HOW THE MIGHTY FALL AND WHY SOME COMPANIES NEVER GIVE IN
How The Mighty Fall And Why Some Companies Never Give In is a book by Jim Collins. It is a research-based book and gives perspective of how decline can happen to great enterprises even to those that appear invincible. The book provides answers to questions like: How do the mighty fall? Can decline be detected early and avoided? How far can a company fall before the path towards doom becomes inevitable and unshakeable? How can company reverse course?
The author based on the research recognizes five stages as below:
Stage 1: Hubris Born of Success
Here, enterprises see success as an entitlement and fail to remember what made them great. Often, enterprises fail to acknowledge the role of luck in their success and over estimate its own virtue and capability. Leaders lose the interest and learning emphasis.
Stage 2: Undisciplined Pursuit of More
In this stage, enterprises propel pride and quest for growth and take undisciplined leap on new ventures. In the process, they lose their focus on their core business and what made them successful. Enterprises, without providing right people, start to pursue more and more new ventures. Bureaucratic process increases and people often think of jobs rather than responsibilities. Succession of leadership becomes difficult due to poor succession planning and absence of grooming. Personal interests override enterprise’s interest.
Stage 3: Denial of Risk and Peril
In this stage, enterprises magnify the positive data and discount negative data and try to ignore ambiguous warnings. Leaders undermine warnings and continue to set brave goals and make big bets without empirical evidence. Healthy team dynamic and dialogue is substituted by dictatorial management. Leaders rather than accepting failures try to blame external factors or other people.
Stage 4: Grasping for Salvation
In this stage, enterprises understand that they are in problem and look for a new charismatic leader who will help the organization catapult them out of the decline rapidly. There is a trend of initial optimistic results but they do not last since there is no cumulative buildup and momentum. There is confusion on the ground over what their core values are.
Stage 5: Capitulation to Irrelevance or Death: In this stage, enterprises still try to reverse its decline yet they spiral down to insignificance or dies out right.
The historical evidences in the book convey that no institution is immune to decline and is vulnerable irrespective of its greatness, success and power. Organizational declines are mostly self-inflicted and recovery is largely within our own control. Leaders by understanding the five stages of decline can substantially reduce the chances of falling or avoid tragic fate.
I highly recommend reading this book.