How The Mighty Fall: And Why Some Companies Never Give In
ISBN:9780977326419 read summary

What a tome! If you are not reading this already, your company is doomed to failure!

Whilst Collins selects his target companies for discussion through a very detailed process and in depth research, we all know and see exactly what he describes as the path to failure through many examples in everday business. This is not a tale of post 9/11 and 2008 GFC catalytic events, but moreover a very apt description of why Nhilism takes place in almost every company. We are taught that the company exists in perpetuity once commenced, but that's probably the greatest myth - and Collins exposes this.

An interesting read if only for some of the case studies that Jim Collins and his team unearthed while researching this book - you often learn much more from failures than you do from success. Having said that, the five stages of decline proposed by the author, while intuitively correct, are too easy to pick apart when applied to all the cases that are not covered in the book. That's not to say that the research is poor, quite the opposite, but as Jim Collins himself pointed out: "Every unhappy family is unhappy in its own way".

I would still recommend the book for the case studies, as they are quiet interesting, but I remain more than skeptical of the overall model.

Collins's four stages also apply to civilizations -- the U.S. comes readily to mind. If redemption can still be gained from Stage 3 or 4, now would be a good time to start. But such an effort cannot by definition be led by the professional political class, it must be led by "outsiders." If you were the CEO of the U.S., what would you do to arrest and reverse the inexorable progression through the stages? Does anyone out there care enough to do something?

Having read Collins' wildly popular book "Good to Great" (a phrase that has entered the common language of many who've never even read the book) and finding it to be remarkably engaging and applicable even though I couldn't be further removed from the business world, I began his newest book "How the Mighty Fall" with high expectations. After charting the history of enduring companies in "Built to Last" and detailing the rise of other companies from mediocrity to sustained excellence in "Good to Great," Collins categorized another collection of companies in "How the Mighty Fall," those that have plummeted from enduring excellence to irrelevance or non-existence. Collins mentions in the introduction that this book emerged almost accidentally in the midst of extensive research for another book, initiated because of the decimation of numerous prominent companies during the recent economic tumult.

Though some may claim that his earlier books have been discredited because companies which he previously praised as exemplary organizations (i.e. Circuit City and Fannie Mae) have deteriorated, I think he offers a convincing argument that his previous books merely noted the practices that brought companies to a point of sustained excellence without implying that these practices are any sort of guarantee for future success. When a successful company changes the practices that built its success, it only makes sense that its success may evaporate, eventually if not always immediately. Collins summarizes the course of the descent of a collection of formerly great companies, based on his study of each of their corporate histories and their financial records. He arrived at five stages of decline that he observed in each case. The first two stages, "Hubris Born of Success" and "Undisciplined Pursuit of More," begin to creep into the culture of an outstanding organization while it climbs towards increasing levels of success. The third stage, "Denial of Risk and Peril," corresponds with the point at which the companies' fortunes just begin to sour. The fourth stage, "Grasping for Salvation," occurs in the middle of the downward spiral of failure. And the fifth stage, "Capitulation to Irrelevance or Death," signals the end point, at which point these once-proud institutions cease to exist (i.e. Circuit City) or exist as a mere shadow of their former prominence (i.e. A&P).

In many ways, the book met my high expectations. I was once again amazed at how interesting it was to me, given my vocational track in church ministry. I really don't have specific interest in the business sector, yet I found his stories and anecdotes about these various companies to be fascinating and enlightening. I am not widely read in the business arena, so I have little point of comparison for Collins' writing against other business books. Nor can I evaluate the veracity of his claims from a research perspective, as I am not an expert in statistics, stock markets numbers, or corporate analysis. I can merely say that his writing style makes sense to this non-business guy and seemed to offer plenty of potential points of application outside the business world.

Having acknowledged my general appreciation for the book, I do have a few critiques. First, the book did seem a bit hastily assembled, in comparison to his much more comprehensive "Good to Great." Collins basically admitted in the introduction that this book was almost an afterthought in the midst of his other primary work, and it definitely felt that way at times. There were many points when I felt as if his story-telling was unnecessarily incomplete and presumed upon the reader's knowledge of the specific history of the featured corporations. Maybe it's fair to assume that business experts will know the intricacies of the rise and fall of dozens and dozens of companies, but knowing that this book would be read by folks like myself outside the business community, I think he could have been more careful to fill in a few more pertinent details. I felt like I was able to fit together the pieces eventually, but it led to a rather uneven reading experience at times. And one thing that might have been helpful is if several of the appendices had been integrated into the main text of the book. As I read through the appendices at the end, I came upon several pieces of information that would have been immensely more helpful had I encountered them earlier.

Ultimately, I'm glad to have read "How the Mighty Fall." Though not quite as powerfully and convincingly written as his "Good to Great," Collins has an amazing ability to turn the complicated analysis of corporate histories into accessible, helpful leadership insight, with applications across many disciplines. He does the hard work of sifting through the numbers, personal experiences, and countless anecdotes to spell out the broad implications of what we can learn from the success and failure of many notable companies. I'm grateful for his contributions and look forward to reading his next book.

Both the 2004 Sydney Finkelstein book "Why Smart Executives Fail" and the 2009 Jim Collins book "How the Mighty Fall" carry a similar message, and even share several of the case studies.

The Finkelstein book's chapters on "Seven Habits of Spectacularly Unsuccessful People" and the concluding "How Smart Executives Learn" are real gems. The 2007 Douglas Hubbard book "How to Measure Anything" supplements the "How Smart Executives Learn" chapter by suggesting ways that top executives can be trained to more accurately assess risk.
Jim Collin's table of "Leadership Team Dynamics: On the Way Down versus On the Way Up" is also particularly good.
My conclusion would be that the (longer) Finkelstein book seems to include many more practical guidelines as to ways of fixing what is broken, rather than merely concentrating on how to detect what is broken. But Collins points out that "Any exceptional enterprise depends first and foremost on having self-managed and self-motivated people .. who accept responsibility, (then) you don't need to have a lot of senseless rules and mindless bureaucracy". And his Appendix 5 on What makes for the "Right People" is also a gem.

Although the books don't phrase it this way, maybe the easiest criteria for predicting success or failure is worldview -- "zero sum gain, divide and conquer, winner takes all" versus "Openness and Diversity", "Great Leader says" vs. "Teamwork and Diversity". "Zero sum gain" means that if the directors want more money, they need to screw their employees and their customers. Think about it. Such a "zero sum gain, winner takes all" mentality is not sustainable. There's a limit to how far you can screw your employees and your customers. The opposite of the "zero sum gain" model is the "goodwill" model -- i.e. "a good team with diverse talents can be worth far more than the sum of its parts. This is the same model as the surgical team model in Frederick Brook's "Mythical Man Month".
Two of Japan's most famous turnarounds are Nissan and Sony -- and both picked non-Japanese as their CEOs. The Nissan site showcases the need for diversity -- and explains why it makes good business sense. Sony also promotes diversity.

The D. Sull review claims that "Collins introduces a five stage model to answer these questions, where steps one and two address the roots of corporate failure and steps three through five managements' response". But these five stages are "Five Stages of Decline" rather than stages one and two being "Root causes of corporate failure" and stages three through five being "Management's response".

The D. Sull review also claims that "There are two major flaws in Collins' argument:" First, he says that Collins "claims that companies get into trouble because they overreach and expand beyond their core". Second, he says that Collins "ignores a rich body of research that finds decline sets in not because companies stray from their core, but because they stick too close to it". But -- as other people have pointed out -- Collins' key point is that companies start to lose control when they no longer have the management talent to continue to be excellent in what they do. This may be because they try to grow too fast, or because they make "undisciplined leaps into areas where they cannot (realistically) be great".