Good to Not So Great: How Companies Fail
Having redefined how organizations succeed, bestselling business guru Jim Collins takes on the five factors that prompt decline in his new book, How the Mighty Fall.
Having redefined how organizations go from good to great, bestselling business guru Jim Collins takes on the five roots of decline in his new book, How the Mighty Fall.
Most people think of Jim Collins as a management guru. But he’s not really that. Yes, he speaks and consults for companies about strategy and leadership. And in his new book, How the Mighty Fall, he updates the ideas that gained popularity in Good to Great to take into account the main critique of his work, that some of his exemplary organizations have since fallen on hard times.
But in the past, Collins has been adamant that he is not particularly interested in business or management. That’s just where the data lie. Good to Great used stock market gains to sort successful companies from the great mass of mediocrity.
Collins’ new book addresses the critics of Built to Last and Good to Great who wonder how his conclusions can be valid when Circuit City and Fannie Mae, despite starring roles in those works, have both stumbled.
Collins likes to think of himself as a social scientist. He goes to great lengths to conduct his research with a dispassionate, unbiased rigor that emulates the double-blind purity of scientific research. The studies that produced his two seminal books— Built to Last and Good to Great—and the one that is under way for his next research project (on why some enterprises thrive during turbulent times) are all based on his matched-pair method where Collins and a team of dogged and obsessive researchers comb through business history to find twin companies in the same industries with opposite destinies. By comparing Ames department stores with Wal-Mart, in How the Mighty Fall, or IBM with Hewlett-Packard or Addressograph with Xerox, Collins hopes to eliminate survivorship bias (the tendency to base conclusions on information that is still essentially random) and a host of other data infections from his conclusions.
But Collins really isn’t a social scientist either. The man who has inherited the crowns of both Peter Drucker and Tom Peters is something at once simpler and broader than a business-school professor or a speaking-circuit icon.
Jim Collins is a moral philosopher. The core of his research is about the behaviors and actions that lead to a better life. In Good to Great, Collins felt he had isolated the habits and practices that lead to world-beating success. His conclusions can be summed up in a word: discipline. In fact, the heart of the Good to Great philosophy is that disciplined people, engaged in disciplined thought and taking disciplined action, have the greatest chance at success.
This, in part, explains the extraordinary success of Good to Great, which began in the fall of 2001 as a run-of-the-mill bestseller. But in the summer of 2002, as the cumulative power of the Enron collapse and post-dotcom-bubble recession drove the stock market down to 7500, Collins appeared for an hour on Charlie Rose.
The segment quickly became one of the most requested videos from Rose’s site and the sales of Good to Great began a long, rising march to overtake management classics like In Search of Excellence. (I know this because I was there as Collins’ publisher from 2002 to 2007.)
Unlike most analysts and advocates, Collins lives by the results of his own research. He is discipline personified. Where others keep lists of things to do, for many years Collins kept a personal “stop doing list” of unnecessary, extraneous and distracting activities. He regularly turns down speaking and consulting work that he deems equally distracting. That focus has allowed him to earn a great deal of money while still pursuing his research projects and keeping up a fitness routine that would make a professional athlete tired. You can read some of the details of his rock-climbing and running in this weekend’s New York Times business section profile.
Indeed, Collins’ compulsion to abide by his own conclusions is what gives his work broader resonance. His culture of discipline can be applied to any group endeavor. This is why Good to Great has been so successful among nonprofit organizations, which led Collins to publish a brief “monograph” called Good to Great and the Social Sector, in which he argued that the profit-and-loss mind-set was not the key to success but disciplined action throughout an organization. Or as Collins put it, disciplined profit-making and nonprofit organizations have more in common with each other than they do with the undisciplined entities within their respective categories.
How the Mighty Fall takes this one step further. It addresses the critics of Built to Last and Good to Great who wonder how his conclusions can be valid when Circuit City and Fannie Mae, despite starring roles in those previous works, have both stumbled. Collins simply points to his moral lesson and observes that—like falling off a diet—any organization can lose its discipline.
Which leads us to a much bigger application of Collins’ principles. In How the Mighty Fall, Collins isolates what he sees as the five stages of institutional decline. Hubris Born of Success; Undisciplined Pursuit of More; Denial of Risk and Peril; Grasping for Salvation; and, finally, Capitulation.
Those five stages will seem eerily familiar to even the casual observer of America in the last decade. Although Collins makes no claims to diagnosing the nation’s ills, all the elements are there.
So let me take the liberty and illustrate the obvious examples from my own observations:
Hubris? Check. Alan Greenspan’s prideful faith in his ability to control the economy led to the disastrous Fed policy that created the credit boom.
Undisciplined Pursuit of More: We got that with the Iraq War. Instead of finishing the job in Afghanistan and finding bin Laden, the Bush administration shifted focus to Iraq, which was only meant to be the beginning of a transformation of the Middle East.
Denial of Peril and Risk: Donald Rumsfeld’s pursuit of a new-look military and the undermanned, poorly planned invasion of Iraq fit that nicely.
Grasping for Salvation: Here’s where the moral lessons of Collins’ work become most important. In How the Mighty Fall, much of the focus in actually on how companies in decline reversed the trend. The hero of these sections is Louis Gerstner, who took over a crumbling IBM and returned it to international leadership and vigor.
Gerstner did all of this without a grand vision or a game-changing acquisition. Tellingly, the company’s transformative merger came shortly after Gerstner’s retirement under the leadership of a lifelong IBMer, Sam Palmisano. The lesson Barack Obama and the rest of us might draw from this example is that charismatic leadership can only succeed if it is coupled with determined and dogged focus on fixing problems.
If How the Mighty Fall has anything like the impact of Good to Great, this model of disciplined attention to constant improvement may come to be seen as the guiding principle of economic and social renewal. It might also be easily remembered as the Collins concept.
Marion Maneker is the publisher of ArtMarketMonitor.com. From 2002-2007, he was the publisher of HarperCollins' business books imprint, where he worked with Jim Collins, Louis Gerstner, Jack and Suzy Welch and other authors. He writes about business for Slate's The Big Money.com.