Monday, June 01, 2009

Why do companies fail? GM; Citibank; Enron?

Let's face it, as the Greeks said: "those whom the gods want humbled, they first give 40 years of prosperity!" Many companies which look successful on the outside are hollow shells. GM had the seeds of failure within it 30 years ago. Citibank, which would also be in Chapter 11 were it not for a government bailout was in the same situation. Yet a few companies, such as Apple Computer or P&G have revitalized themselves. As Jim Collins in his latest book, How the Mighty Fall, lays out five stages of failure:

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

In retrospect, each is capable of being reversed, yet this rarely happens. Even when warnings are loud and clear, they are rarely listened to.

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