How the Mighty Fall

Jim Collins is my favorite business author. I have reviewed his other 3 books and I thought I should complete the reviews with How the Mighty Fall. This came out around the time when Fannie Mae was in trouble and at the heart of the Lehman collapse which put the global stock markets in peril. Jim Collins does have a knack of releasing books at the right time. Of course, there have always been arguments that some of the companies which were once successful in his study have fallen by the wayside. This book addresses why companies or even empires do fall. Here are the 5 stages of decline identified with my commentary on it. Even as individuals we can pay attention to this.
Hubris born of success: This is when companies fall in love with their own success and become arrogant. Example sighted here is Motorola which didn't pivot to digital when there was a movement from analog to digital. The unwillingness to move when things are changing must be a key factor in the downfall of many companies and empires. Of course, the famous example of Blockbuster being Netflixed shows the same type of behavior which doesn't work. As a company it is good to ignore marginal cost. This is the theory from Clayton Christensen. The basic thesis is think that if you were just going to start your business now would you still be doing the same thing you are doing now. If you wouldn't then make the changes now even if the existing business is bringing good revenue. Of course this requires a complete shift in perspective which only few companies are willing to do.
Undisciplined pursuit of more: Here the example of Rubber maid is provided, and they were releasing one new product every day. It is better to be one fad behind. Innovation for the sake of innovation will not work. This is where empirical validation of your ideas is critical. Speed for the sake of speed can kill the enterprise. Jim Collins also says if you have more than 3 priorities you have none. This can be applied to our personal lives as well. Focus only on the wildly important priorities and learn to say no to everything else.
Denial of Risk and Peril: This is when you ignore all signs that things are not going as planned. When you don’t reflect on things that are not going well you will capitulate and go to the next stage of decline. Always be on guard and be ready to face difficult situations before they occur. This is also the subject of Beth Comstock's Imagine it forward. She says we should always be on the look out for trends and forecast best case scenario and worst case scenario. A key question which Jim Collins suggests is "How much time before the risk profile changes."
Grasping for salvation: This is basically when you don’t have any more oxygen left to breathe. This is when organizations try to bring an external CEO to make dramatic transformations which often does not work. Here the example of HP’s Carly Fiorina is provided as someone brought in at that time to save the enterprise.
Capitulation: This is obviously the final death call. This is when the enterprise truly dies and there is no way back. Obviously, you never want to reach this stage.
There you have it the 5 stages of decline. The book has so many examples as all Jim Collins books do. I still think he is one of the best business authors of all time. Here is my review of his other 3 books. Good to Great Built to Last Great by Choice.
The views expressed here are my own and do not represent my organization.