Success is a funny thing. It makes you feel invincible, like you've finally cracked the code and the world is just yours for the taking. But if you’ve spent any time reading Jim Collins, you know that’s exactly when the trouble starts.
In his book How the Mighty Fall, Collins isn't looking at how to become great. He’s already done that with Good to Great. This time, he’s performing an autopsy. He wanted to know how iconic companies—the ones we thought would last forever—suddenly end up in the corporate graveyard. It turns out, decline is almost always self-inflicted. It’s not just "bad luck" or a "bad economy." It’s a series of specific, avoidable choices that lead a giant off a cliff.
The Five Stages of the Death Spiral
Collins identifies five distinct stages of decline. Honestly, what’s most terrifying is that companies can look absolutely fantastic on the outside while they are rotting away in the first three stages. By the time the world notices something is wrong, the company is often already gasping for air in Stage 4.
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Stage 1: Hubris Born of Success
This is where the arrogance kicks in. You’re successful, so you assume you deserve to be. You stop asking why you’re successful and just start believing your own hype. The "rhetoric of success" replaces actual insight. Instead of saying, "We’re successful because we understand these specific market conditions," leaders start saying, "We’re successful because we’re us."
When you lose that "Socrates with a spreadsheet" mindset—where you’re constantly questioning your assumptions—you've already stepped onto the greased flagpole.
Stage 2: Undisciplined Pursuit of More
Hubris leads naturally to Stage 2. If you're "great," you can do anything, right? This is where companies start chasing growth for the sake of growth. They lurch into new markets where they have no business being. They grow faster than they can find the "right people" to fill key seats.
Collins references Packard’s Law: no company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth. If you ignore this, you're toast.
Stage 3: Denial of Risk and Peril
Internal warning signs start popping up like red flags in a minefield. But in Stage 3, leaders develop a magical ability to explain them away. "It’s just a cyclical downturn," they say. Or, "The data is skewed."
They amplify positive news and discount the negative. The culture of "brutal honesty" that defines great companies vanishes. Instead of facing facts, the people in power start blaming external factors—the economy, the government, "unfair" competition—rather than taking responsibility.
Stage 4: Grasping for Salvation
Now the decline is visible to everyone. The stock price is tanking, and panic sets in. What do leaders do? They go for the "silver bullet."
- A charismatic "savior" CEO from the outside.
- A massive, "game-changing" acquisition.
- A radical, untested strategy overhaul.
- A "cultural revolution" that sounds great in a memo but means nothing.
The problem? These are quick fixes. They might provide a temporary bump, but they don't fix the underlying rot. It’s like putting a fresh coat of paint on a house with a crumbling foundation.
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Stage 5: Capitulation to Irrelevance or Death
The money runs out. The spirit breaks. Leaders realize that no matter how many silver bullets they fire, the beast isn't dying—the company is. At this point, the organization either gets sold for scraps, atrophies into insignificance, or just flat-out dies.
Real-World Victims: When the Giants Stumbled
Collins didn't just pull these stages out of thin air. He used a research team to analyze companies like Motorola, Circuit City, and Ames Department Stores.
Take A&P (The Great Atlantic & Pacific Tea Company). They were the Walmart of their day. But they got stuck in Stage 1 and 2, refusing to believe that customers wanted bigger, brighter supermarkets. They stuck to their old, cramped store models because "that's what made us great." By the time they tried to change, they were grasping for salvation in a market that had already passed them by.
Then there’s Motorola. They dominated the analog cell phone market. When digital came around, they basically ignored the risk (Stage 3). They were so convinced of their own technical superiority that they let the transition pass them by. They eventually tried to "grasp for salvation" with the RAZR, which was a hit for a minute, but it wasn't a sustainable strategy.
Can You Come Back from the Brink?
Here is the good news: decline is reversible. Unless you’ve hit Stage 5, there is a way out. But it’s not flashy. It’s actually kinda boring.
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Recovery doesn't come from a new "visionary" or a $10 billion merger. It comes from getting back to the basics. You have to go back to the disciplined management and the "flywheel" effect that made you successful in the first place. You have to stop looking for silver bullets and start looking for lead bullets—the small, incremental, disciplined actions that build momentum over time.
How to Tell if You're in Trouble Right Now
If you're leading a team or a company, you've got to be paranoid. Use these diagnostic questions to see if the rot is setting in:
- Are we losing the "Why"? Do we understand the mechanics of our success, or are we just following a checklist?
- Is the "Right People" ratio dropping? Are we filling seats just to keep up with growth, even if the people aren't a fit for our culture?
- Is the dialogue "Low-Query"? Are leaders making more statements than asking questions? In a declining company, the "questions-to-statements" ratio usually drops through the floor.
- Are we obsessed with "The New Thing"? If you're more excited about a potential new venture than you are about perfecting your core business, you might be in Stage 2.
Moving Forward: Your Action Plan
Don't wait for a crisis to start acting like a "Good to Great" company again. If you feel the pull of hubris, or if you're currently in a stage of denial, here is what you need to do:
- Conduct a "Brutal Facts" Audit: Get your team in a room and ask, "What are we pretending not to know?" Force people to bring data that contradicts your current strategy.
- Re-evaluate Your "Key Seats": Look at the most critical roles in your organization. Are they filled by people who take responsibility, or people who see their roles as just "jobs"?
- Ditch the Silver Bullets: If you're looking for one big move to "save" the year, stop. Focus on the 1% improvements that will get your flywheel spinning again.
- Study Failure, Not Just Success: It’s easy to copy what winners do. It’s much more valuable to understand exactly how the losers messed up so you don't repeat the same patterns.
The "mighty" don't fall because they are doomed by fate. They fall because they stop doing the things that made them mighty. Stay disciplined, stay curious, and for heaven's sake, don't start believing your own press releases.