But all is not gloom. By understanding the five stages of decline we uncovered in our research for How the Mighty Fall , leaders can substantially increase the odds of reversing decline before it is too late—or even better, stave off decline in the first place. Decline can be avoided. The seeds of decline can be detected early. The mighty can fall, but they can often rise again. I'd started this project as a diversion to engage my pen while completing the research for my next full-sized book on what it takes to endure and prevail when the world around you spins out of control based on a six-year research project with my colleague Morten Hansen.
But after my West Point visit, the question of how the mighty fall evolved into a topic of passionate curiosity channeled into a research effort that led to this small book. In one sense, my research colleagues and I have been studying failure and mediocrity for years. Our research methodology relies on contrast, studying those companies that became great in contrast to those that did not and asking: "What's different?
I began to joke with my colleagues: "We're turning to the dark side. We had a substantial amount of data collected from prior research studies, consisting of more than 6, years of combined corporate history. From this data set, we identified a set of once-great companies that fell and constructed a set of "success contrasts" that had risen in the same industries during the era when our primary study companies declined.
Our principal effort focused on a two-part question: What happened leading up to the point at which decline became visible, and what did the company do once it began to fall? Our comparative and historical analysis yielded a descriptive model of how the mighty fall that consists of five stages that proceed in sequence. And here's the really scary part: You do not visibly fall until Stage 4! Companies can be well into Stage 3 decline and still look and feel great, yet be right on the cusp of a huge fall.
Decline can sneak up on you, and—seemingly all of a sudden—you're in big trouble. Even so, I ultimately see this as a work of well-founded hope. With a road map to decline in hand, institutions heading downhill might be able to apply the brakes early and reverse course. We've found companies that recovered—in some cases, coming back even stronger— after having crashed down into the depths of Stage 4.
Our research indicates that organizational decline is largely self-inflicted, and recovery largely within our own control. So long as you never fall all the way to Stage 5, you can rebuild. While a full exploration of the five stages is beyond the scope of this excerpt, here is a brief summary:. Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place. When the rhetoric of success "We're successful because we do these specific things" replaces penetrating understanding and insight "We're successful because we understand why we do these specific things and under what conditions they would no longer work" , decline will very likely follow.
Luck and chance play a role in many successful outcomes, and those who fail to acknowledge the role luck may have played in their success—and thereby overestimate their own merit and capabilities—have succumbed to hubris. The best leaders we've studied never presume they've reached ultimate understanding of all the factors that brought them success. For one thing, they retain a somewhat irrational fear that perhaps their success stems in large part from fortuitous circumstance.
What's the downside if you're wrong? Minimal: If you're wrong, you'll just be that much stronger by virtue of your disciplined approach. You just might find yourself surprised and unprepared when you wake up to discover your vulnerabilities too late. When an organization grows beyond its ability to fill its key seats with the right people, it has set itself up for a fall.
Although complacency and resistance to change remain dangers to any successful enterprise, overreaching better captures how the mighty fall. Discontinuous leaps into areas in which you have no burning passion is undisciplined.
Taking action inconsistent with your core values is undisciplined. Investing heavily in new arenas where you cannot attain distinctive capability, better than your competitors, is undisciplined.
Launching headlong into activities that do not fit with your economic or resource engine is undisciplined. Addiction to scale is undisciplined. To neglect your core business while you leap after exciting new adventures is undisciplined. To use the organization primarily as a vehicle to increase your own personal success—more wealth, more fame, more power—at the expense of its long-term success is undisciplined. To compromise your values or lose sight of your core purpose in pursuit of growth and expansion is undisciplined.
Those in power start to blame external factors for setbacks rather than accept responsibility. The vigorous, fact-based dialogue that characterizes high-performance teams dwindles or disappears altogether. When those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4.
Bill Gore, founder of W. Think of being on a ship, and imagine that any decision gone bad will blow a hole in the side of the ship. If you blow a hole above the waterline where the ship won't take on water and possibly sink , you can patch the hole, learn from the experience, and sail on. But if you blow a hole below the waterline, you can find yourself facing gushers of water pouring in, pulling you toward the ocean floor. And if it's a big enough hole, you might go down really fast, just like some of the financial firm catastrophes of Unfortunately, with only eleven pairs of companies under the microscope, Collins is unable to make a case against any common culprits.
At the same time, expect that legions of managers will snap it up from airport book stands with Harry Potter-like zeal. My advice? Read the book, but skip over its half-hearted claims of rigor and go straight to the sage advice. You have 1 free article s left this month. How do once great companies fall? Jim admits that it is not something very inspiring to study or even look at. However, one really bad leader can bring a company down. Jim warns that some of the greatest companies in history brought about their own senseless self-destruction and if it can happen to them, no one is immune.
He describes the fall of a company as a stage disease. There are five stages of how a company falls. In this stage people lose sight of what made them succeed in the first place and start to consider that they can succeed in anything.
Companies tend to amplify positive data and discount, or explain away, negative data. But the key is not to do everything at a frantic pace, but think what not to do with a focused approach. The knowledge of the five stages serves as a diagnostic toolkit.
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