Editorial Reviews. About the Author. Jim Collins is a student and teacher of what makes great companies tick, and a Socratic advisor to leaders in the business. DOWNLOAD PDF In How the Mighty Fall, Collins confronts these questions, offering leaders the well-founded hope that they can learn how You can find more information about Jim and his work at his e-teaching site, echecs16.infolins. com. by Jim Collins. May History shows, repeatedly, that the mighty can fall. The Egyptian But on another level I found myself becoming increasingly curious: How do the mighty fall? If some of the .. Good to Great Diagnostic Tool ( pdf).
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Sorry, this document isn't available for viewing at this time. In the meantime, you can download the document by clicking the 'Download' button above. And Why Some Companies Never Give In. Amidst the desolate landscape of fallen great companies, Jim Collins began to wonder: How do the mighty fall? How far can a company fall before the path toward doom becomes inevitable and unshakable?. How the Mighty Fall – Jim Collins. Key Notes. The following are the 'key learnings ' from the research that Jim Collins and his team assessed, in examining why.
Army generals, 12 CEOs, and 12 social sector leaders," explained Hesselbein. What could I possibly teach this esteemed group about America? Then I remembered what one of my mentors, Bill Lazier, told me about effective teaching: Don't try to come up with the right answers; focus on coming up with good questions. I pondered and puzzled and finally settled upon the question: Is America renewing its greatness, or is America dangerously on the cusp of falling from great to good? While I intended the question to be rhetorical I believe America carries a responsibility to continuously renew itself, and it has met that responsibility throughout its history , the West Point gathering nonetheless erupted into an intense debate.
On one level this fact didn't cause much angst; just because a company falls doesn't invalidate what we can learn by studying that company when it was at its historical best. But on another level I found myself becoming increasingly curious: How do the mighty fall?
If some of the greatest companies in history can go from iconic to irrelevant, what might we learn by studying their demise, and how can others avoid their fate? I returned from West Point inspired to turn idle curiosity into an active quest. Might it be possible to detect decline early and reverse course—or even better, might we be able to practice preventive medicine?
I've come to see institutional decline like a disease: An institution can look strong on the outside but already be sick on the inside, dangerously on the cusp of a precipitous fall. In the wake of the San Francisco earthquake, A. Giannini, founder of the fledgling Bank of Italy, found himself at odds with other bankers who wanted to impose up to a six-month moratorium on lending.
His response: Giannini lent to the little guy when the little guy needed it most, and his bank, later renamed Bank of America BAC , gained momentum—little guy by little guy, loan by loan, deposit by deposit, branch by branch, expanding ever outward from San Francisco.
By it had surpassed Chase National Bank as the largest commercial bank in the world, and by the late s it had grown to more than a thousand branches in more than a hundred countries. Along the way it became admired not just for its size but also for its quality of management.
Note of clarification: Entering the s, Bank of America held a revered position and was widely regarded as one of the greatest companies in the world. Within eight years it would post some of the biggest losses in U. If a company as powerful and well-positioned as Bank of America in the late s could fall so far, so hard, so quickly, then any company can.
Every institution is vulnerable, no matter how great. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall, and most eventually do. But all is not gloom. By understanding the five stages of decline we uncovered in our research for How the Mighty Fall , leaders can substantially increase the odds of reversing decline before it is too late—or even better, stave off decline in the first place.
Decline can be avoided. The seeds of decline can be detected early. The mighty can fall, but they can often rise again. I'd started this project as a diversion to engage my pen while completing the research for my next full-sized book on what it takes to endure and prevail when the world around you spins out of control based on a six-year research project with my colleague Morten Hansen. But after my West Point visit, the question of how the mighty fall evolved into a topic of passionate curiosity channeled into a research effort that led to this small book.
In one sense, my research colleagues and I have been studying failure and mediocrity for years. Our research methodology relies on contrast, studying those companies that became great in contrast to those that did not and asking: Why do some great companies fall, and how far can a company fall and still come back? I began to joke with my colleagues: We had a substantial amount of data collected from prior research studies, consisting of more than 6, years of combined corporate history.
From this data set, we identified a set of once-great companies that fell and constructed a set of "success contrasts" that had risen in the same industries during the era when our primary study companies declined. Our principal effort focused on a two-part question: What happened leading up to the point at which decline became visible, and what did the company do once it began to fall? Our comparative and historical analysis yielded a descriptive model of how the mighty fall that consists of five stages that proceed in sequence.
And here's the really scary part: You do not visibly fall until Stage 4! Companies can be well into Stage 3 decline and still look and feel great, yet be right on the cusp of a huge fall. Decline can sneak up on you, and—seemingly all of a sudden—you're in big trouble. Even so, I ultimately see this as a work of well-founded hope.
With a road map to decline in hand, institutions heading downhill might be able to apply the brakes early and reverse course. We've found companies that recovered—in some cases, coming back even stronger— after having crashed down into the depths of Stage 4. Our research indicates that organizational decline is largely self-inflicted, and recovery largely within our own control.
So long as you never fall all the way to Stage 5, you can rebuild. While a full exploration of the five stages is beyond the scope of this excerpt, here is a brief summary:. STAGE 1: Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place.
When the rhetoric of success "We're successful because we do these specific things" replaces penetrating understanding and insight "We're successful because we understand why we do these specific things and under what conditions they would no longer work" , decline will very likely follow.
Luck and chance play a role in many successful outcomes, and those who fail to acknowledge the role luck may have played in their success—and thereby overestimate their own merit and capabilities—have succumbed to hubris. The best leaders we've studied never presume they've reached ultimate understanding of all the factors that brought them success.
For one thing, they retain a somewhat irrational fear that perhaps their success stems in large part from fortuitous circumstance. What's the downside if you're wrong? If you're wrong, you'll just be that much stronger by virtue of your disciplined approach.
You just might find yourself surprised and unprepared when you wake up to discover your vulnerabilities too late. STAGE 2: When an organization grows beyond its ability to fill its key seats with the right people, it has set itself up for a fall.
Although complacency and resistance to change remain dangers to any successful enterprise, overreaching better captures how the mighty fall.
Discontinuous leaps into areas in which you have no burning passion is undisciplined. Taking action inconsistent with your core values is undisciplined. Investing heavily in new arenas where you cannot attain distinctive capability, better than your competitors, is undisciplined. Launching headlong into activities that do not fit with your economic or resource engine is undisciplined.
Addiction to scale is undisciplined. To neglect your core business while you leap after exciting new adventures is undisciplined. To use the organization primarily as a vehicle to increase your own personal success—more wealth, more fame, more power—at the expense of its long-term success is undisciplined. To compromise your values or lose sight of your core purpose in pursuit of growth and expansion is undisciplined.
STAGE 3: Those in power start to blame external factors for setbacks rather than accept responsibility. The vigorous, fact-based dialogue that characterizes high-performance teams dwindles or disappears altogether.
When those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4.
Bill Gore, founder of W. Think of being on a ship, and imagine that any decision gone bad will blow a hole in the side of the ship. If you blow a hole above the waterline where the ship won't take on water and possibly sink , you can patch the hole, learn from the experience, and sail on.
But if you blow a hole below the waterline, you can find yourself facing gushers of water pouring in, pulling you toward the ocean floor. And if it's a big enough hole, you might go down really fast, just like some of the financial firm catastrophes of To be clear, great enterprises do make big bets, but they avoid big bets that could blow holes below the waterline.
STAGE 4: The critical question is: How does its leadership respond?
By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place? Those who grasp for salvation have fallen into Stage 4. Although complacency and resistance to change remain dangers to any successful enterprise, overreaching better captures how the mighty fall.
Those in power start to blame external factors for setbacks rather than accept responsibility. The vigorous, fact-based dialogue that characterizes highperformance teams dwindles or disappears altogether.
When those in power begin to imperil the enterprise by taking outsized risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4.
The critical question is, How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place?
Those who grasp for salvation have fallen into Stage 4. Common "saviors" include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution, a hoped-for blockbuster product, a "game changing" acquisition, or any number of other silverbullet solutions.
Initial results from taking dramatic action may appear positive, but they do not last. The longer a company remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spiral downward.
In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future.
It is possible to skip a stage, although our research suggests that companies are likely to move through them in sequence. Some companies move quickly through the stages, while others languish for years, or even decades.
Zenith, for example, took three decades to move through all five stages, whereas Rubbermaid fell from the end of Stage 2 all the way to Stage 5 in just five years. The collapse of financial companies like Bear Stearns and Lehman Brothers that happened just as we were finishing up this work highlights the terrifying speed at which some companies fall. An institution can stay in one stage for a long time, but then pass quickly through another stage; Ames, for instance, spent less than two years in Stage 3 but more than a decade in Stage 4 before capitulating to Stage 5.
The stages can also overlap, the remnants of earlier stages playing an enabling role during later stages. Hubris, for example, can easily coincide with Undisciplined Pursuit of More, or even with Denial of Risk and Peril "There can't be anything fundamentally wrong with uswe're great!
The following diagram shows how the stages can overlap. When I sent a first draft of this piece to critical readers, many commented that they found our turn to the dark side grim, even a bit depressing.
It's a bit like studying train wrecks-interesting, in a morbid sort of way, but not inspiring. So, before you embark on this dark journey, allow me to provide two points of context. First, we do ourselves a disservice by studying only success. We learn more by examining why a great company fell into mediocrity or worse and comparing it to a company that sustained its success than we do by merely studying a successful enterprise.
Furthermore, one of the keys to sustained performance lies in understanding how greatness can be lost. Second, I ultimately see this as a work of well-founded hope. For one thing, with a roadmap of decline in hand, institutions heading downhill might be able to apply the brakes early and revers!
For another, we've found companies that recovered-in some cases, coming back even stronger-after having crashed down into the depths of Stage 4. Great companies can stumble, badly, and recover. While you can't come back from Stage 5, you can tumble into the grim depths of Stage 4 and climb out. Most companies eventually fall , and we cannot deny this fact.
Yet our research indicates that organizational decline is largely self-inflicted, and recovery largely within our own control. All companies go through ups and downs, and many show signs of Stage 1 or 2, or even Stage 3 or 4, at some point in their histories.
Yet Stage 1 does not inevitably lead to Stage 5. The evidence simply does not support the notion that all companies must inevitably succumb to demise and disintegration, at least not within a lOO-year time frame.
Just because you may have made mistakes and fallen into the stages of decline does not seal your fate. As you read the following pages, you might wonder, But what should we do if we find ourselves falling?
It turns out that much of the answer lies in adhering to highly disciplined management practices, and we'll return to the question of recovery at the end of this piece. But for now, we need to descend into the darkness to better understand why the mighty fall, so that we might avoid their fate.
Not as a sentimental memento, but as a tangible admonition to continue to develop newer technologies in an ongoing process of creative self-renewal. In response, he experimented with car radios, changed the name of the company to Motorola, and started making a profit.
But this near-death experience shaped Motorola's founding culture, instilling a belief that past accomplishment guarantees nothing about future success and an almost obsessive need for self-initiated progress and improvement. When Jerry Porras and I surveyed a representative sample of CEOs in , they selected Motorola as one of the most visionary companies in the world, and we included Motorola in our Built to Last research study.
Amongst the eighteen visionary companies we studied at that time, Motorola received some of the highest scores on dimensions such as adherence to core values, willingness to experiment, management continuity, and mechanisms of selfimprovement. We noted how Motorola pioneered Six Sigma quality programs and embraced "technology road maps" to anticipate opportunities ten years into the future.
In , Motorola executives felt great pride in their soon-to-be-released StarTAC cell phone; the then-smallest cell phone in the world, with its sleek clamshell design, was the first of its kind.
There was just one problem: the StarTAC used analog technology just as wireless carriers began to demand digital. According to Roger O. Crockett, who closely covered the company for Business Week, one of Motorola's senior leaders dismissed the digital threat: "Forty-three million analog customers can't be wrong.
If you want the hot StarTAC, explained the Motorola people, you'll need to agree to our rules: a high percentage along the lines of 75 percent of all your phones must be Motorola; and you must promote our phones with stand-alone displays. Bell Atlantic, irritated by this "you must" attitude, blasted back that no manufacturer would dictate how much of their product to distribute.
Motorola's arrogance gave competitors an opening, and Motorola fell from being the 1 cell phone maker in the world, at one point garnering nearly 50 percent market share, to having only 17 percent share by Rufus Fears , outrageous arrogance that inflicts suffering upon the innocent.
We will see hubris in undisciplined leaps into areas where a company cannot become the best. We will see hubris in a company's pursuit of growth beyond what it can deliver with excellence.
We will see hubris in bold , risky decisions that fly in the face of conflicting or negative evidence. We will see hubris in denying even the possibility that the enterprise could be at risk, imperiled by external threats or internal erosion. And we will encounter one of the most insidious forms of hubris: arrogant neglect.
Under his leadership, Circuit City had grown more than 20 percent per year, multiplying the size of the company nearly ten times in a decade. How to keep the growth going? After all, as Forbes commented, in the end every market becomes mature, and this energetic CEO had "no intention of sitting around and waiting for his business to be overwhelmed by the competition.
The company had already piloted CarMax, a visionary application of the company's superstore expertise to the used car business. Circuit City also became enamored with an adventure called Divx. The advantage: not having to return a DVD to the video store before having had a chance to watch it. There came a telling moment when the interviewer asked what investors should worry about at Circuit City. Then he felt compelled to add, "I think there has been some investor sentiment I'd refer Profit margins eroded and return on equity atrophied from nearly 20 percent in the mids to single digits, leading to the company's first loss in more than a quarter of a century.
And on November 10, , Circuit City announced that it had filed for bankruptcy. Circuit City originally made the leap from good to great, a process that began to gain momentum in the early s, under the inspired leadership of Alan Wurtzel. As with most climbs to greatness, it involved sustained, cumulative effort, like turning a giant, heavy flywheel: each push builds upon previous work, compounding the investment of effort-days, weeks, months, and years of work-generating momentum, from one turn to ten, from ten to a hundred, from a hundred to a thousand, from a thousand to a million.
Once an organization gets one flywheel going, it might create a second or third flywheel. Circuit City in decline exemplifies a cycle of arrogant neglect that goes like this: You build a successful flywheel. You succumb to the notion that new opportunities will sustain your success better than your primary flywheel, either because you face an impending threat or because you find other opportunities more exciting or perhaps you're just bored.
You divert your creative attention to new adventures and fail to improve your primary flywheel as if your life depended on it. The new ventures fail outright, siphon off your best creative energy, or take longer to succeed than expected.
You turn your creative attention back to your primary flywheel only to find it wobbling and losing momentum. A core business that meets a fundamental human needand one at which you've become best in the world-rarely becomes obsolete. In this analysis of decline, only one company, Zenith, fell largely because it stayed focused on its core business too long and failed to confront its impending demise.