“Too big to fail” now adorns the tombstones of once-great companies that have stumbled, fallen and can’t get up. Companies such as Bear Stearns and Lehman Brothers, Fannie Mae and Freddie Mac, Merrill Lynch and WaMu, General Motors and AIG.
How do the mighty fall? Is decline inevitable? Can it be detected and even avoided?
Jim Collins, author of Good to Great, spent the past four years researching the decline of institutions and he has some good news for us: Decline can be detected and avoided. In his new book How The Mighty Fall (and why some companies Never Give In), he outlines five stages of decline that tend to proceed in sequence before a Goliath hits the dirt:
- Hubris Born of Success. Accumulated momentum can carry an enterprise forward for awhile, even if its leaders make poor decisions or lose discipline.
- Undisciplined Pursuit of More. More scale, more growth, more acclaim, more of whatever those in power see as “success.”
- Denial of Risk and Peril. Internal warning signs begin to mount, yet external results remain strong enough to “explain away” disturbing data as “temporary” or “cyclic” or “not that bad.” Those in power start to blame external forces for setbacks rather than accept responsibility. The honest, vigorous dialog that characterizes high-performance teams dwindles or disappears.
- Grasping for Salvation. The cumulative effects of risks-gone-bad assert themselves throwing the enterprise into a sharp decline now visible to all. The critical question is, How does its leadership respond? Common “saviors” include a new charismatic-visionary leader, a bold but untested strategy, a dramatic cultural revolution, or a new blockbuster product. All may appear positive, but results usually do not last. The signature of mediocrity, says Collins, is not an unwillingness to change, but chronic inconsistency. Fortunately, there is hope for those companies who discipline themselves to refocus on their core competencies.
- Capitulation to Irrelevance or Death. Nuf said.
The book is a lightning quick read at 123 pages of text, followed by an equally thick section of seven appendices (research criteria/results and Good to Great principles) and notes. At the end of each chapter you will find helpful Markers for This Stage that help translate theory into real-life practice.
Whether you prevail or fail, endure or die, depends more on what you do to yourself than on what the world does to you. – Jim Collins
See Jim’s excellent online interview that gives an overview and summarizes each stage.
Insight for leaders: Whether you’re leading a corporation, a cell group, your kid’s soccer team or anything in between, if you have that sinking feeling that the ship is going down, you may want to dig deeper into these insights. Failure is not inevitable.
One reply on “Book Bite: How The Mighty Fall”
Ken – Good to Great is a very good book. Does Collins address the “Circuit City” example in “How The Mighty Fall”?
That’s a weakness in most, if not all, business books. Authors need to hold up/present real case company examples, and by the time the book gets printed and hits the bestseller list, the material contained within the pages may be dated, and most importantly, real life economic challenges can actually undermine the material.
Circuit City embodies “Denial of Risk and Peril” and “Grasping for Salvation”. I still remember reading Circuit City press releases about “not our fault, everything is going well except economy stunk last quarter”.