What marketing executives can learn from the demise of the Thomas Cook Group
The recent demise of the Thomas Cook Group should serve as a warning to modern and future companies that a sound digital strategy is only as good as the overall business strategy of which it is a part. A business needs to build or acquire properties that work with the strategy and even help speed it up, not slow it down; put the right people in place to guide the transformation; and trust the steps they take to successfully accomplish it.
Thomas Cook & Son was founded in 1841, and in 2001 was acquired by the German company C&N Touristic AG, which changed its name to Thomas Cook AG. In 2007, Thomas Cook AG acquired MyTravel Group, which would lead to the creation of Thomas Cook Group plc. Many attribute this acquisition as the catalyst for the company’s demise.
That demise started around the turn of the millennium, when Thomas Cook began a series of package holiday, hotel, resort, online booking and media acquisitions, acquiring a lot of debt in the process—debt it never succeeded in shedding, and which hampered plans to turn the company around.
Three successive CEOs each have different stories about what happened.
The 1996 acquisition of Sunworld had brought Manny Fontenla-Novoa back to the company. He rose to CEO of Thomas Cook AG in 2003 and remained at the helm following the 2007 MyTravel Group acquisition. Fontenla-Novoa supplied background information on the financial health of Thomas Cook before a British Commons select committee, saying that under his watch, the company acquired a lot of assets that put it in great shape for future growth.
His successor, Harriet Green, said she inherited a mountain of debt. (She later left Thomas Cook to head IBM’s Watson Internet of Things and is currently chairman and CEO of IBM Asia Pacific.) Green noted the company was badly mired in old business practices and couldn’t react fast enough to consumer trends.
Green’s successor and Thomas Cook’s most recent chief executive, Peter Fankhauser, has said the mountain of debt accrued under Fontenla-Novoa became unmanageable, requiring the company to sell millions of vacation packages annually just to pay the interest on its debt. Fankhauser has also said that the speed of transformation was hampered by the amount of revenue that had to be committed to servicing debt. He laments that under his tenure, the company was not more brutal in the way it divested assets. But he also puts some blame on a series of unfortunate events, citing 2016 terrorist activity in the eastern Mediterranean, the 2018 heatwave across Europe and, of course, Brexit as blows to travel bookings in the UK.
What role did a failed digital transformation play in Thomas Cook’s demise?
As Green pointed out in spring 2014, Thomas Cook had a disconnected online business; the group was reportedly using 17 different web platforms at the start of her tenure in July 2012. The company also suffered from poor customer interaction and had no multi-channel experience. As well, its executives had no digital experience and its digital strategy was stifled by silos.
She made that assessment after about two years of trying to revamp the Thomas Cook business strategy, including shifting a third of annual revenue to online business, halving the number of web platforms (with the ultimate goal of having just one), creating a booking website that would work better with mobile devices (nearly doubling its same-period online revenues in its first month of operations late in 2013), and implementing a second-phase digital transformation that would further increase online business and result in projected cost reductions of 38%.
Green’s plan to fully revamp Thomas Cook’s digital business promised to boost online revenues substantially by 2018 but Green was criticized for not revamping the company’s overall business strategy. Her departure in fall 2014 apparently also brought about a halt to the digital transformation.
In a 2017 TEDx talk, Marco Ryan, whom Green had appointed as Thomas Cook’s chief digital officer about halfway into her tenure, indirectly summarized the problem with Thomas Cook’s digital transformation. He explained that the company was aware of the various necessary parts of its transformation, but not fully committed to the process. In his view, a digital transformation process involves trusting the direction and the people handling the digitization, and employing technology in a meaningful way (not just acquiring it).
After failing to reach a last-minute deal for emergency financing, the company went under this fall. The reaction in the business world and among the general public was immediate and widespread. Over half a million people travelling around the world had to be repatriated. Travel groups wound up picking up the tabs for tourist flights and resort stays, but competitors such as TUI saw their stock rise.
In the end, the blame lies with all three chief executives, who didn’t accomplish the requirements to modernize Thomas Cook and keep it not just operating but thriving.
What can we learn from the death of this venerable brand?
Early in the millennium, the company should have acquired more online properties instead of brick-and-mortar ones. In the second decade, it should have been working to streamline its online businesses instead of offering online travel bookers a cafeteria-style food-station menu. And it should have trusted the direction of the digital transformation. And most recently, the company should have hacked and slashed the parts of its business that weren’t going to contribute to its future, and revamped its digital strategy to deal with unforeseen probabilities.
The demise of Thomas Cook will likely be used as a case study for future marketing executives, illustrating that technology, trust and agility are all important factors in implementing a successful digital transformation.