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LEADERSHIP IS A PROCESS OF SOCIAL INFLUENCE, WHICH MAXIMISES THE EFFORTS OF OTHERS TOWARDS THE ACHIEVEMENT OF A SHARED GOAL.

Sunday, August 29, 2010

Why Once Great Companies Fail

Jim Collins, in his book How The Mighty Fall: And Why Some Companies Never Give In spent four years researching how once great companies failed. He developed a five-stage model that describes the stages that each of these companies went though. They are:

1. Hubris born of success. Great companies can become insulated by success. People become arrogant, regarding success as an entitlement, and they lose sight of what made them successful in the first place.

2. Undisciplined pursuit of more. Companies stray from what led them to greatness in the first place and make undisciplined moves into areas where they can’t succeed.

3. Denial of risk and peril. Leaders discount negative data, amplify positive data, and post a positive spin on ambiguous data. They start to blame external factors rather than accept responsibility.

4. Grasping for salvation. They start looking for that “silver bullet” solution.

5. Capitulation to irrelevance or death. Turn out the lights, the fat lady is singing.

Collin’s recent work confirms that organisations don’t fail because of a lack of technical, functional, or business skills – it’s always because of some kind of collective destructive mindset and behaviours.

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