Jim Collins seems like a strange choice to write about failure. His best-selling books Built to Last (1995) and Good to Great (2001) were celebrations of how to build a successful and sustainable company (both are classics, and belong on every leader’s bookshelf). Yet Collins has definitely taken a look at the other side of the coin with How the Mighty Fall (2009).
In this small but powerful book, Collins asks the question about troubled companies – can decline be detected early and avoided? How far can a company fall before the path toward doom becomes inevitable and unshakable? And perhaps most importantly, how can companies reverse course?
In the book, Collins offers leaders hope that they can indeed learn to avoid decline and, if they find themselves falling, reverse direction. Collins’ usual exemplary research uncovers five step-wise stages of decline:
Stage 1: Hubris Born of Success
Stage 2: Undisciplined Pursuit of More
Stage 3: Denial of Risk and Peril
Stage 4: Grasping for Salvation
Stage 5: Capitulation to Irrelevance or Death
By understanding these stages of decline, leaders can substantially reduce their chances of falling all the way to the bottom. In fact, every institution, no matter how great, is vulnerable to decline; there is nothing that says you get to stay on top just because you’re successful today. Anyone can fall and most eventually do. But, as Collins’ research shows, some companies do indeed recover–in some cases, coming back even stronger–even after falling all the way to Stage 4. Decline, it turns out, is largely self-inflicted, and the path to recovery is generally achieveable, if leaders remain open-minded and heed the signs of peril.
I’m sure Collins would agree with the old leadership adage: “it’s when times are good that leaders really need to worry.” Well, maybe you shouldn’t literally be worrying, but you should be staying close to customers, driving innovation, and paying attention to competitors, regulation and other risks to the business model. If you’d like some help thinking about how to avoid a slippage, pick up How the Mighty Fall. It’s a quick read with a lot of wisdom, from one of the best leadership thinkers of our time.