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Jim Collins, How the Mighty Fall – Day 2

My apologies. I’ve been reading the book, but I haven’t been posting. I’ve got some catching up to do.

We covered Stage 1, Hubris Born of Success, 3 weeks ago. It was a great discussion about how past success can make a company arrogant to the point they get careless. “We can do no wrong.” This in turn can cause the company to neglect the very things that made them successful in the first place. Usually, a company finds success by stringing together a series of good decisions and initiatives. Seldom does success come in one fell swoop. It is that ongoing series of good decisions that  companies begin to stray from that is brought on by Hubris of Success. Jim first cited Circuit City as an example of how Hubris began with their CEO in an interview back in late 1998. 10 years later, Circuit City folded.

Once a company has built their successful flywheel, that flywheel must be maintained. Extending the company’s business lines can be done, but care must be taken to maintain the primary flywheel. In Circuit City’s case, they ran unopposed for years and soon found their market share eroding to the upstart Best Buy. Circuit City failed to adjust accordingly.

Jim listed several other compelling examples of the Hubris of Success including A&P with Wal-Mart as the comparison company.

Jim’s Markers for Stage 1, Hubris of Success

  1. Success Entritlement, Arrogance

  2. Neglect of a Primary Flywheel

  3. “What” Replaces “Why”

  4. Decline in Learning Orientation

  5. Discounting the Role of Luck

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