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Jim Collins – How the Mighty Fall – Day 4

Our leadership team will be wrapping up the book early next week, but this week, I’ll cover Stage 3 – Denial of Risk and Peril.

Jim leads out by describing  Motorola’s Iridium satellite phone project that cost the company several billion dollars. Jim’s point being that in any stage of the project prior to launch, Motorola could have cancelled saving the company billions. Although it would still come with a cost, it would only have been a fraction what came later.

In another case, Texas Instruments made the investment in voice recognition chips. Over a 20 year period, TI continued to invest and grow their technology knowledge until they were able to make a “big bet” on the technology.

Jim draws the comparison of these 2 companies as opposing gambles. Motorola made their bet born of “Hubris of Success” while TI did not. Emphasizing the principle of not taking risk below the waterline.

Jim then goes on to discuss the NASA Challenger catastrophe. I learned quite a bit about the challenger issue and how even the best organizations with the “best of the best” can make bad decisions with poor leadership.

Jims comparison of Leadership-Team Dynamics: On the way up versus on the way down. I don’t to steal all of Jim’s thunder, so I’ll only share a few.

  1. (down) People shield those in power from grim facts, fearful of penalty and criticism for shining light on the harsh realities vs. (up) People bring forth unpleasant facts – “come here, look, man, this is ugly” – to be discussed: leaders never criticize those who bring forth harsh realities.

  2. (down) People assert a strong opinions without providing data, evidence or a solid argument vs. (up) people bring data, evidence, logic, and solid arguments to the discussion.

  3. (down) team members seek as much credit as possible for themselves yet do not enjoy the confidence and admiration of their peers vs. (up) each team member credits other people for success yet enjoys the confidence and admiration of his or her peers.

Jim shares a few more good comparisons.

Markers for Stage 3

  1. Amplify the positive, discount the negative.

  2. Big bets and bold goals without empirical validation

  3. Incurring huge downside risk based on ambiguous data

  4. Erosion of healthy team dynamics

  5. Externalizing blame

  6. Obsessive reorganizations

  7. Imperious Detachement

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