NC State of Business

When I say "declining" I don't mean, are you making less money now than you were last week or last month or last year. That's not unusual these days. I mean, have you reached that dangerous point in the life of your company where your inability to adapt to new circumstances is about to doom your business to second-rate status, irrelevancy, or even outright failure?

In Business Week, Jim Collins presented the five stages of decline from his book, How the Mighty Fall (and Why Some Companies Never Give In). He derived the stages by examining "a substantial amount of data collected from prior research studies, consisting of more than 6,000 years of combined corporate history," and listed them as

1. Hubris Born of Success
2. Undisciplined Pursuit of More
3. Denial of Risk And Peril
4. Grasping For Salvation
5. Capitulation to Irrelevance or Death

I saw one of the warning signs of Stage 1 during my Air Force career: the attitude among top leaders that their ideas and decisions must be good because the system had so far recognized and rewarded them for previous ideas and decisions. If you've ever been confronted by a new idea and downplayed its importance because it's different from what has worked in the past, you may be in that first stage of decline.

Collins writes that "Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence -- or both." In other words, your track record of success convinces you that you are going to succeed no matter what you do or how you do it, which can lead you either to do something foolish or to do something in a foolish manner that would otherwise be productive.

Stage 3 reminds me of what I used to teach in CPR classes: that if your first thought upon having chest pain that radiates down the left arm, accompanied by difficult breathing and the feeling that an elephant is sitting on your chest, is, "I can't be having a heart attack," then you probably are. Denial of a heart attack is (or was -- my CPR-instructing days were a few years ago) considered a symptom of a heart attack. So if you've been denying that your company has problems or may be in decline, start looking for the problems that you don't recognize.

The same way drowning people will grab frantically at whatever they think will keep them afloat, Collins says companies in Stage 4 -- having finally recognized their peril -- will latch onto the first thing they think will save them. He writes,

Common "saviors" include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution, a hoped-for blockbuster product, a "game-changing" acquisition, or any number of other silver-bullet solutions. Initial results from taking dramatic action may appear positive, but they do not last.

It's the idea that you have to do something, not because it's time for action and you're about to miss an opportunity, but because you're afraid of the criticism you'll face for doing nothing. Are you in this stage?

Is Stage 5 inevitable? I don't think so, and neither does Collins:

The signature of the truly great vs. the merely successful is not the absence of difficulty. It's the ability to come back from setbacks, even cataclysmic catastrophes, stronger than before. Great nations can decline and recover. Great companies can fall and recover. Great social institutions can fall and recover. And great individuals can fall and recover. As long as you never get entirely knocked out of the game, there remains hope.

So, honest assessment: is your business declining? If so, are you going to let it "go gentle into that good night," or are you going to fight for its survival?

I hope you decide to fight. Let us know if we can help.

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You can read Mr. Collins' full article at this link.

Image "Main Street #6 (Superior Appliances) by kevindooley, from Flickr, under Creative Commons license.