How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins Flashcards Preview

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1

effective teaching: don’t try to come up with the right answers; focus on coming up with good questions.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

2

organizational decline, unlike cancer, is largely self-inflicted.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

3

Every institution is vulnerable, no matter how great. No matter how much you’ve achieved, no matter how far you’ve gone, no matter how much power you’ve garnered, you are vulnerable to decline. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall and most eventually do.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

4

Five Stages of Decline

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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What happened leading up to the point at which decline became visible and what did the company do once it began to fall?

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

6

“What do we learn by studying the contrast between success and failure?”

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

7

The variables we identify in our research are correlated with the performance patterns we study, but we cannot claim a definitive causal relationship.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

8

We therefore derive our frameworks primarily from evidence from the actual time of the events, before the outcome is known,

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

9

Tolstoy’s novel Anna Karenina. It reads, “All happy families are alike; each unhappy family is unhappy in its own way.”

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

10

STAGE 1: HUBRIS BORN OF SUCCESS.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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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.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

12

Luck and chance play a role in many successful outcomes, and those who fail to acknowledge the role luck may have played in their success—and thereby overestimate their own merit and capabilities—have succumbed to hubris.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

13

STAGE 2: UNDISCIPLINED PURSUIT OF MORE. Hubris from Stage 1 (“We’re so great, we can do anything!”) leads right into Stage 2, the Undisciplined Pursuit of More—more scale, more growth, more acclaim, more of whatever those in power see as “success.”

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

14

Although complacency and resistance to change remain dangers to any successful enterprise, overreaching better captures how the mighty fall.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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STAGE 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.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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STAGE 4: GRASPING FOR SALVATION.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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STAGE 5: CAPITULATION TO IRRELEVANCE OR DEATH. The longer a company remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spiral downward.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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Stage 1: Hubris Born of Success

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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hubris is defined as excessive pride that brings down a hero,

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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no excuse to let it just run on autopilot. Exit definitively or renew obsessively, but do not ever neglect a primary flywheel.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

21

great companies foster a productive tension between continuity and change. On the one hand, they adhere to the principles that produced success in the first place, yet on the other hand, they continually evolve, modifying their approach with creative improvements and intelligent adaptation.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

22

The best leaders we’ve studied never presume that they’ve reached ultimate understanding of all the factors that brought them success. For one thing, they retain a somewhat irrational fear that perhaps their success stems in large part from luck or fortuitous circumstance.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

23

Like inquisitive scientists, the best corporate leaders we’ve researched remain students of their work, relentlessly asking questions—why, why, why?—and have an incurable compulsion to vacuum the brains of people they meet.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

24

Wal-Mart maintained its near-religious fanaticism about its core values, purpose, and culture, Ames did the opposite in its quest for quick growth,

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

25

• SUCCESS ENTITLEMENT, ARROGANCE: Success is viewed as “deserved,” rather than fortuitous, fleeting, or even hard earned in the face of daunting odds; people begin to believe that success will continue almost no matter what the organization decides to do, or not to do. • NEGLECT OF A PRIMARY FLYWHEEL: Distracted by extraneous threats, adventures, and opportunities, leaders neglect a primary flywheel, failing to renew it with the same creative intensity that made it great in the first place. • “WHAT” REPLACES “WHY”: The rhetoric of success (“We’re successful because we do these specific things”) replaces understanding and insight (“We’re successful because we understand why we do these specific things and under what conditions they would no longer work”). • DECLINE IN LEARNING ORIENTATION: Leaders lose the inquisitiveness and learning orientation that mark those truly great individuals who, no matter how successful they become, maintain a learning curve as steep as when they first began their careers. • DISCOUNTING THE ROLE OF LUCK: Instead of acknowledging that luck and fortuitous events might have played a helpful role, people begin to presume that success is due entirely to the superior qualities of the enterprise and its leadership.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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Stage 2: Undisciplined Pursuit of More

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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Certainly, any enterprise that becomes complacent and refuses to change or innovate will eventually fall. But, and this is the surprising point, the companies in our analysis showed little evidence of complacency when they fell. Overreaching much better explains how the once-invincible self-destruct.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

28

It’s hard to argue that the primary cause of the Wall Street meltdowns of 2008 lay in a lack of drive or ambition; if anything, people went too far—too much risk, too much leverage, too much financial innovation, too much aggressive opportunism, too much growth.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

29

All three companies from Built to Last that fell in this analysis—Merck, Motorola, and HP—pursued outsized growth to their detriment.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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in all our research that those who resisted the pressures to succumb to unsustainable short-term growth delivered better long-term results by Wall Street’s own definition of success, namely cumulative returns to investors.

How the Mighty Fall: And Why Some Companies Never Give In by Jim Collins

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