Will Your Company Fail without You Realizing It? Book Review: How the Mighty Fall

How the Mighty Fall and Why Some Companies Never Give In by Jim Collins (JimCollins, 2009)

Jim Collins is a self-described “student and teacher of enduring great companies—how they grow, how they attain superior performance, and how good companies can become great companies” (jimcollins.com). He is also the author of Good to Great and coauthor of Built to LastHow the Mighty Fail is by far his most negative book, and well worth the read.

How does a successful company suddenly stop making money?

How the Mighty Fall is a reality check to any businessperson willing to be completely honest with themselves. Prior to reading this book, I generally believed (like most people, I imagine) that big companies that fail almost always do so because they stop innovating, get comfortable, or underestimate the competition. Collins convincingly shows that you can work incredibly hard, be incredibly smart, innovate like crazy, change absolutely everything, and still fail. But there is something that can be done: the signs can be recognized, and often, the trend can be reversed. The key is to act before revenue and profitability declines.

Collins’ research focused on eleven previously “good to great” or “built to last” companies that have now essentially failed and how they ended up irrelevant (pg. 14). This effort resulted in his observation of five stages of decline. The most shocking part: the first three stages of decline happened while revenue and profitability increased. The three stages on the upward mobility side of the trend are “Hubris Born of Success,” “Undisciplined Pursuit of More,” and “Denial of Risk and Peril.” The last stage a company can recover from is “Grasping for Salvation” perhaps best described as looking for a silver bullet (compare Onward, where Howard Schultz describes how Starbuck’s recovered from this stage). Stage five of a mighty company fall is “Capitulation to Irrelevance or Death.” These five stages were not derived from the question, “What do failures share in common?” The focus question for Collins was: “What do we learn by studying thecontrast between success and failure?” This meant comparing the fallen companies to successful companies in the same industry during the same era, and finding the differences (pg. 15).

The most telling part of this book, beyond the trend towards death mainly occurring while you’re still making money, is that mighty companies can be as indignantly naïve as one-person companies. It makes you wonder how naïve you are yourself—it makes you realize how little you actually know. And how it’s really not intelligence that will help you and the company you work for win long-term: it’s disciple, constant questioning of the “way things are,” and a strict observance of very basic business principles.

My only critique of this book is that the second half of it really would have been better as a website. Slogging through the details of the research in a print format was a bit of a bore and unnecessary.

I think the reality of How the Mighty Fail will always stick with me, because I know if it doesn’t, failure may be one to two stages away. 4 stars.

 

(I read this book as part of Logos Bible Software’s “Read for Cash” program. The publisher and/or author in no way influenced my review. However, the links in this post are affiliate links and thus I will receive a small amount of money if you click the link and then make a purchase.)

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