are often the source of commitments. In order to make decisions more objective, we need to propose a decision rule in advance and follow it carefully. If there is no objective data for reference, or there is no relevant experience for inspection, a decision-making voting mechanism can be established for democratic decision-making, and more people can participate in decision-making to dilute the adverse consequences caused by someone’s commitment to upgrade. Among them, the decision voting mechanism is preferably 5 or 7 people, and must be singular. The reason is very simple. If there are too many voters, it is easy to see that the overall situation tends to keep the status quo; if the number of voters is too small, there may be cases where the individual influence is too large.

Develop a script plan. Commitment to upgrade is usually to add production factors such as manpower, material resources and financial resources to the original plan. With the dynamic changes of the environment, many of the promised upgrades seem to be to improve the original plan. In order to avoid this, it is necessary to develop a script plan. A scripting plan is a predictive scenario or alternative that assumes that future or external changes in the enterprise may occur or that certain trends will continue, and that the predicted object may be present or the consequences are likely to occur. Once the original program has a problem, we can immediately start the script plan response.

Replace the action performer. Let project sponsors be responsible for the implementation of specific projects, and they tend to continue investing in the face of failure. Therefore, once the final decision is made to decide, if we reassign others (sometimes the opponents of the project sponsor) to the project, this can effectively reduce the probability of commitment escalation. “Marxism-Leninism for others, and self-liberalism”—people are always good at picking up other people’s problems, and changing the action performers can let them experience the correctness of the project decisions and the problems they have. Avoiding the possibility of an upgrade, it also allows the action executor to revisit the project with a more objective and practical look.

Perform a predictive review. There has been a lot of research in social psychology that people’s nature is too optimistic about the future and their ability to influence the future, especially the leaders who are in high positions. And if you make a predictive review of a problem, the research shows that people think that the problem may be more likely to fail than the direct reasoning of the future can be 25%, and the expected reason for the failure of the problem is more objective and specific. More realistic. This kind of envisioned review is not based on the current perspective to imagine what the future will be, but to find the cause by looking at the bad results caused by the current decision-making from the perspective of the future. For example, if Company A needs to decide whether to expand production capacity, we can ask: “In the next three years of expanding production capacity, our market has begun to shrink sharply. What is the reason? Can we reverse the market shrinking situation?” If we can If you can find the answer, you can choose to expand your production capacity. If you can’t find the answer, we can continue to ask: “After three years, when we were expelled from the company due to the expansion decision three years ago, the new substitute or new leader will take it again. What decision?”