How the Mighty Fall: Why Some Companies Never Give In — Book Summary
By: Dr. Hashim Alzain
Tags: Failure To Success, Crisis Management, Business Intelligence, Failure, Business Strategy

Some companies. plundered while others thrived & prospered with exceptional growth! Why is that?

Were those who struggled due to the Coronavirus outbreak victims of an unforeseen threat or where there some signs preceding the outbreak of underlying problems that were swept under the rug? Could the impact have been mitigated or outright avoided? Does it depend on the industry, company, or culture?

Every great institution stumbles at some point in its history for various reasons.

All companies, no matter how established or successful, can fail! The crucial questions include, “how do you know if you’re on the verge of a decline”, “in what ways could you avoid it before it happens?”, & “how can you turn things around?”

Most great companies that fall go through 5 stages of decline, which can be detected early & avoided!

The 5 Stages of Decline

Stage 1: Abundance of Success

Stage 2: Undisciplined Pursuit of More

Stage 3: Denial of Risk & Peril

Stage 4: Grasping for Salvation

Stage 5: Resignation to Downfall

In the following paragraphs, each stage will be presented & tethered by the characteristics of each stage to enable self-diagnosis to allow you the opportunity to catch yourself before a crisis unfolds to the point of no return!

Stage 1: Abundance from Success

Abundance refers to excessive pride or arrogance. Stage 1 starts when people become over-confident, and forget the true foundations of their success. People start to take success for granted, lose the hunger for learning, get distracted by non-core areas, and confuse their “Why” & “What!”

Indicators of Stage 1 symptoms:

Arrogance : Success is see as something “Deserved” & not earned. People begin to believe that success breeds more success will by virtue of being successful.

: Success is see as something “Deserved” & not earned. People begin to believe that success breeds more success will by virtue of being successful. Distraction : Loosing focus of your core business by neglecting the primary product/service by being distracted by threats or new opportunities that are not thoroughly evaluated.

: Loosing focus of your core business by neglecting the primary product/service by being distracted by threats or new opportunities that are not thoroughly evaluated. Complacency : Employees lose the curiosity & questioning spirit and thirst for new knowledge, seeking excellence, and going above & beyond the call of duty.

: Employees lose the curiosity & questioning spirit and thirst for new knowledge, seeking excellence, and going above & beyond the call of duty. Entitlement: Instead of recognizing that hard work, practice, preparation, luck, and opportunities that may have played a relevant role in success, where people begin to assume that success is entirely due to the superior qualities of the company & its leadership.

Stage 2: Undisciplined Pursuit of More

The arrogance from Stage 1 leads the company to overstretch, jump into areas where it can’t be great, or pursuing growth without the right people or resources. They become obsessed with growth (to the point of losing focus & discipline), and make the fatal error of growing faster than they can get the right people & resources.

Indicators of Stage 2 symptoms:

Unsustainable Growth : success creates pressure for more growth, paving the way for a vicious cycle of unsustainable growth. This can force people to a breaking point by being unable to generate consistent tactical outcome.

: success creates pressure for more growth, paving the way for a vicious cycle of unsustainable growth. This can force people to a breaking point by being unable to generate consistent tactical outcome. Lack of Discipline : Discontinuous and undisciplined jumps while performing maneuvers that fail to address basic questions.

: Discontinuous and undisciplined jumps while performing maneuvers that fail to address basic questions. Unqualified Personal : Low proportion of right people in key positions that may occur due to loss of right people and/or growth beyond organizational capacity.

: Low proportion of right people in key positions that may occur due to loss of right people and/or growth beyond organizational capacity. Passing the Buck : the organization reacts to higher incurred costs to produce products or deliver services by raising prices and billing, rather than stepping back & evaluating their level of discipline.

: the organization reacts to higher incurred costs to produce products or deliver services by raising prices and billing, rather than stepping back & evaluating their level of discipline. Bureaucracy Overdose : people increasingly think of “positions” rather than “responsibilities”.

: people increasingly think of “positions” rather than “responsibilities”. Succession of Power : difficulties in the transition of leadership, failure in the internal development of excellent leaders, lack of an apprenticeship program, political corporate turbulence, or even chance in the selection of successors can cause chronic problems.

: difficulties in the transition of leadership, failure in the internal development of excellent leaders, lack of an apprenticeship program, political corporate turbulence, or even chance in the selection of successors can cause chronic problems. Conflict of Interest: personal interests trump organizational ones when people in power allocate more to themselves or their followers (more money, privileges, spotlight, and more stewardship) seeking to capitalize as much as possible in the shortest amount of time rather than investing primarily in the development of their people.

Stage 3: Denial of Risk & Peril

At this stage, the company is still delivering results, but there are growing signs of danger underneath the surface. Unfortunately, leaders view the data through colored and filtered lenses & neglect the threats. Leaders play-up the positives, play-down the negatives in a confirmation bias approach, read ambiguous data favorably, and attribute problems to external factors.

Indicators of Stage 3 symptoms:

Checks & Balances : making big bets & aggressive goals without empirical validation, where leaders set bold & audacious goals that are not based on accumulated experience, or worse, that do not stand-up to the facts.

: making big bets & aggressive goals without empirical validation, where leaders set bold & audacious goals that are not based on accumulated experience, or worse, that do not stand-up to the facts. Toxic Culture : there is a noticeable drop in quality and in the amount of dialogue & discussion; there is a shift towards consensus or dictatorial management, rather than a process of argumentation & disagreement followed by a joint effort to execute decisions.

: there is a noticeable drop in quality and in the amount of dialogue & discussion; there is a shift towards consensus or dictatorial management, rather than a process of argumentation & disagreement followed by a joint effort to execute decisions. Outsourcing Guilt : Instead of taking responsibilities for the failures, leaders cast the blame at external factors or other people.

: Instead of taking responsibilities for the failures, leaders cast the blame at external factors or other people. Obsessive Reorganizations : Instead of facing reality, the company constantly reorganizes itself; people are increasingly concerned about internal politics rather than external conditions.

: Instead of facing reality, the company constantly reorganizes itself; people are increasingly concerned about internal politics rather than external conditions. Arrogant Detachment: people in power become arrogant & detached from reality; setting policies in a vacuum, avoiding verification of data, blindly trusting people instead of the process, and indulging in luxurious lounges & offices, which can disconnect executives from everyday life.

Stage 4: Grasping for Salvation

The decline becomes undeniable at this stage, but the organization’s death is not yet imminent. Leaders’ responses at this point determine if the organization sinks or swims. Those who panic & seek quick salvations will accelerate their fall to Stage 5! Revival is only possible with a return to fundamentals at this stage!

Indicators of Stage 4 symptoms:

Silver Bullets : tendency to promote great & drastic actions in an attempt to catalyze a revolutionary breakthrough rapidly & then repeat the tactic several times over then jumping from one program to the other, from a goal to another, in a pattern of chronic inconsistency.

: tendency to promote great & drastic actions in an attempt to catalyze a revolutionary breakthrough rapidly & then repeat the tactic several times over then jumping from one program to the other, from a goal to another, in a pattern of chronic inconsistency. Looking for a Hero : The Board of Directors reacts to threats & difficulties by seeking a charismatic leader or savior from outside the company who has not gone through the ranks to inherently know what needs to be done by going back to basics.

: The Board of Directors reacts to threats & difficulties by seeking a charismatic leader or savior from outside the company who has not gone through the ranks to inherently know what needs to be done by going back to basics. Panic & Hustle : instead of maintaining calm, collective, and discipline; people assume a hasty reactive behavior, which approaches panic mode.

: instead of maintaining calm, collective, and discipline; people assume a hasty reactive behavior, which approaches panic mode. Confusion & Skepticism : the company’s core values have been eroded to the point of becoming irrelevant; the organization has become “just another place to work”; people lose belief in their ability to succeed & win anymore.

: the company’s core values have been eroded to the point of becoming irrelevant; the organization has become “just another place to work”; people lose belief in their ability to succeed & win anymore. Weakening of Financial Strength: Every failed initiative drains resources; cash flow, and financial liquidity begin to decline; the organization undergoes several restructurings; options are increasingly restricted & strategic decisions are increasingly dictated by circumstances.

Stage 5: Resignation to Downfall

This is the path of no return! The longer an institution stays at Stage 4, the more its people try to find magic potion solutions, the faster its downward decline becomes inevitable. Eventually, the financial resources dry-up & people run-out of steam. At this point, there are usually 2 paths a company can take:

(a) Give-up & sell the company.

(b) keep going until it exhausts its options & resources.

Indicators of Stage 5 symptoms:

Do you really need signs of decline by this stage?

Is there a way out?

All companies face ups & downs, and many show signs of the early stages of recovery; even at stages 3 or 4, which means that not every organization experiencing stage 1 reaches stage 5! There is a chance for recovery of symptoms were carefully observed to avoid further decline.

To make sure that your company does not reach the depths of Stage 5, there is still hope! Be open to changing tactics before a crisis strikes, but never forget your fundamental purpose & what made you special in the first place!

It may be necessary to cancel new business ideas that have failed, and even shutdown lucrative operations that took a lot of time, effort, and resources! But whatever you do, never give-up on the initial idea of building a sustainable company.

Success comes when you fall & rise, over & over again, without end! If you prevail or fail, endure or die, it depends more on what you do to yourself rather than what the world does to you! Keep in mind that 60%-80% of what happens to you is a direct outcome of how you respond to external situations that are inflicted upon you; good or bad. Your fate is in your hands!

Conclusion

All great companies stumble at some point! As long as you haven’t fallen too far to run-out of options, you can still refocus & rebuild, one step at a time 😇

Takeaways