This is a good start, but ultimately doesn't have much insight into why companies die. Venkat Rao opened this discussion with his Gervais Principle series, which is very good: http://www.ribbonfarm.com/2009/10/07/the-gervais-principle-o...

I continued it with my (ongoing) series on my blog (8 parts and counting, will take a while to read): http://michaelochurch.wordpress.com/2013/02/19/gervais-princ...

Companies start out as a risk transfer. Those who can tolerate financial volatility and change and social upheaval (MacLeod Sociopaths) start to trade risk with those who don't want it (MacLeod Losers). The risk-seekers become the entrepreneurs; the risk-averse become workers. This is benign for a while, but as the company becomes stable, the upper class becomes entitled, established, and complacent. They want to keep the perceived risk trade going, but the business is actually de-risked, so now they're just grabbing for unjustified or legacy superiority. They've won, and now they want to stay where they are. In order to keep the risk-transfer between them and the (expectancy-sacrificing) Losers, they have to create a middling buffer class of Clueless. This style of organization becomes resistant to change, systemically underperforming, and bland, but it's extremely stable on its own terms. People don't want the jobs above them enough to break the rules. Losers (who value comfort and stability) see the ranks above them as being harder, riskier, and are happy to stay put. Clueless are oblivious to the Effort Thermocline (the point in an organization where jobs become easier-- but also more political-- with ascending rank instead of harder) and run the organizational day-to-day while oblivious to the agendas of the Sociopaths above them.

The most common end state of this is the organization with the full MacLeod hierarchy: Losers at the bottom, Clueless in the middle, Sociopaths at the top. It's a mature rank culture where position and subordinacy matter more than creative excellence and technical improvement. But why?

The process is complex, but the truth is that this form of organizational corruption was, for a long time, harmless from a business perspective. When you're providing commodity products or services, the MacLeod rank culture works. It does the job.

What's changing (first in software, increasingly in other areas of business) is the convexity switch. Concave work is work on which the difference between excellence and mediocrity is insignificant compared to that between mediocrity and zero. It's "get-it-done" commodity work where creativity isn't necessary or even useful. Convex work is that in which the difference between excellence and mediocrity is huge, and mediocrity is close to (or might be) zero.

The difference between the (winding down) industrial and (soon to come) technological eras is the convexity of the work that the world needs. In the industrial era, most needed work was concave and the hierarchical MacLeod organization worked well. In the technological era in which the commodity work has been given to machines (who do it far more reliably and cheaply than any human) what's left is convex work. Traditional industrial management, though successful for 200 years, just falls down. The reason why is that it's all about reducing variance. For concave work, variation is mostly to the downside, and variance-reduction (the goal of most management) improves expectancy. For concave work, variance is mostly to the upside, and variance-reducing management drives expectancy to zero.