Sunday, September 11, 2011

Book Review: “How the mighty fall.” Read it and weep.

The “Five Stages” of falling. Where are you now?

Move over “In search of excellence.” Now we have: “In search of arrogance.” This is a new must read business-school book. And for broken-hearted businesspeople everywhere.

I didn't plan on including any book reviews on this blog, but a number of my colleagues recommended that I read this book given its painful relevance. “How the mighty fall: And Why Some Companies Never Give In” is a 182-page do-it-yourself guide on ruining a company from the inside. Close your eyes, ignore the warning signs, lose concentration, and find something or someone else to blame. Full of solid examples and illustrations, this book will teach you how to destroy any well-run and successful company with brutal efficiency.

While in no way specific to the technology industry, given the fast-paced leapfrogging going on in industries such as wireless, this book's subject is painfully relevant to technology vendors of all sorts. As we have seen in the mobile biz, blink and another company is on top. Blink again, and the audience has forgotten your name altogether. As the book's author, Jim Collins, puts it, companies move on a path “from iconic to irrelevance.” So true.

Collins identifies the “five stages of decline:” hubris born of success, undisciplined pursuit of more, denial of risk and peril, grasping for salvation, and capitulation to irrelevance or death. But like Ebenezer Scrooge’s visions of miserable things to come, none of these stages necessarily have to pass. There is always room for R&R: recovery and renewal. Quoting Merck’s CEO Dick Clark, “a crisis is a terrible thing to waste.” Companies should feel a sense of urgency in good times and bad.

The point that Collins is making throughout the book is that any company must detect and address the warning signs early. Success is not an easy thing to handle and is often the beginning of failure. The euphoria of being on top is a sort of Novocain that numbs the senses, making it difficult for the top executive to feel the small pinches below. As the book says, “When you are at the top of the world… your very power and success might cover up the fact that you’re already on the path to decline.” Detect, detect, detect. And be brutally honest with yourself.

What often happens is successful companies get distracted into failure, ignoring the successful parts of the business while concentrating on business building. Collins calls it being “obsessed with growth.” The “waterline” metaphor Collins uses, quoting Bill Gore of W.L. Gore & Associates is particularly poignant, and is a way all executives should think. A ship can take a hit above the waterline, but below, and the water comes gushing in, and all hands are suddenly working on saving themselves. For any company, the cash cow has to be cared for. Ask yourself: where is your company’s waterline? Mind your foundation.

I could take issue with many of the anecdotes that Collins uses to make his points. Victory has a thousand fathers, failure is an orphan. Collins points to Zenith, for example, as a company who had reached the top, becoming the number one black-and-white TV vendor in the U.S. in the late ’60s. Collins states that Zenith’s top executives then ignored the onslaught of competition coming from Japanese electronics manufacturers as the company began to dabble into adjacent industries such a VCRs and home security video cameras. While these ventures failed, I think it would be fair to take a look at the other side of the coin: had these ventures succeeded, any of these moves would have been identified as genius and visionary.

The book is also extremely American centric, with practically no mention of companies outside of the U.S. And more details of headline-grabbing examples of failures would have made this book a more interesting read for me. I would like to have read more about Apple and its near collapse in the mid-'90s. And a lot more about General Motors on its path to becoming a government-sponsored charity organization.

Of course, the truth is, there is no neat formula to failure. Every company has an amazing ability to fail in innovative and unique ways. But the general guidelines are all here in “How the mighty fall.” As a scenario-planning exercise, I would recommend that all top executives write a paragraph or two about the situations that would have them appear in any potential follow-up to this book: Perhaps it could be entitled “How the mighty fail.”

So, for anyone who has ever been part of the slow-moving train wreck that is a company in an obvious and painful decline, this book is for you. For those of you who have been forced to look up in frustration to arrogance and ignorance, to denial and distraction, this is for you. To those of you who have worked in an organization that was sure it could re-org its way back to the top, “How the mighty fall” is for you.

Complacency is a deadly disease. Build up your antibodies early, or choose your coffin now.

A & who? “From iconic to irrelevance”

“How the Mighty Fall.”
Please read it. And weep.

1 comment:

Michael said...

I guess one factor that occurs pretty frequently in these cases is that competition comes from an unexpected source and the company is not equipped to resist. You can see that in one sense in the Zenith case and in another with IBM in the 80s or Nokia in the last few years. It is, perhaps, inevitable, that companies focus too much attention on their current nearest competitors and not enough on emerging threats.

It also strikes me that market analysts play a role here. Imo they have a tendency to extrapolate the present into the future and call that a prediction (sweeping generalization, but hey). Eg, I recall that during the RAZR era it was widely asserted by analysts that Motorola would continue to be a major player just because, well, it currently was. Yet the fact that Motorola would be in serious trouble once the RAZR reached the end of its shelf-life was really quite obvious. Point being that this kind of future-will-be-like-the-present-but-more-so thinking will support complacency amongst those who are currently ahead.