Ford Library

Collins, James C. How the mighty fall : and why some companies never give in. Collins Business, 2009.

The author of longtime bestseller Good to Great and co-author of Built to Last, Jim Collins discusses why once-strong companies begin to decline and then die. Using research data from 60 corporations, Collins describes five stages of corporate decline and shows that even the most successful companies are not immune. Interestingly, decline begins long before it become obvious to anyone, even company insiders.

The 5 Stages of Corporate Decline

• Hubris Born of Success. The first stage of decline begins when company leaders lose sight of the underlying factors that created success in the first place. Instead of creatively renewing the core business, they are distracted by other threats and opportunities.
• Undisciplined Pursuit of More. In the second stage of decline, management loses discipline and makes leaps into other areas that undermine long-term value. The company grows at a rapid rate. Finding talent for key seats in the organization becomes difficult. The company chokes in pursuit of growth and expansion.
• Denial of Risk and Peril. Internal warning signs begin to mount but management blames the difficulty on external factors or puts a positive spin on the data.
• Grasping for Salvation. Decline becomes visible to all. Leadership responds by grasping for a visionary leader or a radical transformation.
• Capitulation to Irrelevance or Death. In the last stage, management abandons hope of building a great future.

The good news is that companies can recover. Collins’ research indicates that organizational decline is largely self-inflicted and recovery is possible by returning to solid management disciplines.

Eleven companies are profiled, including Circuit City, Hewlett-Packard (HP), Merck, Motorola, Rubbermaid and Zenith, in this interesting and very readable book.

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business.
All rights reserved.

Tags: Company history, Management, Success

This entry was posted by Meg on Thursday, January 14th, 2010 at 11:19 am and is filed under Book Reviews. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.