How The Mighty Fall - Jim Collins

In this book, Jim Collins tries to answer the question, why some companies that are doing exceedingly well turn around and fail (and also on why some continue to do well - but the focus is on the failing companies). Jim Collins comes out with the following framework of five stages of failure and discusses the stages with well-researched case studies of 11 organizations that have gone thru them.

Stage 1: Hubris born of success –Assuming that Success is a given no matter what we do.

Stage 2: Undisciplined pursuit of more – Going after quick gains and abandoning the core strengths/values (flywheels) for something new and radically different and deep into stage 1.

Stage 3: Denial of risk and peril – blinded hubris, refusing to see the risk vs. reward symmetry of venturing into a new strategy and abandoning old core strengths.

Stage 4: Grasping for salvation – Looking for a silver bullet (getting a new hotshot CEO, going after (with millions) an all-out drug that is still not proven) that will salvage the organization. Losing out on the culture of the organization.

Stage 5: Capitulation to irrelevance or death - the final stage, where everyone just gives in after the financial power gets eroded by the many false starts. And the organization just melts away.

The organizations that he discusses range from HP (HP took down two of my favorite companies – Digital and Compaq), Bank of America, Ames Dept Stores, Circuit City, Merck, etc. Jim Collins argues that the fall is mostly self-inflicted and not driven by the environment (environment does play a role).

It is really surprising and staggering to read about some of the decisions some leaders take even as they stare at the downfall of their company, it is as if they are blinded by the ego and confidence. It is also amazing to know that many companies that fall are at the peak of their innovation cycle, for example, Motorola and Merck had the highest IP filings during the respective slides. We always think that companies that innovate survive, Jim proves it as otherwise, the message, is probably, innovate at the right time.

Another interesting point is that many companies that are on the downward slope do a lot of restructuring (Scott Papers restructured some 3 times in 4 years during their fall). I can relate to some of the findings to what is going on in my organization (esp. the restructuring), I hope we get it right and prove Jim wrong. The way the book is written is very interesting to read, he has contrasted the company that failed, with a company (in the same market and competitive environment) that has succeeded.

This book is only 123 pages and well structured with chapter-end summaries. The book is easy to read and understand for a layman like me. It is also quite updated (published May 2009) with references to the recent meltdown, but I guess the draft was ready a couple (or at least a year ago), hence not too focused on the recent happenings.

On the downside: like any other solutions book, the conclusions seem to be quite simple and the research findings looks to be twisted to suit the writer’s framework.

Jim Collins is the celebrated author of Good to Great and Built to Last (Trivia: Steve Ballmer considers Built to Last as his single favorite Business Book!). Built to Last, is on the Business Week best-seller list for more than six years, and has been translated into 25 languages. According to Wiki, this book (How The Mighty Fall) has sold more than 2.5 million copies and has been translated into 35 languages.