Name: How the Mighty Fall
Rating: 4.5 (104 reviews)
Author: Jim Collins

What’s in it for me? Learn how businesses come back from decline.

Have you ever wondered why some big companies are there one minute and gone the next? Or why brands you saw all over the place not too long ago seem to have vanished into thin air? Cell phone manufacturer Nokia and photography company Kodak spring to mind. Just where have they all gone?

How the Mighty Fall explains why some companies go from massive success to crushing failure. The author argues that the failure of successful businesses isn’t due to the changing economic climate or bad luck, but to their leaders who steer them in the wrong direction and exacerbate crises through mismanagement.

The book is based on years of research on successful and not-so-successful businesses. It follows the best-selling works Built to Last and Good to Great, and shows you what type of leader a business needs, and what kind it definitely needs to avoid.

In these blinks, you’ll learn

why nobody has a Nokia anymore,
where it’s OK to make a hole in a boat and
why one company tried to launch a product a day!

Every company and institution, no matter how great, is vulnerable to decline.

In the first few centuries after the birth of Christ, the Roman Empire dominated Europe and the Middle East. It was massive, stretching from Portugal in the West to Iran in the East. Among those alive back then, there would have been no doubt: this gigantic, all-powerful empire would last forever. Alas, it did not: within just a few centuries it was gone, banished to the trash heap of history.

The decline of the Roman Empire shows that, no matter how vast or successful something is, it will always be in danger of collapsing.

But what causes decline? What can make a huge entity come crashing down?

The decline of a large organization is always self-inflicted: collapse isn’t the fault of outside factors or bad luck; it’s the direct result of mismanagement.

Remember how everybody had a Nokia phone 15 years ago?

In the years since, the company has gone from being the market leader to having a mere 3 percent market share. Why?

While their competitors, such as Apple and Samsung, were researching and innovating in smartphone technology, Nokia’s management decided to innovate in other, less profitable areas. Thus, when smartphones became popular, Nokia was completely out of the race.

At this point, it’s important to point out that we’re not talking about laziness. Successful firms very rarely collapse because they fail to act: usually it’s because they act in the wrong way. In fact, failing firms often show very high levels of innovation and energy.

Bank of America is a great example of this: in the 1980s, the bank was eager to update outmoded practices. They hired a young, energetic CEO, they closed huge swathes of loss-making branches and they ended the practice of hiring people for life. Yet throughout this period, the company posted some of the most spectacular losses in banking history.

After experiencing great success, companies become arrogant and tend to succumb to hubris.

You may or may not be familiar with Greek tragedy.

In Greek tragedies, we often find the heroes in trouble after succumbing to hubris, i.e., they’re so overly confident that they strive for too much and end up failing.

Companies can lose their focus if they chase unsustainable levels of innovation and growth.

Why do successful companies fail? Is it out of laziness?

Actually, most of them fail for the complete opposite reason: they try to be too innovative and grow too quickly.

As the first visible signs of decline occur, companies choose to ignore it or blame others.

What do we do when someone criticizes our heroes? Do we take their comments into consideration? Or do we ignore their criticisms and continue to believe our heroes are perfect? Usually, when someone tells us something we don’t want to hear, we shut out their views and put our rose-colored glasses on.

Companies can also fall into this trap. And in their case, ignoring valid criticisms can lead them to gigantic mistakes.

Facing the catastrophe, companies tend to take risky, sweeping changes or simply give up.

If you’ve ever been on a sinking boat, you know that the natural response to crisis is panic. It’s also the response most business leaders have when decline sets in. Which, in turn, can lead them to make rushed decisions that only deepen the crisis.

One such response is to search for the silver bullet, or one sweeping solution that will solve all problems.

Since decline is always self-inflicted, it’s important to work on improving your attitude.

So far we’ve seen what leaders do wrong to put their businesses in danger. Now we’ll look at what leaders should do to ensure that this never happens.

We’ll start with the most important factor for making the best decisions: having the right attitude.

If you find yourself falling, stay calm and disciplined instead of taking massive risks.

Taking risks is something all business leaders will have to contemplate in their careers, especially when their business is struggling. There’s nothing wrong with adopting a risky strategy as long as you remember that it might fail.

When thinking about taking a risky strategy, you need to ask yourself, “What will happen if things go wrong? Will the consequences severely hurt the company or will we be able to recover?”

With the right determination and willpower, even fallen companies can recover.

When you’re in deep trouble and it seems like there’s no way out, the natural temptation is to give up and walk away. Companies in dire straits often feel this way, too, seeing surrender as the only option to their plight.

But there’s no reason to react this way: a firm can turn things around until that fat lady starts singing. That is: if they act the right way.

How the Mighty Fall summary