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How the Mighty Fall

There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall and most eventually do.

Stage 1 Decline

Hubris Born of Success (excessive pride that brings down a hero)

• Success Entitlement, Arrogance
• Neglect of a Primary Flywheel
• Rhetoric of Success (we win because we do these things) replaces Understanding and Insight (we win because we understand WHY we do these specific things and under what conditions they would no longer work.
• Decline in Learning Orientation
• Discount the Role of Luck

Stage 2: Undisciplined Pursuit of More

• Unsustainable quest for growth, confusing big with great.
• Success leads to Growth Pressure leads to Vicious Cycle of Expectations
• Undisciplined discontinuous leaps that don’t align with core values, can’t be best in the world, don’t drive the economic engine.
• Declining proportion of people in key seats.
• Easy cash erodes cost discipline.
• Bureaucracy subverts discipline (people think of jobs rather than responsibilities).
• Problematic success of power (succession planning).
• Personal interests placed above organizational interests.

Stage 3: Denial of Risk and Peril

• Tendency to Amplify the Positive, Discount the Negative
• Big Bets and Bold Goals without Empirical Validation (no accumulated experience, or fly in the face of facts)
• Incurring huge downside risk based on ambiguous data
• Erosion of Healthy team dynamics
• Externalizing blame
• Obsessive reorganizations
• Imperious detachment (symbols and perks of power)

Stage 4: Grasping for Salvation

• A series of silver bullets
• Grasping for a leader-as-a-savior (big negative correlation between building great companies and going outside for a CEO)
• Panic and haste
• Radical change and “revolution” with fanfare
• Hype precedes results
• Initial upswing followed by disappointments
• Confusion and cynicism
• Chronic restructuring and erosion of financial health

Stage 5: Capitulation to Irrelevance or Death

Collins, Jim. 2009. How the Mighty Fall: And Why Some Companies Never Give In. Wiley

Connections

• Everything dies eventually. history-and-biology
• Scale Laws and Business
• The entropy tells us that weakly managed systems become more disorganized and less focused over time.