‘How the Mighty Fall’ by Jim Collins, published by Harper Collins

It is perhaps a feature of the ‘schadenfreude’ in my make-up that I am more convinced by books and case studies about failure than success. Thus I was less than convinced by Jim Collins first book - ‘From Good to Great’ - and by the all time management best seller ‘In Search of Excellence’ because, however well they are researched, such books can be subject to simplistic post rationalisations, particularly where glory seeking CEOs are supporting the research.

For this reason, I looked forward to Collins’ follow-up and I was not disappointed; certainly it was much more convincing than his earlier work (particularly as that trigger of the financial crisis - Fannie Mae - was one of his ‘great’ companies) and a much easier read too.

The book is built around a framework that is easy to relate to and to associate with your own experiences; it has five stages, summarised as follows:

• Hubris
• Undisciplined pursuit
• Denial
• Grasping for salvation
• Capitulation

The hubris occurs because of arrogance and encourages managers to keep doing the same things even when the world is changing; the top team attribute all the success to their own excellence and do not accept that luck and a favourable environment may have helped. This causes them to believe that everything they do will turn to gold and leads to stage 2 - the chase for growth that triggers expansion into the wrong areas where competitive advantage is less certain. As with his previous book, Collins emphasises discipline above everything else in the achievement of success.

During the third denial stage, the top team tends only to notice positive data and blames uncontrollable factors for any decline; they cannot see the risks and the dangers involved in sustaining their initial success. The grasping for salvation usually takes the form of the recruitment of a high profile CEO or a dramatic major acquisition, often of a company that is in the same kind of trouble. This can work if luck is on their side but more often than not makes the situation worse and leads to the fatal stage five.

The case studies of companies quoted are generally impressive, though it would have been good to see a more international selection, rather than mainly USA. It was interesting to see Hewlett-Packard among the mighty fallen, when the stock of this company (and major MTP client) has risen dramatically since its nadir of a few years ago. Collins explains this by saying that companies can rise again after stage 4 if they have the resources; my interpretation is that sometimes the grasp for salvation doesn’t work but sometimes it does. Collins suggests that HP's acquisition of Compaq did not work but does not go into detail about how the new CEO led such a magnificent recovery.

A good test of a book of this kind is how many times you say to yourself - yes, I can recognise that danger or that feature in my own company or in those that I know well. By that test, it is an excellent work and improves Collins’ reputation as one of leading contemporary management thinkers.