Jim Collins: How Mighty Companies Fall


Jim Collins: How Mighty Companies Fall

Circuit City. Lehman Brothers. Fannie Mae. The economic crisis has devastated a slew of companies that once ranked among the country’s most admired. Best-selling author and corporate researcher Jim Collins spent five years studying the decline of great businesses for his fourth book, How the Mighty Fall: And Why Some Companies Never Give In. He spoke with TIME about finding lessons amid the corporate wreckage, his choice for “entrepreneur of the decade” and why the rocky business climate may be here to stay.

Your timing was close to perfect — you wrapped up your research just as some iconic businesses were falling to earth. What did you learn about corporate mortality

There are three things worth keeping in mind about any great enterprise that eventually falls. Number one, the seeds of decline are usually in place long before decline becomes visible — like a disease where you look strong on the outside but you’re already ill on the inside. Second, we tend to think decline happens because of complacency — people just sitting still, not being aggressive or innovating. But we found there’s often tremendous change and innovation leading right up to the point of fall. It’s overreaching: undisciplined growth, undisciplined risk-taking. Finally, I was surprised by how far you really can fall and still come back — it’s one of the most wonderful things to come from this work. The tendency for many of us might be to give up too early.

Some of the fallen companies you analyze, like Circuit City and Fannie Mae, are companies whose strengths you’d previously praised. What happened

What happened in all the great companies that fell is they made a shift from a humble drive to an arrogance, the belief they somehow magically deserved all that success — “We’re just really better than everybody else, and we always will be.” The great irony is that leads to the undisciplined pursuit of more, and it’s very hard to preserve your values and your basic model if you grow too fast.

You write about a lot of failed business leaders, but your tone is usually sympathetic — they were well-intentioned, but simply didn’t get the job done. That seems out of step with the anger flowing toward corporate America these days. Are there villains in executive suites, too

In the companies we’ve studied we did not find villains. I think that’s very important. These were smart, well-intentioned people trying to make the right call. To me, that’s even more sobering: hardworking people who are often full of tremendous imagination and energy can still bring enterprises down. I know villains are more fun to write about, but it’s not what we found.

Most of your readers aren’t executives running large corporations. What do your books offer ordinary workers

I’ve never really seen our work as being about business. These are human questions — how do you take something mediocre and make it exceptional Why do some people become great in a world that’s full of tremendous volatility, uncertainty and rapid change That’s a human question that we happen to address by looking through business, which we can do because of the rigor of the data.

This is one of the most treacherous and unpredictable economic climates we’ve ever seen. Are we headed out of it any time soon

The period of time from 1950 to 2000 was a combination of prosperity and relative stability. I think the odds are very high we regain prosperity, but very low that we regain that combination. I think our likely scenario is tremendous prosperity with tremendous ambiguity and instability. That means those who know how to manage in that environment will do very well, and those who don’t may disappear.

You’ve studied business leaders spanning most of American history. The entrepreneur of the decade, you say, is Teach for America founder Wendy Kopp. Why

Wendy Kopp didn’t sit back and say, “How can I find something that will channel my passion” She built something. The ultimate entrepreneurial act is creating a movement. Wendy Kopp is on a 50-year mission to transform education in this country. And she’s doing it by creating an army of people who have been in classrooms, who can say, “I know firsthand what the problems are.” She’s demonstrating the idea that entrepreneurship is about an idea more than just an organization.

You say one key to being successful today is developing “a ferocious understanding of what you’re not going to do.” What do you mean

As I got into my research, I saw that those who were really effective made use of not just a “to-do” list but a “stop-doing” list. I set up a time almost every day where I turn off my cell phone and do not get on [the Internet]. It’s a pocket of quietude. I also leave white space on my calendar, roughly three days every two weeks. Nothing can be scheduled during white-space time. I try to create bubbles of tranquil time for hard thinking. It can also be a day where you get up at 6 and do a bunch of writing and then go rock-climbing for three hours.

You refer to rock-climbing quite a bit, calling it one of your three passions, besides your work and your marriage. How is it useful for understanding business

It’s been one of my great classrooms. Gravity does not care if you didn’t get enough sleep — you’ve got to be on your game. El Capitan [a perilous rock formation in Yosemite National Park] is unforgiving, and gravity is unforgiving. That’s what we’re studying — how you build something great in an environment that’s unpredictable, uncertain and ultimately unforgiving.

See business bucking the recession.

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