"How the Mighty Fall--and Why Some Companies Never Give In"
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“How the Mighty Fall”
Jim Collins’ new book, “How the Mighty Fall” is a great read for any business going through difficult financial situations—and those who want to avoid them. Though the title may initially cause you to think, ‘That’s all I need, more negativity!” the book provides empirical information on the common steps that highly visible companies have gone through in their decline, and others that turned it around mid-crisis.
The five steps that Collins identified are:
Collins and his researchers used the same methodology from their previous books, “Built to Last” and “Good to Great”, and applied it to “fallen" companies such as Ames Department Stores, A & P Groceries, Bank of America, Circuit City, HP, Merck, Motorola, Zenith and others. The steps were consistent in all these companies, yet a turn-around could have occurred during any of the initial steps.
The keys to his findings seem to be:
Collins stresses that these findings should be viewed in the context of learning from the mistakes of other businesses, and providing a bit of a roadmap to help us identify where we could be, helping us make the appropriate course corrections in time to improve our situation.
Stage 1 does not necessarily lead to Stage 5. All companies have their ups and downs for a variety of reasons. Having a positive, realistic, pragmatic approach to addressing their situation proved essential to the eventual turnaround of those companies that recovered.
What are the lessons for Agriculture? I would encourage you to add your own, but here are a few I would suggest….
Don Tyler
tdyim52pbc
Jim Collins’ new book, “How the Mighty Fall” is a great read for any business going through difficult financial situations—and those who want to avoid them. Though the title may initially cause you to think, ‘That’s all I need, more negativity!” the book provides empirical information on the common steps that highly visible companies have gone through in their decline, and others that turned it around mid-crisis.
The five steps that Collins identified are:
- Hubris Born of Success
- Undisciplined Pursuit of More
- Denial of Risk and Peril
- Grasping for Salvation
- Capitulation to Irrelevance or Death
Collins and his researchers used the same methodology from their previous books, “Built to Last” and “Good to Great”, and applied it to “fallen" companies such as Ames Department Stores, A & P Groceries, Bank of America, Circuit City, HP, Merck, Motorola, Zenith and others. The steps were consistent in all these companies, yet a turn-around could have occurred during any of the initial steps.
The keys to his findings seem to be:
- Just because you have a long history of success, developing a sense of hubris from that success can make you insensitive to the systemic changes in your industry and your own business. These companies tended to say, “We are successful because we do these things….” but the insightful, chronically successful company says, “We are successful because we understand why we do these specific things and under what conditions they would no longer work.”
- These fallen companies had a tendency to overreach, and think that they could do anything because they had been so good at what they had already done.
- Companies can create a sense of denial when they see the initial warning signs in their business reports, excusing away negative information at the early stages. Preventing a slide to the next stages requires a full acceptance of the situation and the realization that the business climate is no longer what it has been in the past.
- “Grasping for Salvation” occurs when a company seeks a “business savior,” the “turn-around specialist,” new technology, or radical, unproven strategies in the desperate hope for a quick fix to their rapidly increasing decline. Some companies going through this stage of decline try all of these steps, and some of the several times, without realizing that they are near their end.
- In the end, if no solution is found, the company ends up selling out or simply liquidating their assets because they got too far away from profitability and any possible solution.
Collins stresses that these findings should be viewed in the context of learning from the mistakes of other businesses, and providing a bit of a roadmap to help us identify where we could be, helping us make the appropriate course corrections in time to improve our situation.
Stage 1 does not necessarily lead to Stage 5. All companies have their ups and downs for a variety of reasons. Having a positive, realistic, pragmatic approach to addressing their situation proved essential to the eventual turnaround of those companies that recovered.
What are the lessons for Agriculture? I would encourage you to add your own, but here are a few I would suggest….
- Regardless of the situation, keep a positive attitude and enlist the help of all your employees and/or family.
- Realize that the business environment has changed. From borrowing to marketing, new standards and trends have--and will continue—to come to bear on our decision-making processes.
- Don’t compromise your core principles as you modify your practices and business strategy.
- Know why you do what you do, and why it has proven successful in the past.
- Face the facts of your situation. Denial is devastating and only prevents you from seeing the facts clearly and rationally.
- Your years of success can be the catalyst for your future—or a reason for your demise. Every business has some points in its history where critical decisions had to be made to position the company for continued success. Future generations will look back at these times to see what we did “on our watch.”
Don Tyler
tdyim52pbc
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Indeed! In the late 1980's we at Wang Labs interviewed Peter Drucker so that we could use his wisdom in our promotions. What struck me and stays with me today was his answer to the question, "What is the major pitfall for successful companies in our industry?" His reply, "Becoming arrogant...like IBM." (Yes, Dr. Wang's $3-billion company did fold, but it was not because of arrogance.)
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