Quit While You’re Behind

Why organizations keep failing bets alive

Zombie projects are the default state of most organizations.

Quitting failing efforts is hard enough for individuals. Institutions make it worse. Organizational structure doesn’t just fail to correct for this problem; it amplifies it, compounds it, and in some cases makes it recursive: once a bad bet exists, the safest move for insiders is to keep it alive.

There is no better example of how this plays out than Sony’s VAIO.

The Promise of Lilac Boxes

The PC market in the 1990s was characterized by commodification and price wars. PCs were highly modular and used open standards by the early 1990s, making hardware differentiation difficult beyond minor tweaks.

It was in this highly competitive market that Sony launched the VAIO line of PCs in 1996. PCs during this era were referred to as “beige boxes”, indistinct in both form and function. Sony saw an opportunity to fill a gap in the market: Offer computers that combined beautiful aesthetics with strong A/V features, consistent with Sony’s legacy of designing stylish, high-end consumer electronics.

The first lilac-and-grey models debuted to significant fanfare. The colorful aesthetics and sleek forms were completely unique for the era, predating the first iMac by two years. Steve Jobs admired VAIO so much that he (unsuccessfully) pitched porting OS X to Sony. The early models sold well. Customers saw the innovation as worth the premium. VAIO proved its thesis, inspiring other companies to follow suit. That early success also meant Sony had something emotionally and politically hard to walk away from later.

Success was short-lived. By the early 2000s, plunging PC prices opened a gap with Sony’s models that consumers could no longer justify. Then came the trends that VAIO missed: the ultrabook, the tablet explosion, and ecosystem integration that made Apple’s walled garden a feature rather than a limitation.

After over a decade of mounting losses, Sony finally threw in the towel when they sold the brand in 2014, taking a $1.1B hit in that year alone.

The Institutional Trap

In Quit, Annie Duke catalogs the cognitive bugs that make individuals hold on too long: loss aversion, identity attachment, and escalation of commitment. These are individual pathologies. Institutions make them worse.

Inside a firm, people aren’t optimizing for organizational value. It’s something closer to: don’t get fired, don’t lose headcount, don’t lose status or narrative control. Keeping a failing project alive is often the rational move. The longer it lives, the more constituents it builds, and the more ambiguity about whether it could turn around protects its sponsors.

Profitable divisions deepen the trap. During VAIO’s long decline, PlayStation printed money. Sony as a whole remained profitable in many years, which meant VAIO’s losses never posed an existential threat. Where an individual feels losses directly, an institution can redistribute them, defer them, hide them.

This is why zombie divisions aren’t anomalies; they’re what game theory would call an equilibrium. Given how careers, budgets, and hiring rewards work, no single actor can safely be the one to pull the plug.

These dynamics explain how the story we’re about to share was possible.

The Lifeline

Sony introduced MiniDisc in 1992 as a replacement for the cassette tape, finding early success in Japan and, to a lesser extent, Europe. By the early 2000s, the format was under existential pressure. PCs with CD burners had become ubiquitous, the media was cheaper, and MP3s had reached widespread adoption. The iPod launched in 2001.

It was at this moment, with MiniDisc’s decline already evident, that Sony’s Consumer Electronics division treated VAIO PCs as a lifeline.

This is a Sony VAIO laptop from 2002. The top bay is a DVD-ROM drive. The bottom bay, taking up half the modular space in a chassis where every cubic centimeter is contested, is a MiniDisc drive.

Photo credit: reddit u/alwaus

Sony adapted MiniDisc to store data and pitched it as a replacement for the 3.5” floppy. MD drives appeared in VAIO desktops starting in 2000 and laptops by 2002. This wasn’t a peripheral you could plug in; Sony re-engineered VAIO bays with custom circuit boards and proprietary connectors. This diverted R&D, manufacturing capacity, and marketing to bundle a struggling format into a product line already fighting for survival. Resources went to MiniDisc integration instead of features that differentiated VAIO.

The cost extended beyond the hardware itself. VAIO engineering cycles became tied to MiniDisc firmware, media compatibility, and software integration, slowing development at precisely the moment when agility against Dell and HP mattered most. By the time MD drives appeared in laptops, ZIP drives were already widespread and the iPod was eating the world. None of the imagined use cases materialized.

Sony kept including MiniDisc drives until the mid-2000s.

Zombies All the Way Down

The inclusion of MiniDisc in VAIO PCs shows us how failures to quit can compound, and how one zombie can nest inside another.

MiniDisc was already dying when Sony embedded it in VAIO. Finding a new use case allowed the division to craft a new narrative about the technology’s viability, while saddling VAIO with dependencies that made it harder to compete. The poor sales of expensive, MD-equipped models accelerated VAIO’s decline from promising newcomer to zombie in its own right. The cycle became self-perpetuating: each failure created the conditions for the next.

How did this happen? How does a dying format get designed into a computer chassis without someone asking whether it makes sense?

The answer lies in how Sony was organized.

Warring Fiefdoms

At COMDEX 1999, Sony introduced three competing digital music players from three different divisions, each running incompatible proprietary technology. The divisions did not share information or collaborate; they saw each other as competitors, not colleagues.

This sounds like dysfunction but it was by design. Sony operated as 25 autonomous units, each with its own P&L. They were quasi-independent companies under the Sony brand, and they treated each other accordingly.

Gillian Tett’s The Silo Effect documents how Sony’s divisions operated as warring fiefdoms. The silo structure explains how MiniDisc integration happened: the MD division had its own budget, its own leadership, its own survival imperatives. Embedding MD into VAIO wasn’t a company-wide strategic decision; it was one silo colonizing another to stay alive.

Silos don’t just create inefficiency; they create constituencies. And constituencies fight for survival in ways that diverge from what’s good for the institution. The MD division needed to justify its existence; embedding in VAIO gave it a new narrative regardless of whether that narrative served Sony. Without cross-functional scrutiny, no forum existed to ask whether the integration made sense. Coordination problems became political problems. In a unified structure, “should we put MD drives in laptops?” is an engineering question. In a silo structure, it’s a question of which division wins.

Given the incentives, every action the MD division took was rational for the people in that division, and harmful for the company as a whole.

In 2005, Sony acknowledged the silo problem explicitly as a cause for poor financial results. They also announced a restructure of the company specifically to “eliminate the business silos that had prevented us from focusing resources on our most competitive champion products.”

It was too late for VAIO.

Without deliberate design, institutional incentives make timely quitting all but impossible. But some companies have treated quitting as a first-class design problem, and their stories look very different from Sony’s. The most successful companies show us that a combination of systems and culture can counteract these forces consistently and without heroics.

Building an Offramp

Companies that quit in a timely fashion do so by making quitting routine. Systems and culture, working together, make this sustainable. Systems ensure quit decisions are made regularly, objectively, and consistently. Culture ensures quitting is safe, creating the conditions for the systems to survive.

Amazon shows us what the culture looks like.

Amazon’s launch of the Fire Phone was seen as a spectacular failure in its era. Amazon lost $170M, including $83M in unsold inventory. More interesting than failure itself is how Amazon pulled the plug in just three months, and how they acted in the wake of the shutdown.

When asked about the Fire Phone failure in 2016, Jeff Bezos said: “If you think that’s a big failure, we’re working on much bigger failures right now—and I am not kidding. Some of them are going to make the Fire Phone look like a tiny little blip.”

He then explained the underlying logic: “You need to be making big, noticeable failures. The size of your mistakes needs to grow along with the company. If it doesn’t, you’re not going to be inventing at scale that can actually move the needle.”

The review decision sat with executives above the group that created the Fire Phone—the exact separation of ownership and evaluation that Sony’s silo structure prevented.The executive who launched the Fire Phone remained a respected figure and went on to lead other divisions. Amazon lowered the cost of failure by showing that failures were both expected and were not career ending. This culture allowed Amazon to shut down the Fire Phone so quickly.

While culture makes quitting safe, it is systems that ensure it happens.

Danaher became one of the most successful industrial conglomerates by building an operating system designed, in part, to prune failing bets before they became a drag on company performance.

Two design choices matter most:

Centralized capital allocation. Danaher conducts all investment through a single capital allocation process, making it harder for dying bets to hide. This separates the quit decision from the people with the most to lose.

Explicit quit criteria set in advance. Long before Annie Duke described kill criteria, Danaher had implemented it at an institutional level. All divisions were subjected to the same explicit criteria, and divisions no longer meeting them were candidates for exit.

Danaher’s structure assumes some bets won’t work and builds the exit path into the operating model. Recent divestitures show this discipline in action. Since 2016, Danaher has spun off Fortive (industrial businesses), Envista (dental), and Veralto (water/packaging). These businesses were profitable but growing slower than Danaher’s portfolio targets. Rather than let them consume capital and management attention, Danaher spun them out while they still commanded high valuations.

Amazon built a culture where failure doesn’t end careers. Danaher built a system where exit criteria are explicit and centralized. Together, they illustrate what deliberate design looks like: quitting becomes safe and routine. Sony had neither cultural permission to fail nor structural mechanisms to force the question. Zombie divisions filled the vacuum.

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Every institutional incentive pushes toward keeping failing bets alive. This is why zombies are the default rather than an aberration. Without deliberate design, organizations don’t get a clean exit. They get a dying format designed into a struggling product line: one zombie infecting another, accelerating the decline of both.