Date post: | 18-Dec-2015 |
Category: |
Documents |
Upload: | clifford-rice |
View: | 219 times |
Download: | 1 times |
How The Mighty Fallby Jim Collins
“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
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 do!”
“All happy families are alike; each unhappy family is unhappy in its own way” Tolstoy “Anna Karenina”
What Do We Learn By Studying The Contrast Between Success and Failure
There are more ways to fall than to become great
The Five Stages of Decline
1. Hubris* Born of Success2. Undisciplined Pursuit of More3. Denial of Risk and Peril4. Grasping for Salvation5. Capitulation to Irrelevance or Death
*Hubris (also hybris) means extreme haughtiness or arrogance. Hubris often indicates a loss of touch with reality and overestimating one's own competence or capabilities, especially for people in positions of power.
Stage 1Hubris Born of Success
Stage 1 kicks in when:
• Companies become arrogant, regarding success as an entitlement
• Neglect of a primary flywheel, failing to renew it with the same creative intensity that made it great in the first place
Stage 1Hubris Born of Success
When WHAT replaces WHY“We are successful because we do these specific things” replaces “We’re successful because we understand why we do these specific things and under what conditions they would no longer work”
Sam Walton: “Wal-Mart does not exist for the aggrandizement of its leaders; it exists for its customers.”
Stage 1Hubris Born of Success
Decline in learning orientation Leaders lose their inquisitiveness
Discounting the role of luck
Stage 1Hubris Born of Success
Confusing BIG with GREAT
Overreaching explains how the once invincible self destruct
Obsession with growth
Ames vs. Wal-MartCircuit City vs. Best BuyRubbermaid; Motorola; Merck
Stage 2UNDISIPLINED PURSUIT OF MORE
Breaking “Packard’s Law” …“Packard’s Law”:
No company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company
DECLINING PROPORTION OF THE RIGHT PEOPLE IN KEY SEATS
Any exceptional enterprise depends first and foremost upon having self managed and self motivated people
The wrong people see themselves as having a job, while the right people see themselves as having responsibilities.
Review APPENDIX #5 “What Makes For The RIGHT PEOPLE in Key Seats?”
THREE QUESTIONS
1. What are the KEY seats on your bus?
2. What % of those seats can you say with confidence are filled with the right person?
3. What are you going to do to improve on that percentage?
Stage 2UNDISIPLINED PURSUIT
OF MOREEasy Cash Erodes Discipline
Increasing price rather than increasing discipline
Bureaucracy Subverts DisciplinePeople start to think in terms of JOBS rather than
RESPONCIBILITIES
Problematic Succession of PowerLeaders who fail the process of succession set their
enterprise on a path to decline
Stage 2UNDISIPLINED PURSUIT OF MORE
PERSONAL INTEREST PLACED ABOVE ORGANIZATIONAL INTERESTS
Chrysler
Stage 3DENIAL OF RISK AND PERIL
AMPLIFYING THE POSITIVE WHILE DISCOUNING THE NEGATIVE
MAKING BIG BETS IN THE FACE OF MOUNTING EVIDENSE TO THE CONTRARY
Motorola (Iridium) vs. Texas Instrument
TAKING RISKS BELOW THE WATER LINE
• Challenger's “O” rings
Stage 3DENIAL OF RISK AND
PERILThree Important Questions To Ask
When Making A Big Decision:
1. What’s the Upside, if events turn out well?
2. What’s the downside, if events go very badly?
3. Can you live with the downside? Truly?
Stage 3DENIAL OF RISK AND PERIL
What Indicators Should Be Most Closely Watched?
• Deterioration in gross margins• Current Debt to Equity Ratios• Customer Loyalty• Decline of the Right People on your Bus• When those in power blame other people or
external factors
Stage 3DENIAL OF RISK AND
PERIL OBSESSIVE REORGANIZATION
People are increasingly obsessed with internal politics rather than external conditions
IMPERIOUS DETATCHMENT
Executive “perks” and fancy surroundings disconnect executives from daily life
Stage 4GRASPING FOR
SALVATIONThe Silver Bullet
Game changing acquisitionsLurching from goal to goal; strategy to strategy; INCONSISTANCY
Grasping for a leader as a saviorHP / Fiorina Vs. IBM / Gerstner
Stage 4GRASPING FOR
SALVATIONPANIC AND DESPERATION
If you want to reverse decline, be rigorous about what NOT to do.BreathCalm yourselfThinkFocusAim Take one shot at a time
Stage 4GRASPING FOR SALVATION
FANFARE; HYPE; NEW PROGRAMS; NEW CULTURE; NEW STRATEGIES; SPENDING A LOT OF TIME TO MOTIVATE PEOPLE
RESULTPeople cannot articulate what the company is all about; core values disintegrate; the organization becomes “just another place to work”; cash and resources get drained
Stage 5CAPITULATION TO
IRRELEVANCE OR DEATH
You Can Be Profitable and Bankrupt
Companies do not die from a lack of earning, they die because if a lack of CASH
Stage 5CAPITULATION TO
IRRELEVANCE OR DEATH
The Two Versions of Stage 51. Giving Up The Fight2. Denial or Hope
Stage 5CAPITULATION TO IRRELEVANCE OR DEATH
Giving Up The Fight
Scott Paper selling to Kimberly-Clark
Denial or Hope Zenith
What Do All These Companies Have In Common?
Xerox Nucor IBM Texas Instrument Pitney Bowes Nordstrom Disney Boeing HP Merck
What Do All These Companies Have In
Common?Level 5 Leaders Appeared.
Mulcahy of Xerox “I am the culture!”
Dick Clark of Merck “ A crisis is a terrible thing to waste”
Gerstner of IBM describe getting the right people in the right seats on his bus was “…my top priority during those first weeks “
APPENDIX
#s 1 and 2 talk about the selection criteria
# 3 … Fanny Mae
#4 … Important to read since it subverts the complacency hypothesis
# 5 … A must read … Right People in Key Seats
THERE IS HOPE
# 6 View 3 companies from DECLINE TO RECOVERY step by step:
Level 5 Leaders First Who, Then What Confront the Brutal Facts Hedgehog Concept Culture of Discipline Flywheel, NOT Doom Loop Clock Building, Not Telling Time Preserve The Core / Stimulate Progress
6A … IBM6B … Nucor6C … Nordstrom