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Home Profitune RSS Business Management the 5 Stages of Decline in Business Management

The author of one of the all-time Great Business Books (Good to Great) has done it again. Jim Collins has now looked at how and why even the best companies can crash and burn, and he provides some early warning signs.  In 5 Stages of Decline.

Collins names the stages and warns that most victims don’t know they have The Decline Disease until Stage 4 – when it’s very late, and when the therapy is very scary!

As a quick “check up from the neck up”, here are Collins’ 5 Stages of Decline:

  1. Hubris: We’ve made it!  (Symptoms:  Arrogance, disconnect from values, denial of the role of luck, believing your own press.  Cure:  “Retaining a somewhat irrational fear that perhaps your success stems in large part from fortuitous circumstances, so as to stay focused on what got you here in the first place.”)
  2. Undisciplined Pursuit of More: We're so great, we can do anything! (Symptoms:  Pursuit of more scale, more growth, more acclaim, more of whatever those in power see as "success."  Straying into areas where you can’t be “world’s best at” and/or for which you have no burning passion. Cure:  Stick to what you are passionate about AND can be world’s best at and don’t do anything else; renew your vows to your Values regularly and use them as a compass.)
  3. Denial of Risk and Peril: Titannicitis - We’re so big even God couldn’t sink us. (Symptoms:  Explaining away negative or disturbing data by attributing it to outside forces or sources.  Window dressing. Risk taking on a scale that could endanger the organisation.    Cure:  Paranoia about negative information and the automatic assumption that “it’s us; it’s what we’re doing”.
  4. Grasping for Salvation: We’re sinking!  (Symptoms:  Sharp visible declines in key performance indicators; reactive behaviour; grasping at straws; seeking saviours; radical transformation.  Cure:  Go back to what made you great in the first place – your key values – and translate them into the current context.  Be rigorous about what not to do.)
  5. Capitulation to Irrelevance or Death: We’re going down for the third time!  (Symptoms: Grasping for silver bullets; repeated false starts; market irrelevance; bankruptcy.  Cure: Abandoning ‘survival’ as a strategy and accepting ‘rebirth’ as the only way out; retaining only your values and seeking new relevance to your market. Stoicism and preparedness to never give up.)

Case Studies

  • Xerox, with $19 billion in debt and only $100 million in cash, came back from Stage 4.
  • IBM rebuilt itself from Stage 4, as did Disney.
  • Chrysler did the same under Iacocca the first time around, so it can be done but there is no guarantee of permanence – it’s a continuous process of maintenance and renewal.

For a fuller treatment of Collins’ book, see this link.

PS The relevance of this information is directly proportional to your success of the moment – it you feel you’ve “made it” then the information is truly vital for you right now!

PPS Chrysler makes an interesting study as I write this article. Having come back from the dead in the ‘80s, they promptly returned to making the types of cars they wanted to (the massive V10 Viper is almost the epitome of this fact), instead of making the types of cars their marketplace wanted, and that the world needed.  Chrysler were facing bankruptcy as this went to press.



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