I recently read Jim Collins’ new book, “How the Mighty Fall.” This is an outstanding book that takes a detailed look at companies that were great companies as defined by Collins’ previous book “Good to Great”, and fell to irrelevance. Collins defines a great company as one that had to significantly outperform the market for at least 15 years in a row. On average, the companies that Collins studied as great companies outperformed the general stock market by at least 6.9 times.
Collins found that these great companies had one thing in common…they followed 3 simple principles;
1. They determined what they could do where they were “best in class” or best in the world at
2. Because they were best in class, they were passionate about what they did
3. They understood what drove their economic engine (i.e., they understood how they could take their strengths and their passion and build a profitable company around these two principles) and they took a disciplined approach at doing so.
The first two principles sound very similar to the Strength Zone concept….discover what your strengths are and do your best to always leverage your strengths in everything that you do. Good to Great is kind of like a corporate Strength Zone!
As stated above, the book, “How the Mighty Fall”, deals with a number of the companies featured in Good to Great that took their eye off the ball, stopped following the three principles and fell to irrelevance or disappeared entirely. Collins determined that there are five stages of decline listed below. Take a look at these and see if you can name a company that falls into any of the stages.