The Five Stages of Decline
You might feel like Superman, but kryptonite is real.
Success goes sideways when leaders feel invincible.
5 companies that were great once:
- Sears & Roebuck
- Blockbuster (Blockbuster has 1 store in Bend, Oregon. That’s a decline from 9,000.)
- Howard Johnson’s Restaurants (From 1000 locations to none.)
Twentieth century car brands that declined and died:
- Pontiac (No more GTOs!!)
- Hummer (Discontinued in 2011 – resurrected in 2021)
Business that trends up always trends down.
5 stages of decline:
The decline of great companies often occurs in five stages. Jim Collins
#1. Hubris born of success.
Hubris is taking credit for success that has more to do with good fortune than skill.
Those who ‘have’ answers don’t seek answers.
#2. Undisciplined pursuit of more.
Fast growth often results in mediocrity. High standards are easy to maintain when growth is manageable. But when growth is an untamed mustang, you lose sight of small compromises.
Excellence requires more diligence after success.
#3. Denial of risk and peril.
During stage 3, “… leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data.” Jim Collins.
Denial uses success to diminish threat and belittle alternatives.
#4. Grasping for salvation.
When the inevitable decline comes, and lean years ALWAYS come, you choose between quick fixes or returning to the core beliefs and practices that made you great to begin with.
Grasping for salvation often expresses itself by seeking charismatic leaders to save the day.
#5. Capitulation to irrelevance or death.
“In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future.” (How the Mighty Fall)
What causes good leaders and great organizations to become mediocre?
How might leaders anticipate future decline without losing momentum today?
Note: The five stages of decline are listed in, How the Mighty Fall, by Jim Collins.
Great insight. I am currently working in a situation where we have grown too quickly (#2) and moving quickly to stage 3. Thank you for clarifying the stages. I can share this with our leadership to see if we can avoid #4!
Thanks Michael. Growth is one of the hardest things to manage. Maybe Jim Collins’ book will be useful.
Anything written by Jim Collins is worth reading, and “How the Mighty Fall” is no exception. A businessman friend of mine used to say “Declaring success would be my downfall.” as he always worked to carefully nurture and improve his small company. Looking back, I won’t use the “S” word, but I see what he built and I believe he accomplished his goals.
Thanks Jim. Constant vigilance comes to mind along with the danger of declaring victory when it’s really a journey.
I have a white board in my office and every Monday morning I put a “quote of the week” on that board. Often they are from you! I will be using “those who have answers, don’t seek answers”. This one hit me in a profound way because I struggle with being “that guy” who wants to know it all.
Thanks for the daily word punch to the face that makes me look in mirror and question myself…
Thanks for your transparency, Ryan. Learning to not have the answer is harder than having the answer.
PS It’s an honor to be on your whiteboard.
I too plan to post this on my white board.
Some of these great companies couldn’t find the alternate route when there core business became irrelevant and number 5 has been too common but Toys R US was pure victim to venture capitalism. It was still a good concept but not good enough to overcome the mountain of debt.
We are in different times as of late. I see different tactics in play. Employees pulling together to make it work in order to keep a company open. This is ownership and good people want to feel this sense of belonging, a sense of success as a team… “we got this” momentum!
We’ve been isolated and torn down, now we are ready to reconnect and build up.
Im with Melrose2016 on people pulling together, “developing Ownership” is a route that many have taken and still failed, or reinvented themselves. The plateau of everyone on board is crucial, yet still falls on who controls what? “Ride the wave” until it dissipates, then “find another wave”.