by Jim Collins
Stage 2 in, 152
stock price of, 52
success-contrast candidates, 140
and Vioxx, 51–53
vision of, 53
Merck, George II, 53, 54
Merrill Lynch, xiv, 76
missionary zeal, 148
Morton Thiokol, 71–73
motivation, 160
Motorola, 8, 14, 128, 133
arrogant neglect in, 29–30
cultural shift in, 28–29, 152
denial of risk, 65–68
founding culture of, 28, 54
and General Instruments, 92–93
IBM contrast with, 140, 152
and Iridium, 66–68, 70, 152
jobs lost in, 29
patent productivity in, 47
Six Sigma at, 28, 152
Stage 1 in, 27–30
Stage 2 in, 152
Stage 4 in, 157
StarTAC cell phone, 28–29
stock returns in, 30
success-contrast candidates, 140
TI contrast with, 92–94, 140, 141
and undisciplined growth, 54
and Zenith, 140, 141
Mount Everest, 66, 118–19
Mulcahy, Anne, 113–16
NASA, 71–73
NationsBank, 7, 14
negative, discounting, 81
negative inflection, 131
neglect, arrogant, 29–36
Nero, Roman Emperor, 59
Newell Corporation, 49, 158
Newsweek, 115
Nordstrom, 128, 132
core concept of, 175, 176–77
culture of discipline in, 175–76, 176
customer service in, 174, 175, 176–77
decline and recovery case, 116, 117, 173–77, 173
inverted-pyramid structure in, 174
level 5 leadership in, 174
right people in key seats, 174–75
rule book of, 176
Nordstrom, Blake W., 173, 174–76
Norton, 128, 131
Nucor, 128, 133
acquisitions of, 172
benchmarking in, 172
confront brutal facts, 169–70
consistency, 171
core values, 171–72
culture of discipline, 170–71
customer focus of, 172
decline and recovery case, 116, 117, 167–72, 167
hedgehog concept, 170
level 5 leadership in, 168–69
right people in key seats, 169
Office of Federal Housing Enterprise Oversight (OFHEO), 146
overreaching, 39, 46–50, 53, 61, 68
Pacific Southwest Airlines, 17
Packard, David, 54, 86
Packard’s Law, breaking, 55–58
Pandit, Vikram, 144–45
panic, 96–99, 100
passion, 160
Pearlman, Jerry, 109–10
performance divergence, 137–38
performance fit, 137
Peters, Thomas J., and Waterman, Robert H., Jr., In Search of Excellence, 118
Pfizer, 128, 132, 140
Philip Morris, 128, 132
Picasso, Pablo, 36
Pitney Bowes, 116, 128, 141
Platt, Lew, 83–84, 151
Porras, Jerry, 148, 179
Porter, Michael E., 118
positive, amplification of, 81
power:
and personal interests above organizational interests, 64
succession of, see succession
primary flywheel (core business), 32–34, 35, 43, 182
Procter & Gamble (P&G), 25, 79, 105, 128, 132, 153
public corporations, pressure on, 54
Radio Shack, 139
RCA, 108
recovery, 25, 113–18, 120
reorganization, obsessive, 79–80, 81, 91, 105, 158
research process, 13–19
candidacy criterion, 129–31
companies in recovery, 14–15
contrast methodology, 135
correlations vs. causes, 16–17
diagnostic tool, 179
evidence table, 149–58
exclusions, 132–33, 139
Fannie Mae and other financial meltdowns (2008), 15
historical analysis, 17–18
matched-pair contrast method, 120, 135–41
results of, 19–23
selection criteria, 127–33
success comparison set, 15–16, 16
success-contrast selection criteria, 135–41
responsibilities, 57, 160
restructuring, chronic, 49, 80, 101, 105
revolution, with fanfare, 100
risk taking, 71–76
on ambiguous data, 81
“waterline” principle of, 74
R.J. Reynolds, 128, 131
RJR Nabisco, 95
rock-climbing, 66, 75, 96
Roman Empire, fall of, 59
Rubbermaid, 14, 23, 128, 133, 140, 141
jobs lost in, 49, 158
overreaching, 47–49
restructuring, 49
Stage 2 in, 152–53
Stage 4 in, 157–58
salvation, grasping for, 22, 83–101, 83
A&P, 155
Addressograph, 97–99, 155–56
Ames, 156
Bank of America, 156
behaviors that exemplify/reverse, 90
chronic restructuring, 101
Circuit City, 156–57
confusion and cynicism, 101
HP, 83–85, 157
hype before results, 100
IBM, 85–88, 95–96
initial upswing, then disappointments, 100
markers, 100–101
Motorola, 157
outside savior, 100
panic and desperation, 96–99, 100
revolution with fanfare, 100
Rubbermaid, 157–58
Scott Paper, 158
search for silver bullet, 88–96, 100
survival instinct, 96
Zenith, 158
Sanford, Shade H., 66
San Francisco earthquake, 5
Sarbanes-Oxley Act (2002), 146
Sawyer, Diane, 85
Schering-Plough, 140
Schulze, Richard, 33–34
Schumpeter, Joseph, 118
Scott Paper, 14, 47, 128, 133, 135
capitulation of, 111
competition against, 79, 105
debt-to-equity ratio, 105
and Kimberly-Clark, 106, 141, 158
obsessive reorganization in, 79–80, 91, 105, 158
Stage 2 in, 153
Stage 4 in, 158
Seafirst Corp., 10
self-managed employees, 56, 159–60
Shackleton, Ernest, 115
share price vs. value, 54
Silo, 128, 131
silver bullets, searching for, 22, 88–96, 100
Six Sigma, 28, 152
size fit, 136
Sony Corporation, 128, 133
Southwest Airlines, 17
Speak & Spell, 68–69
spin, positive, 22
stakeholder engagement, 76
Stalin, Joseph, 121
StarTAC cell phone, 28–29
Stockdale Paradox, 181
strategic thinking, 117
strategy, bold, 22
success:
comparison set, 15–16, 16
deserving, 38–39, 43
discounting, 38
hubris born of, see hubris
study of, 24–25
underlying causes of, 38
Wall Street’s definition of, 54
succession:
at HP, 85, 87–88
at IBM, 85–88, 165
modes of turmoil in, 60–61
problematic, 58–61, 63–64
Sun Microsystems, 93, 139
survival instinct, 96
team dynamics, erosion of, 81
Teledyne, 128, 133
Templeton, Richard
, 94
Texas Instrumnts (TI), 128, 132
and DSP technology, 68–70
HP contrast with, 139
Motorola contrast with, 92–94, 140, 141
recovery of, 116
succession in, 93–94
Thoman, Richard, 114
3M, 25, 48, 128, 132
Titanic (film), 144
Tolstoy, Leo, Anna Karenina, 19
transformation, radical, 22
Tufte, Edward, Visual Explanations, 72
turbulence, 118–19
UCLA Bruins, 4
undisciplined pursuit of more, 21, 45–64, 45
Addressograph, 149
Ames, 45–46, 150
Bank of America, 150
breaking Packard’s Law, 55–58
bureaucracy, 63
Circuit City, 150–51
declining percentage of key people, 55, 56, 63
discontinuous leaps, 48, 63
easy cash vs. cost discipline, 63
HP, 54, 55, 84, 151
markers, 63–64
Merck, 50–54, 152
Motorola, 152
obsession with growth, 50–54, 63
overreaching, 46–50, 61
personal interests above organizational interests, 64
problematic succession of power, 58–61, 63–64
Rubbermaid, 152–53
Scott Paper, 153
Zenith, 153
Upjohn, 128, 131
upswing, initial, 100
USA Today, 85, 87
Vagelos, Roy, 50
value:
creating, 165
share price vs., 54
values, core, 55, 101, 111, 159, 166, 171–72, 182
Vaughan, Diane, The Challenger Launch Decision, 72
Verifone, 151
Vioxx, 51–53
Vogue, 85
vulnerability, 8, 147, 148
Walgreens, 128, 132
Wall Street Journal, 10
Wal-Mart, 128, 132
Ames contrast with, 15–16, 16, 39–42, 46, 141
Circuit City contrast with, 139
core values of, 42, 46
Walsh, William, The Rise and Decline of The Great Atlantic & Pacific Tea Company, 37
Walt Disney, 116, 128, 133
Walton, Sam, 40–42
Warner-Lambert, 128, 132
warning signs, 76
Washington Mutual, xiv
Washington Post, 52
Waterman, Robert H., Jr., 118
Watson, Thomas J., Jr., 162
Watson, Thomas J., Sr., 162
wealth creation, 83
Wells Fargo, 128, 132, 141, 156
Westinghouse, 128, 133
what and why, confusing, 36–42, 43
Williams, Elisa, 94
“window and mirror” maturity, 160
Winfrey, Oprah, 85
W. L. Gore & Associates, 74
Wooden, John, 4
World War II, 121–23
Wright, Joseph, 108–9
Wurtzel, Alan, 31
Wyeth Corporation, 140
Xerox Corporation, 97, 98, 113–16, 149
Yahoo!, 84
Zander, Ed, 93
Zayre, 45–46, 150, 156
Zenith Corporation, 8, 14, 23, 128, 133, 135
in bankruptcy, 110
blaming others, 79, 109
core business of, 32
Data Systems Division, 109–10
debt-to-equity, 108, 109
failure to innovate, 47
historical analysis of, 18
jobs lost in, 111
Motorola contrast with, 140, 141
in Stage 1, 108
in Stage 2, 108–9, 153
in Stage 3, 109
in Stage 4, 109–10, 158
in Stage 5, 107–8, 111
succession in, 108–9, 110
Acknowledgments
I owe a debt of gratitude to many people for their hand in helping this work come to life.
I thank my ChimpWorks home team for their role in this project and for their ongoing effort to keep the system running: Susan Barlow Toll for her extensive fact checking and citations, Michael Lane for his superb editing and conceptual contributions, Taffee Hightower for her happy binders and management of the critical-reader process, Judi Dunckley for her making sure everything balances (and keeping us all very afraid), Vicki Mosur Osgood for her years of service turning the ChimpWorks flywheel, and Kathy Worland-Turner for her cheerful effectiveness serving as my right arm so that I can focus on creative work and teaching.
I thank members of my research team for their contributions to this project: Robyn Bitner for her analyses and fact checking, Kyle Blackmer for his work on Merck, Brad Caldwell for his work on HP and IBM, Lauren Cujé for her work on Nordstrom, Terrence Cummings for his many projects and his contribution to the study-set selection, Todd Driver for his work on financial analyses and IBM and his fact checking, Ryan Hall for his study-set selection analyses and collection of key data, Lorilee Linfield for her work on Best Buy and Circuit City and her fact checking, Catherine Patterson for her analyses, Matthew Unangst for his study-set selection analyses and work on Xerox, and Nathaniel (Natty) Zola for ongoing analysis and criticism.
I thank my editor, Deborah Knox, for her hundreds of hours of dedicated work to challenge, edit, fact check, polish, and improve the manuscript through dozens of iterations, and for her extensive examination into Merck and Fannie Mae.
I thank my critical readers, whose intelligent critiques helped sharpen the concepts and writing immeasurably. Thank you to Bill Achtmeyer, Jerry Belle, Ed Betof, Ann S. Bowers, William P. Buchanan, Scott Cederberg, Dr. Alan G. Chute, Ken Coleman, Alan J. Dabbiere, Brian Deevy, Jeff Donnelly, Salvatore D. Fazzolari, Andrew Feiler, Claudio Fernández-Aráoz, Christopher Forman, Dick Frost, Denis Godcharles, Wayne H. Gross, Eric Hagen, Pamela Hemann, Liz Heron, John B. Hess, Frank Hightower, Phil Hodgkinson, Kimberley Hollingsworth Taylor, John A. Johnson, Alan Khazei, Betina Koski, Kevin McGarvey, Thomas W. Morris, Tom Nelson, Michael Prouting, Bobby Rao, Gloria A. Regalbuto Bentley, PhD, Jim Reid, Neville Richardson, Kevin Rumon, Kim Sanchez Rael, Dirk Schlimm, Roy Spence, Frank Sullivan, Kevin Taweel, Jean Taylor, Tom Tierney, Alan Webber, Jim Weddle, and Walter Wong. I thank Frank Sullivan also for suggesting the title How the Mighty Fall.
I thank Betty Grebe and Carol Krismann at the University of Colorado William M. White Business Library for their able and enthusiastic assistance, helping all my research assistants with their death marches. I thank the Center for Research in Securities Pricing (CRSP) at the University of Chicago for its quality data and excellent service. I thank Dennis Bale and Lori Drawbaugh for their professionalism and for the roving office that allows me to keep doing creative work while in transit.
I thank Frances Hesselbein and Dick Cavanagh for the invitation to speak at West Point that inspired me to dive deeply into this topic. I thank Breck England for coming up with the term “well-founded hope” as a way to describe our research findings. I thank Bob Buford for his continued insistence that I pursue questions that ignite my curiosity and for his belief that less is more. I thank Alan Wurtzel and David Maxwell for their helpful perspectives on the stages framework, and for their continued friendship and belief in our work.
I thank Peter Ginsberg for his years of support, challenge, and professionalism, and for his extraordinary ability to come up with publishing ideas that have never been tried before—and to make them work. I thank Hollis Heimbouch for her editorial instincts, her advocacy, and her willingness to join me in an adventure.
I thank Janet Brockett for her design genius and friendship.
I thank Caryn Marooney for her extraordinary wisdom and creative perspective.
I thank my friend and research colleague Morten T. Hansen, who continues to inspire and challenge me by providing critical feedback and helpful guidance.
I thank my Personal Band of Brothers for their ongoing support and ins
piration, and my #1 brother, Michael Collins.
Finally, and always, I thank Joanne Ernst, my life partner and best friend, for inspiring me, for being my most severe critic, and for her unyielding belief in me. After twenty-nine years, which I consider to be a nice start to an enduring marriage, I still feel lucky every single day.
About the Author
JIM COLLINS is a student of companies—great ones, good ones, weak ones, failed ones—from young start-ups to venerable sesquicentenarians. The author of the national bestseller Good to Great and coauthor of Built to Last, he serves as a teacher to leaders throughout the corporate and social sectors. His work has been featured in Fortune, BusinessWeek, The Economist, USA Today, and Harvard Business Review. You can find more information about Jim and his work at his e-teaching site, www.jimcollins.com.
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Copyright
Copyright © 2009 by Itzy.
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