I have been a fan of Jim Collins since reading Built to Last while pursing my MBA. Jim Collins and his co-authors have been exploring what makes a great company that can persist over time. I most recently read How the Mighty Fall. In this book Collins discusses how what was viewed as a great company can fall to non-existence, or at a minimum, a shell of their former selves. This book especially was of interest given that I formerly worked at Motorola and Collins discussed some of the key mistakes made while I worked there that led to the fall of Motorola.
In How the Mighty Fall, Collins lists five stages of decline:
- Hubris born of success – I look at hubris born of success as getting too big for your britches. Cockiness, overconfidence, entitlement, and arrogance also describe this stage. Some examples discussed in the book were: a company going into an area where the company cannot be the best or deliver excellence; making risky decisions when evidence suggests the opposite; ignoring the possibility that the organization could be at risk; and ignoring the role that luck has had for the business.
- Undisciplined pursuit of more – Examples of undisciplined pursuit of more include overreaching (developing many new products at the same time), growing the company revenues faster than the company can hire the right people, and not having a proper succession plan for the head of the company and other senior leadership.
- Denial of risk and peril – Some examples of denial of risk and peril are ignoring contrary evidence when making a big bet and denial of responsibility for negative events (choosing to blame others or external events instead of taking the blame yourself).
- Grasping for salvation – Examples of grasping for salvation include looking for a quick fix or silver bullet and acting out of desperation, fear, or panic.
- Capitulation to irrelevance or death – Examples of reaching the irrelevance or death stage include running out of cash, giving up, having no options, and being in denial.
Collins describes some instances where companies hadn’t reached the fifth stage yet and were able to reverse the falling. The sooner a company realizes that they have entered into the stages of decline, the better the chances of breaking that cycle of decline and achieving recovery.
Connecting back to my Motorola past, I find it interesting how Collins discusses two key decisions made by Motorola decision makers that led to their decline. Sticking with analog cellular phones and continuing with Iridium too long solidified their decline. The book provided a reiteration of some key actions that I think can help keep companies from falling. Keep making common sense decisions and stick to your core values until they are proven to be invalid. Also, there are no magic fixes for problems, other than hard work and dedication. What worked before is not necessarily going to work again, so continuing to evolve when needed is important for the future. And last, don’t get too arrogant, it provides more motivation for people or companies to want to see you fall.