This is not another review on Jim Collins's book. This is about how his book relates to Lean companies.
If you plan to read the book I highly recommend listening to BusinessWeek's John A. Byrne interviewing Jim Collins on the book (audio mp3). back in May of 09.
To be honest, if you listen to the interview you will understand the 5 Stages of decline without even needing to read the book. He covers the major points in under 30 minutes, however the book really does get your brain thinking so I still recommend it!
How does a company know when it's in trouble? Profits may be soaring and customers are happy but at some point a company starts the journey towards failure. The problem is that they might not realize it until it's too late.
The book looks at why companies fail and the 5 stages of decline that they all seem to go through during their demise.
- Stage 1 - Hubris Born of Success
- Stage 2 - Undisciplined Pursuit of More
- Stage 3 - Denial of Risk and Peril
- Stage 4 - Grasping for Salvation
- Stage 5 - Capitulation to Irrelevance or Death
What I realized while reading the book is that Lean businesses don't fit the profile of a company that will go through these stages....unless they stop being Lean.
At any of the first 4 stages a company can reverse course and be saved.
"The critical question is, How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place? Those who grasp for salvation have fallen into Stage 4."
How the Mighty Fall - Jim Collins
Toyota teetered on the edge of Stage 4 however when they shifted their focus back to Lean and back to their customers they began to move out of their decline.
Here is the best part. If your company uses Lean I don't think that these 5 stages will ever apply to you. For everyone else, I suggest you listen to the interview so you can find out if you're in trouble right now and what you need to do to "reverse course"
