HBS case presentation on behavioral strategy

1. Group-7
Harvest City Case Presentation
What are your recommendations to Miller on how to proceed
further? Justify the escalation or de-escalation of commitment
required.
Presented By:
Bhaskar
Kiran
Komal
Manya
Namita
Nikhil
Behavioural
Strategy

2. HARVEST CITY CONVENTION
CENTER PROJECT OVERVIEW
Inception: City council approval in 2009 for a downtown convention center.
Formation of Harvest City Corporation in 2010 to manage the project.
CEO John Casper hired in 2012, bringing extensive experience.
$60 million grant secured for the project, supplemented by city investment.
Phases: Phase 1 (hotel, convention center, parking garage) and Phase 2 (shopping center, apartments).
Estimated federal grants of $100 million, with $80 million in 2013 and $20 million in 2014.
Construction began in October 2014.
Bookings confirmed for hotel and convention center in early 2017.
Strong support from tourism office and chamber of commerce.
Expected to boost the downtown area's economic vitality.
Project Background:
Funding and Phases:
Construction Timeline:
Economic Impact:

3. EVOLUTION OF CONVENTION CENTERS &
HARVEST CITY'S VISION
Economic growth drivers for municipalities.
Increasing competition and higher attendee standards.
Customized services and diverse consumer expectations.
Utilization of big data and predictive analytics.
Enterprise software firms (e.g., Salesforce.com, SAP) offering intelligent systems.
Aggregation of data from various sources, including social media.
Cloud-based, Software as a Service (SaaS), and Infrastructure as a Service (IaaS) solutions.
CEO John Casper's emphasis on stakeholder experience.
Global inspiration and promotion of Harvest City.
Commitment to advanced technology and operational efficiency.
Intelligent building system for centralized control.
Attention to aesthetics, ambiance, and luxury service.
Sustainable features like solar panels.
High-bandwidth connectivity for guests.
On-site audiovisual support and cutting-edge business center.
Convention Center Evolution:
Technology Integration:
Harvest City's Vision:

4. REVOLUTIONIZING PROCUREMENT AT HARVEST CITY
Rising competition from online marketplaces like Airbnb.
Focus on meeting evolving guest expectations and cost-effectiveness.
Turning to advanced analyses for customer satisfaction and shareholder value.
Recognizing the need for a modern hotel booking and property management system.
Emphasis on linking internal systems with financial, resource planning, and external data sources.
IoT-enabled procurement system envisioned for efficient materials and service delivery.
Surprise at Venso's initial reluctance despite their IoT expertise.
Commitment to integrated, intelligent procurement for cost reduction and guest satisfaction.
Agreement signed in November 2015 for a $26 million cloud- and IoT-based system.
Fixed deadlines and irrevocable design decisions.
Contract stipulated Venso's role in designing, installing, and managing the system.
Harvest City Corporation assumed the cost and management for the entire convention center.
Design changes needed to accommodate sensors and cables.
Interior spaces had to be demolished and rebuilt for system integration.
CEO change and division of responsibilities due to Casper's illness.
Challenges in the Hospitality Industry (2014):
Vision for Intelligent Procurement (2015):
Venso's Initial Reluctance (2015):
Contract Terms and Responsibilities:
Unforeseen Design Alterations (Construction Ongoing):

5. CHALLENGES IN IMPLEMENTING THE VENSO
CONTRACT
Work halted due to safety concerns after CEO Casper's resignation.
Tensions arose as future tenants sought changes to the contract, leading to chaos.
Significant changes requested by convention center teams and catering vendors.
Changes saved costs but required building demolition and reconstruction.
Venso's complaints to Harvest City Corporation executives went unresolved.
Lack of recognition of the procurement system's critical role in the project
Misunderstanding of managing the complexity of an intelligent procurement system.
Overwhelmed executive team dealing with tight timelines.
Mixed opinions from project consultants on Venso's responsibilities and project planning.
Varied perceptions of Venso's ability to foresee and account for project challenges.
Disruptions After CEO Resignation (2016):
Change Requests Impacting the Project:
Communication Breakdown:
Complexity Mismanagement:
Differing Perspectives:

6. INCIDENT AND FALLOUT - DELAYED OPENING
Scheduled event disrupted by a fire alarm triggered by IoT sensors.
Sprinklers activated, causing water damage.
Sensors also alerted emergency responders, attracting media attention.
Post-incident review identified problems with Venso's IoT sensors.
Unauthorized access to sensors by the building management system vendor.
Dust interference and unintentional circumvention of safety features.
Harvest City decided to postpone the opening.
Mayor engaged OnCloud for assessment and proposed changes.
OnCloud's report highlighted system complexity and conflicting requirements.
Suggested changes to building maintenance system.
Proposed standalone procurement systems for all tenants.
Estimated installation within five months at $1.25 million.
Tenants and Harvest City demanded $1.25 million from Venso.
Threats of legal action for breach of contract and damages.
Venso hired legal team for negotiations, expressing concerns over scapegoating.
The Sprinkler Incident (November 2016):
Review Reveals Sensor Issues:
Opening Delay and Evaluation (December 2016):
OnCloud's Recommendations:
Legal Challenges and Demands (February 2017):

7. FACTORS LEADING TO PROJECT FAILURE
Poor Communication
Insufficient Design Iterations
Venso should have anticipated and accounted for all the
potential issues and design iterations that a project of this
scope entails
Lack of due diligence
No direct communication channel between executive team and
Venso’s team.
The executive team was not involved in decision making early on
which led to a divergence in project approach
Venso was not informed about a third party taping into the
sensor for setting its fire emergency,

8. FACTORS LEADING TO PROJECT FAILURE
Scope Creep
Poor Project Management
The tenants treated the contract as a starting point for negotiation
rather than a final document, leading to constant changes and
modifications to accommodate their requests.
There was no well defined change management process due to
which it was difficult to manage changes in project scopes
In this project the time and cost was fixed , however
scope was changed multiple times which led to a
inferior quality of delivery.
The executive team that took on additional
responsibility was overwhelmed with demanding
decisions and a short time frame. This pressure may
have led to inadequate decision-making and project
management.

9. WHO IS AT FAULT
HCC (Harvard City Corporation) failed to
adequately define its requirements for the
intelligent procurement system.
HCC was unwilling to delay the project to
accommodate changes to the system
requirements.
HCC made arbitrary changes to the system
without informing Venso.
HCC ignored Venso's complaints about the
project's direction.

10. Venso failed to adequately assess the
complexity of the project.
Venso overcommitted to HCC on the project
timeline and budget.
Venso was unable to manage the changing
requirements effectively.
Venso failed to communicate effectively with
HCC about the project's challenges.
WHO IS AT FAULT

11. HOW IT ALL COULD HAVE BEEN BETTER - FROM THE
LENS OF BEHAVIORAL STRATEGY
THE SUNK COST
FALLACY
LOSS
AVERSION
ILLUSION OF
CONTROL
PREFERENCE FOR
COMPLETION
PLURALISTIC
IGNORANCE
PERSONAL
IDENTIFICATION
Mutually reinforcing biases that collectively explain what went wrong for the Harvest City Corp-Venso contract
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12. Tendency to continue investing in a project or venture
even when it is clear that the project is unlikely to be
successful.
Why? Reluctance to abandon something that they have
already invested time and money in.
A rational decision maker will look only at future
costs, not at past ones.
As per case, City Convention Complex Corporation
project was plagued by problems from the start, including
delays, budget overruns, and technical difficulties.
The so-called “task force” and the investors continued to
invest in the project despite these problems.
HOW IT ALL WENT WRONG - FROM THE LENS OF
BEHAVIOURAL STRATEGY
Tendency for people to feel the pain of a loss more
acutely than the pleasure of an equivalent gain. This
means that people are more likely to avoid losses than to
seek out gains.
The project was very expensive, and the company had
already invested a significant amount of money in it.
The project was behind schedule and over budget.
The project was not meeting the company's expectations.
Venso was facing pressure to complete the project on
time and within budget.
Miller’s decision to continue investing in the project
(despite resisting in first place), even though it was
clear that the project was unlikely to be successful.
1
THE SUNK COST FALLACY
2
LOSS AVERSION

13. Tendency to overestimate one's ability to control events.
People often believe that they have more control over
events than they actually do.
A common cognitive bias that leads to poor decisions,
especially in situations where control over the outcome is
limited.
In absence of Casper, the executive team took over
ignoring crucial components right from beginning like
installation of IoT sensors, not responding to Miller’s
complaints - eventually led to project going offtrack.
The project managers overestimated their ability to
control the project believing that they could
overcome any challenges that arose and could
complete the project on time and within budget.
HOW IT ALL WENT WRONG - FROM THE LENS OF
BEHAVIOURAL STRATEGY
A cognitive bias that leads people to favor completing
tasks, even when it is not in their best interest to do so.
Why? People tend to value completed tasks more than
incomplete tasks.
The project managers, with/without Casper, exhibited
a preference for completion to continue working on
project despite high unlikeliness of its success. Why?
Reluctant to admit that the project was a failure
Concerned about the negative consequences of
abandoning the project
Sunk costs in the project and the need to complete it
to avoid losing that investment
Simply reluctant to give up on the project
3
ILLUSION OF CONTROL
4
PREFERENCE FOR
COMPLETION

14. A social phenomenon in which a group of people privately
believe that they are the only ones who disagree with the
group's consensus, when in fact most people in the group
disagree with the consensus.
This can lead to a situation where everyone in the group
is afraid to speak up, even though they privately disagree
with the group's decision.
Pluralistic Ignorance is evident in the fact that many
of the project stakeholders privately believed that the
project was unlikely to be successful, but they
continued to work on the project because they
believed that this was what was expected of them.
They may have been afraid of being seen as negative
or pessimistic if they expressed their true beliefs.
HOW IT ALL WENT WRONG - FROM THE LENS OF
BEHAVIOURAL STRATEGY
Tendency to favor people or things that we identify with.
This bias can be based on a variety of factors, such as
physical appearance, social status, or shared interests.
The Mayor, Thompson, recognized that his reputation
was at stake after the “sprinkler incident” with re-
election and pressure from Harvest City stakeholders
and engaged OnCloud consulting.
Planted Scapegoat - Thompson went public with the
demand to fine Venso with fine of $1.25 million.
The tenants, the Hotel threatened to sue for breach of
contract and loss of revenue for delayed period and
reputation damage.
Consensual neglect of managers overseeing Venso,
ignoring and not cooperating with Venso’s project team
5
PLURALISTIC IGNORANCE
6
PERSONAL
IDENTIFICATION

15. HOW IT ALL COULD HAVE BEEN BETTER - FROM THE LENS OF
BEHAVIORAL STRATEGY
SET DECISION
RULES
DISJUNCTIVE
DECISION MAKING
PROTECT
DISSENTERS
EXPRESSLY
CONSIDER
ALTERNATIVES
SEPARATE
ADVOCACY AND
DECISION MAKING
REINFORCE
ANTICIPATION OF
REGRET
Addressing these biases, following are some practices that could have reduced the likelihood of falling into escalation trap
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3
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16. Agree to decision rules in advance.
Establishing criteria for determining whether or not to
continue investing in a project.
In absence of Casper, the Harvest City Corp could have
onboarded another CEO to takeover the leadership. This
could also have avoided the likelihood of escalation since the
new leader did not initiate/advocate the project.
The CEO’s job is to ensure the best decision gets made.
Venso could have gauged the project and all involved
departments’ requirements right in planning phase to avoid
ad-hoc changes.
The project planners could have systematized the execution
plan considering every stakeholder including Venso right
from the construction of the project.
HOW IT ALL COULD HAVE BEEN BETTER - FROM THE LENS OF
BEHAVIORAL STRATEGY
Decision-making in which a decision is made if any one of
a set of conditions is met.
This is in contrast to conjunctive decision-making, in which all of
the conditions must be met in order for a decision to be made.
Casper and team could have decided to abandon the project if
any of the following conditions were met:
The project exceeded a certain budget.
The project fell behind schedule.
The project experienced significant technical difficulties.
The project's market viability decreased significantly.
The project's strategic importance to the company
decreased significantly.
More likely to have abandoned the project early on, before too
much time and money had been invested in it.
1
SET DECISION RULES
2
DISJUNCTIVE
DECISION MAKING

17. Dissenters can be ruthlessly suppressed. They may be
reluctant to speak up if they think they are alone in their
disagreement.
Why? Tacit calculus: balancing the immediate risk of speaking
up against a course of action against the longer term
consequences of not speaking up.
The executive team did not create an environment where
project team members felt safe to express their concerns and
disagreements.
Provide anonymous feedback channels
Deploy larger teams - more information-processing capacity
and a greater diversity of perspectives.
Calibrated diversity - diverse groups produce more innovative
and creative solutions, are better at solving complex problems,
and are more capable of incorporating novel information
Modeling doubt
HOW IT ALL COULD HAVE BEEN BETTER - FROM THE LENS OF
BEHAVIORAL STRATEGY
The importance of explicitly considering all possible options
before making a decision.
Important for complex and expensive projects like the Harvest
City project.
In the Harvest City case, the project managers did not
explicitly consider alternatives to the proposed intelligent
procurement system project. They simply assumed that the
project was necessary and that it was the best option
available.
Had alternatives been considered, they may have decided that
the project was not necessary, or that there were better
alternatives available.
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PROTECT DISSENTERS
4
EXPRESSLY CONSIDER
ALTERNATIVES

18. Managers who initiate a course of action are more likely
to continue funding it (even in the face of failure) than
managers who assume leadership after a project is
started.
Reduce the likelihood of escalation if responsibility for a
strategic move given to people who did not advocate or
initiate that move.
In the Harvest City case, had John Casper been
replaced by someone else and his responsibilities
not distributed among the executive members, the
course of action would have been different.
Would it have been effective?
HOW IT ALL COULD HAVE BEEN BETTER - FROM THE LENS OF
BEHAVIORAL STRATEGY
Importance of helping people to imagine the negative
consequences of making a bad decision. This can help
people to avoid making bad decisions in the first place.
In the Harvest City case, the project managers did not
explicitly consider the potential negative
consequences of not investing in the proposed
intelligent procurement system project. This led them
to make the decision to invest in the project, even though
it was a risky and expensive project.
The project managers could imagine a concrete scenario
and then work backward using Prospective hindsight
Interpersonal perspective: Persuade managers to
question commitment and consider alternatives by getting
them to step into different roles
5
SEPARATE ADVOCACY
AND DECISION MAKING
6
REINFORCE
ANTICIPATION OF
REGRET

19. ESCALATION
AND
DE-ESCALATION
OF
COMMITMENT

20. ESCALATION & DE-ESCALATION OF COMMITMENT
ESCALATION OF COMMITMENT DE-ESCALATION OF COMMITMENT
Escalation of commitment refers to the tendency of
individuals or organizations to increase their
investment (e.g., time, money, resources) in a decision
or project, even when evidence suggests that the
decision is not working out as planned or that the
project is failing.
This phenomenon occurs when people become
emotionally or psychologically attached to their initial
decision, making it difficult for them to abandon it,
despite mounting evidence that it is not the best course
of action.
Escalation of commitment can lead to situations where
individuals or organizations continue to pour resources
into a failing project, hoping that additional investment
will eventually lead to success. This behavior can be
driven by factors such as pride, fear of admitting
failure, or a desire to recoup previous losses.
De-escalation of commitment is the opposite of
escalation. It involves reducing or cutting one's
investment in a decision or project that is not yielding
the expected results.
Individuals or organizations engaging in de-
escalation are willing to acknowledge that their
initial decision was not optimal and are open to
changing course or abandoning the project to
minimize further losses.
De-escalation of commitment can be seen as a
rational response to negative feedback and
evidence of failure. It allows for a more flexible and
adaptive approach to decision-making.

21. Ego
Defensive
Competition
Public
image
Low
salvage
value
Sunk
costs
weight of
Institute
Framing
effects
Politics
Audience
and
perception
Reputation
al Damage
Escalation
Problem
Investing more
money into a
failing project
would be
irrational
Decision
Psychological
social Cause
Economic
Organizational
All decisions
involve
uncertainty and
risk. Decision
makers should
allocate resources
ONLY where
economic criteria
of utility can be
maximised i.e.
benfits outweigh
the costs.
ESCALATION
PROBLEM
Causes

22. ESCALATION & DE-ESCALATION OF
COMMITMENTS INSTANCES FROM THE CASE
01
02
03
04
November 2015, Miller reconsidered Venso’s position (influence by Casper) and signed a
risky $21 million contract to develop a “Best in class cloud- and IoT-based procurement
system
Venso agreed for irrevocable deadlines in the terms of the contract though knowing the
contract was not part of the original timeline. Miller’s awareness of risks did not stop him
from accepting to implement the intelligent procurement system on a project already
constructed
In mid-November 2016, the convention scheduled to hold first national conference seven
weeks the hotel was supposed to begin serving guest. A month later, in December 2015,
when Casper resigned due to illness; his responsibilities were dispatched among the
remaining team members instead of hiring a new CEO
After Casper resignation, the new executive team failed to understand the Venso’s
project approach and miscommunicated. In February 2016, an operation team at the
convention center requested a change to intelligence system. In March 2016, the catering
vendor for the convention center, requested another modification in the procurement system

23. RECOMMENDATIONS
Harvest City started the construction of convention
centre before looping in the consultants capable
building it the way they wanted
The plan to build state-of-the-art IoT and integrated
infrastructure needs a strategy and vision and cannot
be an abrupt over the night decision
1.Planning and foresight a.k.a Strategy:
The project management was carried by Casper in the
nascent stages but later on his exit, it was shared
among the other executives that did not served well.
They ultimately ended up being overburdened
2.Responsibility of Project Managemet (Control) :

24. RECOMMENDATIONS
Miller already warned Casper of the operational
difficulties w.r.t., starting integration post (Post
construction).
The vision should be capable of being implemented
3.Operational feasibility :
Proposed prospective tenants and Casper should
have been in harmony and sync but that’s not the case
here.
Both were acting individually without any thought of its
consequences and each others work.
This is the primary reason for the mishap happened in
the first event held in 2016
4.Integration :
Casper never tried to bring all the stakeholders on the
same page
Even in 2016, tenants were making changes to the
sensors and other infrastructure without giving notice
to the Vinso’s team and have eveded the mis hap
5.Stakeholder management (Inclusivity) :

25. THANKS
Group-7