Dissecting Economic Wrecks - and Possible Resurrections
How the Mighty Fall (and Why Some Companies Never Give In)
Author: Jim Collins
ISBN-10: 0977326411
ISBN-13: 978-0977326419
232 pages
The global crisis that sent shock waves throughout every business community in the world in 2008 may not have been the motive for Jim Collins' new tome, the appropriately titled How The Mighty Fall, but its timely publication was uncanny.
By the time the author of bestsel lers Built to Last and From Good to Great was penning his preface to his new slim volume in September 2008, he financial landscape had undergone a radical transformation. As that same preface notes, formidable institutions such as Lehman Brothers, Fannie Mae and Freddie Mac, Merrill Lynch, and Bear Stearns had either succumbed to bankruptcy, a hostile takeover, or government stewardship. Other companies were cutting their losses and reducing manpower to stem the bleeding. Tycoons, leaders, and the average working man (or woman) alike reeled as they pondered that age-old question: How could these giants have fallen?
STRIKING POINTS
In his effort to reply, Collins makes one compelling thesis: the seeds of collapse had been planted within the institutions long before the first economic tsunami had laid them waste to the ground. To paraphrase one of his points: a company can be profitable yet bankrupt at the same time.
The analogy he presents is simple but striking, and ultimately provocative to those of us who would take our health (physical, financial, and in all its forms) for granted: a seemingly vibrant, energetic runner who can successfully compete in a marathon, yet unknowingly harboring a cancerous stage that would take a few more years to surface and shock him with all its implications.
Collins argues the death of an institution does not come like a thief in the night. Like a malignant tumor, it develops in stages before hitting an unavoidable path to decline. Each stage is tackled in a chapter, detailed with his trademark support of information and examples.
Stage 1 is marked by hubris or an overweening arrogance that cannot accept correction or criticism, instead guided by a fatal confidence that thinks there is no way to go but up and the company can do no wrong. Stage 2 is characterized by the "undisciplined pursuit of more," or single-mindedness toward expansion and growth, without paying heed to the core values and business that had made the company successful in the first place. For example, jumping headlong into new ventures to increase earnings or enlarge market share without the right foundation, expertise, and experienced personnel on board can bring a company closer to the precipice, while still having its blinders on.
The third stage, denial, is self-explanatory; the writing on the wall is clear but management ignores it at the company's peril, preferring to blame external forces such as the economy and trade policies instead of taking a good hard look at its competitiveness, cash flow, and reserves.
By the fourth stage, the company would have realized that it is in dire straits, and tries valiantly to bring about salvation by desperate means – massive lay-offs, restructure of loans, a new CEO (or several of them). This part is interesting, because Collins points out that a few companies, though they have reached this stage, were able to arrest their decline and stage a comeback, as opposed to sliding down irrevocably into Stage 5, which is corporate death in the forms of bankruptcy, closure, or irrelevance.
STAYING ALIVE
It is a thesis that he repeats at the end as a poignant wake-up call:
"Never give in. Be willing to change tactics, but never give up your core purpose... Be willing to evolve into an
