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Sat, 16 May 2009

How Good Companies Fail..

In early 2002 i recall reading and falling in love with Jim Collins book: "From good to Great". I recall being so excited by some passages that i typed out whole paragraphs and sent them around to the rest of the office..

For my last birthday Deels got me Collins other book "Built to Last: Successful Habits of Visionary Companies".

It seems as if he has done it again, with his new (soon to be released) book called "How The Mighty Fall: And Why Some Companies Never Give In"

Businessweek posted [an excerpt from the book], and i wanted to post an excerpt of that excerpt. He covers the 5 stages of a failure (im pasting 3 of them):

  1. HUBRIS BORN OF SUCCESS Great enterprises can become insulated by success; accumulated momentum can carry an enterprise forward for a while, even if its leaders make poor decisions or lose discipline. Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place. When the rhetoric of success replaces penetrating understanding and insight , decline will very likely follow
  2. UNDISCIPLINED PURSUIT OF MORE Hubris from Stage 1 ("We're so great, we can do anything!") leads right to Stage 2, the Undisciplined Pursuit of More—more scale, more growth, more acclaim, more of whatever those in power see as "success." Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence—or both. When an organization grows beyond its ability to fill its key seats with the right people, it has set itself up for a fall. Although complacency and resistance to change remain dangers to any successful enterprise, overreaching better captures how the mighty fall. Discontinuous leaps into areas in which you have no burning passion is undisciplined. Taking action inconsistent with your core values is undisciplined. Investing heavily in new arenas where you cannot attain distinctive capability, better than your competitors, is undisciplined. Launching headlong into activities that do not fit with your economic or resource engine is undisciplined. Addiction to scale is undisciplined. To neglect your core business while you leap after exciting new adventures is undisciplined. To use the organization primarily as a vehicle to increase your own personal success—more wealth, more fame, more power—at the expense of its long-term success is undisciplined. To compromise your values or lose sight of your core purpose in pursuit of growth and expansion is undisciplined.
  3. DENIAL OF RISK AND PERIL As companies move into Stage 3, internal warning signs begin to mount, yet external results remain strong enough to "explain away" disturbing data or to suggest that the difficulties are "temporary" or "cyclic" or "not that bad," and "nothing is fundamentally wrong." In Stage 3, leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility. The vigorous, fact-based dialogue that characterizes high-performance teams dwindles or disappears altogether. When those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4
Managing high performance teams, and well performing companies is a constant battle against the forces of darkness, and like most of his work, all i can say is "Preach brother.. Preach.."