The hidden forces that keep failing strategies alive

In the world of business strategy, it is tempting to believe that decision-making follows a rational path—one where empirical evidence dictates action, and failing strategies are swiftly abandoned in favor of superior alternatives. Yet, reality paints a different picture. Time and again, organizations persist in strategic approaches that empirical data has long rendered untenable. Why? The answer lies not in a lack of information but in deeper, often irrational, philosophical, cognitive, and institutional barriers that obstruct strategic change.

The Persistence of Failed Strategies: a Cognitive and Philosophical Dilemma

In theory, businesses should function as Bayesian decision-makers, continuously updating their beliefs based on new evidence. In practice, however, they behave more like Kuhnian paradigms, where an existing strategic framework is not easily abandoned, even in the face of overwhelming disconfirmation. Thomas Kuhn’s concept of “paradigm shift” (1962) in scientific revolutions is deeply relevant here: just as scientists resist abandoning a dominant theory until a crisis forces a new model to emerge, corporate leaders often cling to a failing strategy until the damage is irreversible.

This reluctance is not merely cognitive bias but is rooted in ontological security—a term from sociology describing an individual’s or organization’s need for continuity in its self-concept. Strategy is not just a set of decisions; it is an identity, a worldview, and a story that leaders tell themselves about their organization. Changing strategy is, therefore, not just an operational shift but an existential one.

Yet, it is important to acknowledge that not all resistance to change is irrational. History has shown that some of the most successful strategies—such as Apple’s unwavering commitment to premium products in an era of cost-cutting—succeeded because leaders resisted pressure to conform to prevailing market trends. The challenge lies in distinguishing between visionary persistence and cognitive entrenchment.

The Sunk Cost Fallacy and Institutional Inertia

At a more pragmatic level, economic theory offers a well-known but frequently ignored explanation: the sunk cost fallacy. Decision-makers, instead of evaluating future prospects rationally, allow past investments—financial, emotional, and reputational—to dictate current choices. Kahneman and Tversky’s Prospect Theory (1979) provides further insight: losses loom psychologically larger than gains, leading organizations to double down on failing strategies rather than endure the immediate pain of acknowledging failure.

But beyond individual biases, organizations suffer from institutional inertia—a structural resistance to change embedded in governance models, incentive structures, and organizational culture. Even when evidence overwhelmingly supports strategic change, power dynamics and vested interests within the organization create resistance. Those who designed and championed the existing strategy often have the most to lose from admitting its failure, leading to escalation of commitment rather than rational course correction.

Real-world examples abound. Kodak, despite pioneering digital photography, failed to pivot away from its film business because of deep-seated investment in its legacy strategy. Nokia, once a dominant force in mobile phones, struggled to adapt to the smartphone revolution due to an internal culture that resisted necessary transformation. These cases illustrate how even market leaders can fall victim to the psychological and institutional traps that inhibit strategic change.

The Illusion of Control and the Myth of the Visionary Leader

Another philosophical barrier is the deep-seated belief in strategic agency—the idea that leadership and vision can override external realities. Many executives subscribe to a Nietzschean model of leadership, where the strong-willed strategist imposes their vision on the market rather than adapting to external constraints. This illusion of control is reinforced by business mythology: we celebrate outliers who defied the odds and dismiss as “unlucky” those who failed despite following sound strategic logic.

Clayton Christensen’s Innovator’s Dilemma (1997) provides a stark example: many firms fail not because they lack awareness of industry shifts but because their leaders believe they can outmaneuver structural forces through sheer will and execution. BlackBerry, for instance, maintained its focus on physical keyboards and enterprise customers long after touchscreens and consumer-driven markets had become the norm—convinced that its brand identity could defy evolving consumer preferences.

Acknowledging external constraints does not mean leaders should abandon bold vision. Rather, it underscores the importance of strategic adaptability—balancing conviction with responsiveness to changing realities.

Breaking Free: Overcoming the Barriers to Strategic Change

If the obstacles to strategic change are so deeply rooted, how can they be overcome? The answer is neither purely rational nor purely emotional—it requires a synthesis of epistemic humility and structural mechanisms:

• Institutionalized Skepticism: Borrowing from Karl Popper’s falsificationism, organizations should design mechanisms where existing strategies must continuously prove their validity rather than being assumed correct until proven disastrous.

• Leadership Detachment: Boards and executives must recognize that strategic frameworks are tools, not identities. Just as in science, models are meant to be updated, not worshipped.

• Decision-Making Architecture: Separating the individuals who assess strategic performance from those who crafted the strategy reduces personal bias in evaluation.

• Pre-Mortem Analysis: Gary Klein’s research suggests that envisioning a future where the current strategy has failed can help bypass biases by making failure tangible before it happens.

• External Benchmarking: Looking at how competitors or adjacent industries have successfully navigated similar challenges can provide valuable insights and reduce overconfidence in one's unique approach.

Final Thought: A Strategic Razor

The difficulty in abandoning failing strategies is not a failure of intelligence or analysis but a reflection of deeper philosophical, cognitive, and institutional forces. Understanding these barriers is the first step to overcoming them. The best organizations are not those that never fail but those that can abandon their failures before they become existential crises.

Just as Occam’s Razor favors simplicity in explanations, a useful Strategic Razor could be formulated: if maintaining a strategy requires increasingly complex explanations rather than straightforward execution and results, it is time to reconsider its validity.

By cultivating a culture of adaptability, organizations can ensure that their strategies evolve with the realities of the Market—before it is too late.