Skip to main content

INSIGHTS BLOG > Switching Costs: The Overlooked Obstacle to Change

Switching Costs: The Overlooked Obstacle to Change

Written on 18 January 2018

Ruth Fisher, PhD. by Ruth Fisher, PhD

Why do we adopt new technologies?

Many people will be quick to respond, “Because they help us do things faster, easier, or better.”

Pretty obvious.

Well, then, why don’t people adopt new technology?

Most people would probably say that people don’t adopt new technology either because the technology is too expensive or because people don’t need the features the technology offers.

But there’s another reason we don’t adopt new technology or make some other change in our lives, even though we’d like to: something is holding us back. There’s an obstacle that’s preventing us from making the change.

I call this obstacle switching costs. Switching costs are an important, yet often overlooked, obstacle to change. In my book, Winning the Hardware-Software Game, I define switching costs as it relates to adoption of new technology as follows.

switching costs encompass any costs or investments consumers must bear when they leave their old products and suppliers and establish themselves with new ones… They can include, for example, any penalties or fees users must pay to break contracts (such as leases) or end agreements with current suppliers to free themselves up to move on to new ones; uninstallation and disposal costs required to remove old system components; equipment and installation costs required to install new systems; time and money costs required to train users to operate new systems; costs associated with downtime while transitioning from old systems and ramping up to obtaining the full benefits of new systems; any costs associated with losing connectivity to users or content that remains on old networks; any risks associated with new systems not living up to expectations, not providing all the expected benefits, ending up requiring more than the expected time or money costs to use, etc.

An important way for convincing people to adopt a new technology, buy a new home, or go to the gym more often is to remove the barriers preventing them from doing so.

I recently heard a commercial on the radio from a company selling new carpet. They said, “We’ll rip up and take away your old carpeting for free.” I smiled and thought to myself, “switching costs.”

I also recently heard Daniel Khaneman, the Behaviorial Psychologist and Nobel Prize Winner, talk about switching costs from a different perspective that I thought was insightful. He said that when people try to get us to do something, they usually use a carrot (offer a reward) or stick (threaten punishment). He said that, instead, it’s actually much each to remove the obstacle that’s preventing us from doing it in the first place. From Mindy Hernandez, “A Conversation with Daniel Kahneman”:

The basic idea of applied psychology is from Kurt Lewin: if we want people to change, how do we make it easy? … Kurt Lewin said: if you want to get people to change, ask why aren't people behaving in ways we or they themselves want? What are the obstacles? And then we need to try to eliminate those obstacles and remove the barriers.

This seems simple and self-evident, but why is removing obstacles instead of adding pressure or incentives so counter-intuitive? Kahneman mentioned the three usual ways we try to induce change:

  • Arguing
  • Promising
  • Threatening

These techniques often fail because we are simply increasing tension rather than easing tension by removing barriers that make behavior change easy.

The idea of removing barriers to change is also the basis for Nudge Theory. This theory gained popularity through a book coauthored by Cass Sunstein and recent Nobelist, Richard Thaler, Nudge: Improving Decisions About Health, Wealth, and Happiness. Nudge Theory has been used successfully, for example to get more people to save for retirement.

The idea of removing barriers to change also lies at the heart of persuasive technology. Thanks to BJ Fogg, pioneer of Persuasive Technology, the use of persuasive technology on the internet has become pervasive. Persuasive technology is used to remove obstacles that prevent us from buying things or to put up obstacles to keep us from leaving a site. Anthony Wing Kosner “Stanford's School Of Persuasion: BJ Fogg On How To Win Users And Influence Behavior” describes the essence of Fogg’s methodology.

the path of least resistance is to tap existing motivations and make a behavior easier to achieve. Most successful mobile apps create new habits for users by making it easier to do something that they already do or want to do.

Finally, Clayton Christenson, noted scholar in the area of innovation and change, made a similar observation to the “remove barriers to change” concept. The way Clayton Christenson puts it is, “Know Your Customers’ ‘Jobs to Be Done.’” He said that when selling someone a product or service, you have to understand what need you’re satisfying for that person. Once you understand what the need is, you can help your customer meet that need. He gives the example of selling someone a new home. Often people are reluctant to move, not because they don’t like the new home, but because they will be forced to leave something important behind. He noted that home builders are not selling new homes, they’re “moving lives.”

That realization helped Moesta and his team begin to grasp the struggle potential home buyers faced. “I went in thinking we were in the business of new-home construction,” he recalls. “But I realized we were in the business of moving lives.”

Once you think about it, it seems so obvious.

The problem, however, is that when we approach the problem of trying to get people to do something – like adopt a new technology or change their behavior – we generally think about where we want them to go. The trick, however, is to change the question to “why aren’t they already there?”