Tuesday, June 02, 2009

How Companies Fail

Jim Collins, after his two very successful investigations into how one sets up companies to survive long term and how companies achieve greatness in their respective industries, has now turned his attention to the not-so-good, ones that fail, and ones that are poised to fail. His intervention could not be more timely. As I write this post, General Motors will file for bankruptcy in the United States, an almost unthinkably big company to go down. The book isn't out yet and will only be released in Britain later this week, but the essential ideas are available through video and excerpts at this time. I thought it to be appropriate and useful to review the core argument in the context of my own experience.

So, here is the backstory, which I am sure you will find as interesting as I did.


I found it particularly interesting as I have seen companies going through these stages. Indeed, some companies are set up to fail - they were never going to make it from the very start - but then there are others who achieved significance and deep capabilities and even leadership in their industry/ geography, but yet they end up setting themselves up for failure.

A graphical representation of the five stages of decline is here:



I am sure it will be interesting for you to hear Jim Collins talking further about the process of the slipping slope, which is narrated in the two videos below.

I shall also capture the contrasts between teams on the way up and teams on the way down, here:
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Teams on the way down: People shield those in power from unpleasant facts, fearful of penalties and criticism for shining light on the rough realities
Teams on the way up: People bring forth grim facts—"Come here and look, man, this is ugly"—to be discussed; leaders never criticize those who bring forth harsh realities
Teams on the way down: People assert strong opinions without providing data, evidence, or a solid argument
Teams on the way up: People bring data, evidence, logic, and solid arguments to the discussion
Teams on the way down: The team leader has a very low questions-to-statements ratio, avoiding critical input and/or allowing sloppy reasoning and unsupported opinions
Teams on the way up: The team leader employs a Socratic style, using a high questions-to-statements ratio, challenging people, and pushing for penetrating insights
Teams on the way down: Team members acquiesce to a decision but don't unify to make the decision successful—or worse, undermine it after the fact
Teams on the way up: Team members unify behind a decision once made, then work to make the decision succeed, even if they vigorously disagreed with it
Teams on the way down: Team members seek as much credit as possible for themselves, yet do not enjoy the confidence and admiration of their peers
Teams on the way up: Each team member credits other people for success, yet enjoys the confidence and admiration of his or her peers
Teams on the way down: Team members argue to look smart or to further their own interests rather than argue to find the best answers to support the overall cause
Teams on the way up: Team members argue and debate, not to improve their personal position but to find the best answers to support the overall cause
Teams on the way down: The team conducts "autopsies with blame," seeking culprits rather than wisdom
Teams on the way up: The team conducts "autopsies without blame," mining wisdom from painful experiences
Teams on the way down: Team members often fail to deliver exceptional results and blame other people or outside factors for setbacks, mistakes, and failures
Teams on the way up: Each team member delivers exceptional results, yet in the event of a setback each accepts full responsibility and learns from mistakes
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And, finally, this is a good slideshow to look at on what we can learn from failure.

1 comment:

Anonymous said...

Thanks for the writeup, very informative and very much appreciated.

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