How the Mighty Fall: And Why Some Companies Never Give In?

How the Mighty Fall: And Why Some Companies Never Give In? By Jim Collins Random House Business, London, 2009; Pages: 240; Price: ?750 ISBN: 9781847940421 The financial crisis of 2008 saw several giant corporations opting for Chapter 1 1 (Liquidation), especially in the financial and real estate sectors, in a surprisingly accelerated manner, slowly engulfing other sectors and spreading to become a worldwide phenomenon. The background for How the Mighty Fall cannot be more appropriate. Exploring the dark and grim sides of a firm's performance, it is downfall, the book tries to address two important contextual questions: "What are the factors which led to the fall of great companies?" and more significantly, "How the managers and leaders can identify the downslide early enough and what actions, if any, can be taken to prevent it?" The book had its origin when the author was having a discussion with the leaders from military, business and social domains. He was perplexed by the enquiry from one of the participants, a CEO of a latge company: "How will you recognize symptoms of downslide if you are at the pinnacle and success blinds the early signals of decline?" In this book, the author, using comparative case study method, tries to identify the patterns in the downfall of once great companies, and delineate stages of decline, comparing the phenomenon with a cancer creeping into a healthy body, initially asymptomatic but potentially lethal. He posits prescriptive guidelines to leaders and managers about suspecting and identifying the downward slide, and taking appropriate actions to prevent it. The book is addressed, specifically to managers and leaders, who strive to identify the signs of impending collapse befote it becomes apparent and to take precise preventive and corrective actions, important for sustaining their company's competitive advantage and strong performance. The book is entirely based on the theoretical paradigm of "strategic choice" (Child, 1972) rather than the "environmental determinism" of population ecology model (Hannan and Freeman, 1977). The author reiterates his contention, similar to his earlier works, namely "Good to great" and "Built to last", that performance of a firm absolutely depends upon strategic directions adopted by the leaders, discounting the population ecologists' deterministic view that it is the "environment" that "selects" and "retains" the "variations" produced by strategic actions. The preferred paradigm of strategic choice is evident as the author quotes, "Whether you prevail or fail, endure or die, depends more on what you do yourself than on what the world does to you." The conclusions drawn by the author could thus be colored with their overemphasis on strategic choice. This is especially important as "Environmental determinism" (population ecology) model and strategic choice act at different levels of analysis, the former at the population level and the latter at the firm level. The author mined out companies from the databases used for "Built to last" (Collins and Porras, 1994) and "Good to great" (Collins, 2001) and then selected 1 1 companies from the original list of 60, which fit the pre-decided criteria of downfall. Companies studied included A&P Addressograph, Ames, Bank of America, Circuit City, HP Merck, Motorola, Rubbermaid, Scott Paper and Zenith. The list includes stalwart firms from various domains including technology, commodity, finance, pharmaceutical industry, etc. Similarly, 11 successful companies were selected to serve as a contrast, in the same period, on the basis of similarities in parameters like industry, size, performance, age, etc. The corresponding contrasting firms were Kroger, Pitney Bowes, Wal-Mart, Wells Fargo, Best Buy, IBM, Johnson and Johnson, Texas Instruments, None Qualified, Kimberly-Clark and Motorola. Major firm collapses, like Fannie Mae and other financial institutions, which got excluded from the study due to selection criteria, are discussed separately in the appendix. …