Monitor Group: A Failure of Scenario Planning

Monitor Group's bankruptcy raises a number of questions around supply risk management, services firm internal controls, scenario planning failures, and more. Below, we feature a guest post from Azul Partners and Cartegic Group scenario planning expert, Art Hutchinson. Art worked for Northeast Consulting (a rival of Monitor Group's Global Business Network (GBN) scenario planning practice) for many years. He continues to teach and consult on scenario planning for a range of clients. Art and Spend Matters co-founder Jason Busch have worked together for fifteen years.

Let me begin by referring to a quote from Victor Cheng, "a one-time McKinsey Consulting associate, author of The Recession-Proof Business and advisor to the management consulting industry," courtesy of an interview on Quartz:

"...the kind of problem Monitor currently faces is precisely the kind of problem Monitor used to be hired to solve for their clients. It's like having your mechanic get into a car accident because of faulty brakes – in short, they should have known better. The underlying business cause is made worse by some degree of hubris or denial. It's the thought that, we can't possibly go under, because we're Monitor – founded by the legendary Michael Porter [a Harvard professor]. It is precisely the false belief that you're somewhat invincible that causes a firm to delay taking aggressive actions to prevent a bankruptcy."

Recognizing the shortsightedness of an organization necessarily entails personal introspection by those running it. Identifying the particular corporate, collective manifestations of such shortsightedness presents a steeper challenge. Applying those lessons with resolute discipline and the right timing is even harder. Monitor's declaration of bankruptcy is a case in point. Their scenario business makes this all deeply ironic.

Human beings are inherently shortsighted creatures, prone to mistakes that look plain in hindsight. Part of this challenge stems from how much this fact irks our egos. We don't like to admit we're wrong. Failure to accept one's own personal shortsightedness can be most acute among individuals with the greatest intellectual assets. One can become less resilient by virtue of extended success or great power, experiencing fewer substantial setbacks than those of more modest abilities (or those simply less fortunate).

The problem is mirrored in organizations, where collectively held beliefs can cause management teams to discount emerging patterns of fact that signal step-function change. Developments that run orthogonal to the prevailing corporate story – the strongly held and once valid mental model of what 'works' and what made them great – are explained according to an increasingly obsolete context. The result: improper responses, including complacency masquerading as courage. (Playing PR doc for a notorious dictator for three million bucks in extra revenue surely qualifies in that regard.)

In organizations with great intellectual prowess, such as Monitor, the two problems can converge with tragic result. A relative dearth of trials, tests and existential crises can exacerbate the effects of shortsightedness when consequences finally emerge. The most superficial review of recent corporate history (e.g., Enron, Lehman Brothers) proves this. The same has been observed of various national empires across history as well.

Monitor was known – among other things – as a purveyor of scenario planning services. Unfortunately much of what passes for scenario thinking is only pseudo-effective executive entertainment. Such work is too often tied to rigid, self-affirming models for organizational change that don't break the hubris trap. What I like to call 'organizational antibodies' work to surround and kill that which is foreign – even that with the power to save.

Modular, interactive scenarios are quite different. They help to slay the dragons of hubris, denial and false belief by starting with the default belief system itself as a scenario. However incoherent and incomplete it may be, this 'conventional wisdom' scenario becomes the starting point for change based on reality. Egos may persist in delusion for a time, but a good modular scenario framework will eventually bring them to truth.

The scenarios very few are willing to contemplate with intellectual honesty are the ones in which they are captured or killed, yet such scenarios – including the possible mechanisms for such a catastrophic fall – are the most important to think about.

Is it too late for Monitor? The brand will surely live on inside Deloitte. Some leaders will too, in retirement or as principals in a new organization. Either way, the particulars of that scenario are still being written.

Spend Matters would like to thank Art Hutchinson for his contribution. Art can be reached at art (at) cartegic (dot) com.

Voices (2)

  1. Art:

    Acquired at the peak of the bubble (Dec. ’99), then chewed-up, spit out, and scattered to the four winds… proving that no firm (and no person) is immune to Monitor disease.

  2. JSular:

    While there maybe some painful truths (and untruths) here, I can’t help but ask; so what did happen to Northeast Consulting?

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