DEFINITION of 'Icarus Factor'

The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

BREAKING DOWN 'Icarus Factor'

In Greek mythology, Icarus and his father, Daedalus, were imprisoned in Crete by King Minos. Daedalus created two sets of wings made from wax and feathers. He and his son were to use them to escape by flying. Daedalus warned his son not to fly too close to the sun. Icarus was overcome with the excitement of flying and disregarded his father's warning. He flew higher and higher, approaching the sun. As the wax melted and the feathers fell, so too did Icarus fall to his death in what is now called the Icarian Sea, near Icaria, an island southwest of Samos.

The Icarus factor is most often seen when companies plow into businesses that work on different models from their existing lines. As they spend more and more money to try and catch up to companies already dominant in those fields, they use up the cash reserves built up by their core business - sometimes this drain can be fatal.

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