How the Mighty Fall

“We are seeing more and more formerly great companies fall – e.g. Circuit City, Lehman Brothers, Fannie Mae. Jim Collins spent five years looking at how the mighty fall.

“Jim Collins’ research project uncovered five step-wise stages of decline. These stages are like a staged disease. It is generally hard to detect the disease while it is in its early stages, but that is when it is most curable. Detecting the disease in the later stages becomes easier, but the ability to cure it becomes difficult.”

Jim was asked by Randy James with TIME magazine what his book offers ordinary workers. He responded:

I’ve never really seen our work as being about business. These are human questions – how do you take something mediocre and make it exceptional? Why do some people become great in a world that’s full of tremendous volatility, uncertainty and rapid change? That’s a human question that we happen to address by looking through business, which we can do because of the rigor of the data.

The five stages of decline are identified as follows:

Stage 1: Hubris Born of Success

Companies like people often become arrogant when they are successful. The key to success in the first place was humility and a continually focus on excellence. When you are on top you quickly forget the hard work that you got you there, and you begin to develop a sense of entitlement.

The key here is to remain humble, and to focus unrelentingly on your passions and talents

Stage 2: Undisciplined Pursuit of More

Businesses can become “obsessed with growth” and again forget what got them there – an unrelenting focus on their greatest passions, talents and providing tremendous value. Leaders focus on power and money instead of using the doing their best to make a difference.

Focus on providing the most value to your customers

Stage 3: Denial of Risk and Peril

“As individuals and businesses, we don’t want to believe realities at time. When the warning signs come, we tend to “amplify the positive and discount the negative.”

Embrace reality so that you can truly create a better future

Stage 4: Grasping for Salvation

When the decline is obvious, businesses look for quick fixes (e.g., CEO, acquisitions, new products, new programs). Collins states that the, “signature of mediocrity is not an unwillingness to change”… but “chronic inconsistency.”

Identify and stayed focused on the right things

Stage 5: Capitulation to Irrelevance or Death

Businesses that end up in Stage 5, have often run out of resources and hope

Highlights by David Willden