Jim Collins has recently released his new book on How The Mighty Fall because of all the once great companies that are now a shadow of what they used to be. He writes, “Whether you prevail or fail, endure or die, depends more on what you do to yourself than on what the world does to you.”
His research of these companies led to develop a list of the five stages that lead to decline:
1. Hubris Born Of Success—Great companies can become insulated by success; accumulated momentum can carry an enterprise forward, for a while, even if its leaders make poor decisions or lose discipline.
2. Undisciplined Pursuit Of More—Hubris from stage one leads right into stage two of more scale, more growth, more acclaim, more of whatever those in power see as success.
3. Denial Of Risk And Peril—As companies move into stage three, internal warning signs begin to mount, yet external results remain strong enough to “explain away” disturbing data or to suggest that the difficulties are temporary or cyclic or not that bad.
4. Grasping For Salvation—The cumulative peril and or risks gone bad of stage three assert themselves, throwing the enterprise into a sharp decline visible to all. Should the leader grasp for quick salvation or return to the disciplines that brought about greatness in the first place?
5. Capitulation To Irrelevance Or Death—The longer a company remains in stage four, repeatedly grasping for silver bullets, the more likely it will spiral downward. In some cases, their leaders just sell out; in other cases, the institution atrophies into utter insignificance; and in the most extreme cases, the enterprise simply dies outright.
The book is not all doom and gloom because there are clear principles given why some companies never give in even though they may suffer temporary setbacks and short term failure.