Toy Headquarters Firm’s Fall and Active Inertia

Subject: Case Studies
Pages: 2
Words: 580
Reading time:
3 min
Study level: College

Introduction

It is safe to say that the question of what causes the rise and fall of companies will remain one of the main subjects of the economy until the end of time. Thinkers and experts from various scientific disciplines have developed many theoretical models, economic formulas, and even philosophical concepts to explain the issue. One such concept is active inertia and its four hallmarks. The case of Toy Headquarters (THQ) downfall will be explored in this paper through the prism of active inertia.

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Active Inertia and Its Four Hallmarks

The idea of active inertia was first proposed and described by Donald Sull in “Why Good Companies Go Bad.” According to Sull (1999), “active inertia is an organization’s tendency to follow established patterns of behavior – even in response to dramatic environmental shifts” (p. 43). Four hallmarks of active inertia include strategic frames becoming blinders, processes hardening into routines, relationships becoming shackles, and values hardening into dogmas (Sull, 1999). They describe how to identify a company in a state of active inertia and explain why companies cannot adapt to external factors.

How THQ Became Blind

The story of THQ is a prime example of how strategic frames become blinders and processes harden into routines. THQ was a video game developer, publisher, and distributor with headquarters in Agoura Hills, California (THQ Inc, n.d.). Between 2008 and 2013, the company gradually fell due to accumulated managerial and organizational problems, which eventually led to the company’s collapse. The company became successful in the entertainment software market thanks to licensed games, and such an over-reliance resulted in high financial costs and waste of production cycles.

According to Lien (n.d.), THQ was “like being on monkey bars, knowing where it had to swing next, but being too scared to let go of the bar it was hanging to” (para. 28). Managers were unable to respond to changing markets and new gaming technologies due to their narrow vision. Nowadays, THQ Nordic, a company’s remaining European branch, tries to get back into the industry.

THQ’s Inability to Adapt

Another reason for the downfall of THQ is the inability to restructure production processes to adapt to changing markets. The company mainly produced licensed games for the sixth generation of consoles such as Sony PlayStation 2 and Microsoft Xbox (Lien, n.d.). When the iPhone came out, the mobile gaming market emerged. Making video games for the new market has proven to be a very cheap process that involves a small number of people, which guaranteed a relatively significant profit (Lien, n.d.).

The production processes within the company and THQ’s organizational model were so engrained that the company was unable to adapt and position itself in a new promising industry. It would have been impossible “without some radical changes” and the company “had no experience working with mobile games” (Lien, n.d., para. 30). Instead, THQ decided to focus on AAA games, but they have had little success in this field.

Conclusion

This work examines the history of the fall of THQ, a video game company, through the prism of the concept of active inertia. Two hallmarks of active inertia were found in the THQ case. They are frames becoming blinders and processes hardening into routines. THQ is remembered for video games like Warhammer 40,000: The Dark Crusade, Titan Quest, and the Darksiders series. There is a hope that THQ Nordic will learn from the mistakes of its predecessor and will soon return to the gaming industry as a major player.

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References

Lien, T. (n.d.). The fall of THQ. Polygon. Web.

Sull, D. (1999). Why good companies go bad. Harvard Business Review, 77(4), 42-52.

THQ Inc. (n.d.). Bloomberg. Web.