Jim Collins
How the Mighty Fall
ISBN: 978-1-8479-4042-1
We talk a great deal in the business and startup world about success and how to get there. We don’t talk nearly enough about failure or the things that can lead a formerly successful company into the dustbin of history. In the third book in his series, Jim Collins discusses the five stages that companies go through as they decline in his book, How the Mighty Fall. This is the shortest of the four books in his series of studies, but I thought it actually packed the biggest punch of the bunch.
This book was actually a side project that he worked on while working on the fourth book in the series, Great by Choice. As he was looking through the data for that book, he noticed that companies tended to go through a series of stages before completely failing. The stages start at the pinnacle of success for each company, leads through denial of problems existing in the company, concluding with a death spiral out of which certain companies can’t pull themselves. He did mention a few companies that made it all the way to the fourth stage of five and were able to change course and recover – however, companies that reach the fifth and final stage cannot escape and end up shutting down soon after.
Collins had a chance to unfortunately revisit some of the companies that he featured in his earlier books Built to Last and Good to Great as examples of companies that aimed for the stars but, through different reasons, ended up shutting down or are currently circling the drain. It was actually quite humorous in an earlier book reading about the greatness of Circuit City knowing what ended up happening to it in the late 2000s – this was addressed in How the Mighty Fall. Also, because this book was published in the late 2000s, the Great Financial Crisis was in the middle of unfolding and some extra material had to be included as companies once looked upon as beacons on a hill were suddenly struggling to make it through the recession.
Even though the Five Stages of Decline were the main focus of this book and its study, Collins did discuss an alternate fifth stage – Recovery and Renewal. Companies can pull themselves out of the death spiral, but it takes a lot of work to get there. Apple was the example used of a company that came very close to the fifth and final stage of the Five Stages of Decline – Capitulation to Irrelevance and Death – but managed to make a recovery once Steve Jobs returned to the company in the late 1990s. The period that Jobs was not with Apple saw the company go through the first four stages, with protracted stays in stages 3 and 4, Denial of Risk and Peril and Grasping for Salvation. I remember all of the different products made by other manufacturers that Apple put their logo on – I still have a few of these in a closet in my house, including inkjet printers and digital cameras. Jobs returned to the company, killed off nearly every product line that wasn’t necessary to the core business, and Apple was only then able to escape the death spiral.
Overall, 9/10, would highly recommend for anyone looking for a reminder that even the greatest can stumble if they take their eyes off the end goal. This book was an incredibly short but powerful read, knowing that even the greatest companies can fall victim to the Five Stages of Decline. Utilizing the strategies outlined in the first two books in the series, entrepreneurs can avoid decline and the death spiral. This book should serve as a wake-up call to any CEOs or founders who are becoming complacent with their success or are pursuing growth just for the sake of growth. Many companies have gone down this path in the past and are now only memories.