In this review of Collin's latest offering, Amrita Das of MBAUniverse.com finds the book relevant and full of relevant insights for these troubled times.
Decline can be avoided.
Decline can be detected.
Decline can be reversed.
These lines catch your fancy as soon as you open HOW THE MIGHTY FALL authored by Jim Collins, also author of international bestsellers and business essential GOOD TO GREAT and BUILT TO LAST. The management guru, Collins, picked up HOW THE MIGHTY FALL exactly where he left GOOD TO GREAT – his book on why some companies make the leap while others don't. The writer has carefully woven his research insights, thoughts and experience to bring out this piece which broadly focuses on how companies can best avoid, necessarily detect and absolutely try and reverse the fall. What makes this book an interesting read is the way the author has gone about explaining exactly ‘how’ organisational decline is largely self-inflicted, and recovery largely within their own control.
The author in his ‘small book’ – as he himself writes in the preface – has neatly charted out the decline process into five stages with apt organisational examples, which are worth a read. The management guru admits that his framework isn’t “the definitive” framework, which if followed, can save companies from falling (due to factors like fraud, bad luck, scandal etc), but says it’s a work of a minutely-done case research that’s bound to help its readers. Quoting a line from Tolstoy’s Anna Karenia, ‘All happy families are alike; each unhappy family is unhappy in its own way’, he goes on to state that all companies have different problems and equally different solutions to those problems.
Let’s look at these 'five stages of decline', and how to avoid them:
Stage 1: Hubris born of success
Collins goes about explaining his framework one-by-one, and starts with the example of Motorola, which made a killer shift from ‘humility’ to ‘arrogance’ and in the process lost its mightiness during the mid-1990s. The author has in the book deftly penned the markers and the symptoms of decline. The book says companies ignorantly start their stage one journey when the reason of success changes from ‘deserved’ to ‘hard earned’, when they get distracted by extraneous threats, when leaders lose their inquisitiveness and learning orientation, and lastly when they begin discounting the role of luck. Companies that fail to innovate with changing times too are destined for a fall, the author points.
Stage 2: Undisciplined pursuit of more
However, Collins opines that complacency or failure to stimulate innovation and bold actions are not always responsible for an organisational decline. While explaining why he thinks so he uses his research data and introduces the cases of Wall Street meltdowns of 2008 and Merck’s tumult during late-1990s. He writes the 2008 recession came despite people going too far with growth and innovation. Even Merck’s overriding business objective of growth elevated the expectations too far and ultimately caused detriment. The author, however, cautions that it’s not the pursuit of more which pulls the company spiralling down; it’s the ‘undisciplined’ pursuit – discontinuous leaps, inconsistent actions and the worst, using the organisation as a vehicle to increase personal success. The book also cautions all companies to look for the right people since the company’s success is directly linked with weather it has the right people in the key seats.
Stage 3: Denial of risk and failure
When any company reaches stage three, it enters a mode of denial Collins notes. The leaders begin to explain away negative data rather than understanding the core of the disease and eliminating it. Next, they to go for big, unreal, impossible goals that eventually fall flat. The book asks the managers to think twice before acting on ambiguous data and says when making risky bets always check beforehand if you can handle and put up with the downside of the action. It says that if while taking a decision, the debate takes shape of a dictatorial decision or consensus; understand that healthy team dynamics, which is every organisation’s key to future success, has died. The book also blatantly states that leaders, more often than not, blame ‘external’ factors for decline rather than accepting faults. This is when people, instead of working on ‘how-to-restore-the-company’, increasingly remain occupied with internal politics that further pushes the company tumble down.
Stage 4: Grasping for salvation
After the leaders can not stretch the denial-mode, stage four begins: organisations react to downturn by making big moves like acquisitions or by taking up new strategies inconsistently in an attempt to quickly catalyse a breakthrough. The writer has in this part induced the traits of stage two once more and has counter pointed the cases of Hewlett-Packard’s ordeal and IBM’s tactics. On July 1999 Carly Fiorina, who was then listed as Fortune’s # 1 ‘Most Powerful Women in Business’, replaced the 57-year-old HP CEO Lew Platt. She did a lot for the company, the writer says, but she was in a hurry and her tenure ended in disappointment. On the other hand, Collins talks about Louis V. Gerstner's philosophy. In the year 1993, Gerstner was brought in as CEO to lead IBM out of its rough-pitch. Both the new leaders increased profitability, but Gerstner did it consistently and Fiorina inconsistently.
Stage 5: Capitulation to irrelevance or death
Not all companies deserve to last. While explaining the fifth stage of decline, Collins points out that an organisation does not die from lack of earning, but from lack of cash. In the entrepreneurial phase, leaders struggle to get ‘enough cash to become self-sustaining’, but as an organisation becomes big and successful, ‘cash consciousness fades’. In this part, he talks about how a company should continue its fight and when it should just let it go. He stresses that perhaps it’s best for some to die rather than shrinking into utter irrelevance. Here also, the author has deftly drawn a contrast by taking cases of two different companies – Scott Paper and Zenith. Hope, Collins writes, can’t pull back a company from its death, it needs resources, too. The book throws light on why some companies never die in its final part.
Well-founded hope
Collins while praising companies like Xerox, Nucor, IBM, Nordstrom, Disney, Boeing, HP, Merck, articulates that these once-fallen companies are standing again since their leaders simply refused to give up. He warns that if you have not yet fallen, beware the temptation to proclaim a crisis when none exists… and if you’ve already taken a fall, the sooner you break the cycle of grasping for salvation the better. The path to recovery lies first and foremost in returning to sound management practices ad rigorous strategic thinking, he opines.
In its last-leg, Collin says that all of us need beacons of light to help us in our struggle with our respective setbacks. He writes: For me, that light has often come from studying Winston Churchill.
MBAUniverse.com thinks Collin’s latest, How The Might Fall – And Why Some Companies Never Give In, is a must read for all business leaders and MBA students as it provides detailed case-studies of the struggles and success stories of the world’s best business brands. It shows how they dealt with their crisis, what led to their debacle, what made them tick and how some of them rose again from the ashes
