On 2 October 2017, Monarch Airlines ceased trading, leaving more than 110,000 passengers stranded abroad and two thousand members of staff without a job.
External, uncontrollable factors
Within hours of the news hitting the headlines, reasons for the collapse of Britain’s fifth-biggest airline were offered:
- Increased cost of fuel due to the fall of the pound against the dollar since the Brexit vote
- Increased competition from other low-cost carriers created overcapacity in the market and led to overly aggressive pricing
- Reduced demand for flights to Monarch’s key markets of Egypt, Turkey and Tunisia due to recent terror attacks
In other words, the demise of Monarch after 50 years’ flying people on their package holiday around Europe was explained as the result of external, uncontrollable factors. These caused costs to rise and revenues to fall, leading to unsustainable losses.
When you look at the reasons once famous businesses disappeared, similar external factors are mentioned. However, when you look deeper, it turns out that 85 percent of corporate failures are caused by internal, controllable factors such as a lack of innovation, loss of strategic focus, overreliance on a dominant position and inaction of the board.
What all these internal, controllable factors have in common is that, they are the result of the prevailing mindset within a company. That is, the mental model used to look at and make sense of the surrounding world. The problem in many companies is that, over time, this worldview hardens into unquestioned beliefs and assumptions, turning the focus of activities inward. As a result, shifts in the business landscape are missed or ignored. When these are eventually noticed, often with much shock and confusion, there is a tendency to apply the outdated mental model with even more rigour in the hope it will turn the company’s fortunes around. It never happens.
Thriving in today’s complex, dynamic and uncertain marketplace requires the willingness to ask challenging questions, take risks in finding answers and to learn from failure. The latter can be done in real life, but a faster and more effective way is to challenge current thinking and explore new concepts in strategic games, such as business simulations, premortems and wargaming. It is about seeking out and finding data that doesn’t fit the current worldview, understanding what it means for the business and adapting before competitors, customers or other market players unexpectedly change the game for real. Otherwise, you’re left in a position of playing catch-up.
What is your game going to be?