Tedded - Business Book Review

“I’ve come to see institutional decline like a staged disease; harder to detect but easier to cure in the early stages, easier to detect but harder to cure in the later stages.”

“How The Mighty Fall” by Jim Collins can be called a sequel of “Build to Last” and “Good to Great”, arguably the two most influential business books in recent era. In a nutshell, the “visionary” companies in “Build to Last” and the “Good to Great” companies in “Good to Great” can fall. Jim Collins and his team studied the companies that used to be successful but eventually on the path of failure; some died, some recovered.

“All happy families are alike; each unhappy family is unhappy in its own way.” After studying success in depth in his two books mentioned, Jim Collins admitted in this book that the study of failures are more difficult and instead of pointing out specific activities or actions that doom the companies, he wrote the five “stages” in which failing companies went through some faster than others, some recovered at some points. These stages are:

Contents:

Stage 1: Hubris Born of Success

For many companies, “arrogance” comes with success. Collins termed “arrogance neglect” or the cycle that you built a successful flywheel (aka great business or the organisation per se); you found new opportunities and rushed to them and divert attention from your successful flywheel. The new ventures fail, you came back but your initial flywheel already lost momentum. Moreover, the hubris came when you replace “why” with “what” by instead of trying to understand the reasons behind specific things you do, the company takes it for granted and stops learning.

Examples: Motorola, Circuit City, Ames

Stage 2: Undisciplined Pursuit of More

Complacency and lack of innovation are not the primary causes of the decline, “catastrophic decline can be brought about by driven, intense, hard-working, and creative people.” but it’s when you went to far. Companies going through this stage are “obsessed with growth”. They went outside the “Hedgehog Concept” or the core value of the organisation. Proportion of right people in key seats are less because they are confusing “big” with “great”. Other symptoms in this stage are bureaucracy, problematic succession of power, fetching easy cash.

Examples: Rubbermaid, Merck, Bank of America

Stage 3: Denial of Risk and Peril

The obvious signs of the companies in this stage are that they “amplify the positive and discount the negative” and make big bets in the face of mounting evidence of the contrary, They often deny the downsides and blame external factors.

Examples: Motorola, NASA (Challenger), IBM, Scott Paper

Stage 4: Grasping for Salvation

When the companies begin noticing obvious decline, they were in search for a silver bullet and most of the times, they are trying to find the “savior CEO”, seek game-changing acquisition, bet on new technology or new unproven product. “Companies stuck in Stage 4 try all sorts of new programs, new fads, new strategies, new visions, new cultures, new values, new breakthroughs, new acquisitions, and new saviors.” However, Collins continued “The signature of mediocrity is not an unwillingness to change. The signature of mediocrity is chronic inconsistency.” There will be hypes, panic, haste, confusion, cynicism and without being consistent to their values and “take one shot at a time” (e.g. IBM), the companies will fall into Stage 5.

Examples: HP, Motorola (again), Addressograph

Stage 5: Capitulation to Irrelevance or Death

The company that went through Stage 1-4 and fell into Stage 5 often ran out of resource (read: CASH) and lost hope. “The point of the struggle is not just to survive, but to build an enterprise that makes such a distinctive impact on the world it touch, and does so with such superior performance, that it would leave a gaping hole if it ceased to exist.”

Example: Zenith

Well-found hope

From Collins’ study, companies can still bounce from Stage 5 for example Xerox.

…

I’ll compare this book to the ideal business book in my opinion: a book that is easy to understand, distinct, practical, credible, insightful, and provides great reading experience.

Ease of Understanding: 9/10: First of all, this is a very short book, 2/5 of the size of the book are appendices. The charm of Jim Collins’ book is how he could break down the contents into highly structured chapters (Stage 1-5). But the point needed to be taken because if you have not read “Build to Last” and “Good to Great”, there will be some parts that you will not be familiar with unless you read all the appendices!

Distinction: 7/10: Writing and analysing the failures of companies is not new and all the cases are not new either. However, the advantage of this book is the historical researches of Jim Collins that he has done and accumulated and the way he tried to put them into patterns.

Practicality: 6/10: The good part of the practicality of this book is that in each Stage, Jim Collins wrote on how to bounce back and how to recover from the imminent path to failure. The not so good but not so bad part is that although Jim Collins listed out “markers” or symptoms of companies in each stage, it is still very difficult to identify ourselves as declining and which stage we are in because as he wrote that overlaps occur. The bad part of the practicality of the book is that we don’t need the book because Collins, most of the times, referred to contents in “Build to Last” and “Good to Great”, so get them instead.

Credibility: 4/10: I am not sure if I am correct or not but I believe that Jim Collins tried very hard to write the book and I also believe that he is not as confident in “How The Mighty Fall” as he is in his previous books. As he mentioned “All happy families are alike; each unhappy family is unhappy in its own way.”, it is not very convincing in some of his remarks.

For example, “Stage 2: Undisciplined Pursuit of More” in “How The Mighty Fall” and “BHAGs (Big hairy audacious goals)” in “Build to Last” are separated by a very thin line. Boeing might ‘fall’ with their “bet the pot on the B-17, 707, 747”, IBM might ‘fall’ with their commitment to a $5billion gamble on the 360. etc.

Moreover, Scott Paper, from Good to Great, sold their other businesses and jumped into paper, and that’s “Hedgehog Concept” while Circuit City invested in CarMax and DivX and that’s “Hubris Born of Success”

I might be thick, I read them and try to distinguish by the word “discipline” and some others. Looking in a hindsight is still okay but if I were at that point of time, it can be very confusing.

Insight: 6/10: Despite being a small book, the researches Jim Collins did in the past are still extensive and impressive. I wish he write more but it might be the case that there are too many conflicts and controversy I mentioned earlier.

Reading Experience: 7/10: I ensure you that reading this book will not be pleasant because it might undermine your motivation because you will be guided through series of failures after failures. There are also glimpses of hope from some companies. However, if you like other Jim Collins’ books, you’ll still like the structure of this book.

Overall: 6.7/10: I have to be honest that I am disappointed with this book, I simply expected much more from Jim Collins. Do I recommend the book? I think I still do and if you are a Jim Collins fan, you will probably buy it anyway. I believe the topic is very difficult to write comprehensively but I praise the pattern of 5 Stages which will be very useful when the time comes. Nevertheless, I will stick with “Build to Last” and “Good to Great” while building a company, but if things start to go wrong, I might check “How The Mighty Fall” out.