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“A crisis is a terrible thing to waste.” — Dick Clark, former CEO at Merck

Jim Collins initially thought that How the Mighty Fall was a simple magazine article. An opportunity to rest his mind from six years of research working on his next book following Good to Great. I’m glad he didn’t try to fit this interim book into an article! However, if you’re looking for an article excerpt, Business Week did a decent job.

I love the way Jim Collins organizes information. His well-researched principles are so palatable and practical, mostly because he lets the story stay at the steering wheel. How the Mighty Fall is a darker book of sorts, spending the majority of its pages studying the five stages of decline, outlined here.

Stage 1: Hubris born of success
- Success entitlement, arrogance
- Neglect of a primary flywheel
- “What” replaces “why”
- Decline in learning orientation
- Discounting the role of luck

Stage 2: Undisciplined pursuit of more
- Unsustainable quest for growth, confusing big with great
- Undisciplined continuous leaps
- Declining proportion of right people in key seats
- Easy cash erodes cost discipline
- Bureaucracy subverts discipline
- Problematic succession of power
- PErsonal interests placed above organizational interests

Stage 3: Denial of risk and peril
- Amplify the positive, discount the negative
- Big bets and bold goals without empirical validation
- Incurring huge downside risk based on ambiguous data
- Erosion of healthy team dynamics
- Externalizing blame
- Obsessive reorganizations

Stage 4: Grasping for salvation
- A series of silver bullets
- Grasping for a leader-as-savior
- Panic and haste
- Radical change and “revolution” with fanfare
- Hype preceded results
- Initial upswing followed by disappointments

Stage 5: Capitulation to irrelevance or death

Whenever I read Collins’ stuff, I am always drawn to his repeated admonishment to stay true to your core values and principles.

“Discontinuous leaps into arenas for which you have no burning passion is undisciplined. Taking action inconsistent with your core values is undisciplined. Launching headlong into activities that do not fit with your economic or resource engine is undisciplined. To neglect your core business while you leap after exciting new adventures is undisciplined.”

“If you’re struggling with the tension between continuing your commitment to what made you successful and living in fear about what comes next,” says Collins, “ask yourself two questions:”

1. Does your primary flywheel face inevitable demise within the next five to ten years due to forces outside your control—will it become impossible for it to remain best in the world with a robust economic engine?

2. Have you lost passion for your primary flywheel?

“The #1 ingredient for a culture of discipline,” says Collins, “depends first and foremost upon having self-managed and self-motivated people.”

“The best leaders we’ve studied had a peculiar genius for seeing themselves as not all that important, recognizing the need to build an executive team and to craft a culture based on core values that do not depend upon a single heroic leader.”

“Reorganizations and restructurings can create a false sense that you’re actually doing something productive.”

At the conclusion of How the Mighty Fall, Collins channels the spirit of Winston Churchill and his famous “never give in” commencement speech from 1941. “We all need beacons of light as we struggle with the inevitable setbacks of life and work,” says Collins. “For me, that light has often come from studying [Churchill].”

Never give in. Be willing to change tactics, but never give up your core purpose. Be willing to kill failed business ideas, even to shutter big operations you’ve been in for a long time, but never give up on the idea of building a great company. Be willing to evolve into an entirely different portfolio of activities, even to the point of zero overlap with what you do today, but never give up on the principles that define your culture. Be willing to embrace the inevitability of creative destruction, but never give up on the discipline to create your own future. Be willing to embrace loss, to endure pain, to temporarily lose freedoms, but never give up faith in the ability to prevail. Be willing to form alliances with former adversaries, to accept necessary compromise, but never—ever—give up your core values.

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