How The Mighty Fall: And Why Some Companies Never Give In
by Jim Collins
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Book Summary Information
Author: Jim CollinsEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2009-05-19
ISBN: 0977326411
Number of pages: 240
Publisher: JimCollins
Product features:
- ISBN13: 9780977326419
- Condition: New
- Notes: BRAND NEW FROM PUBLISHER! 100% Satisfaction Guarantee. Tracking provided on most orders. Buy with Confidence! Millions of books sold!
Book Reviews of How The Mighty Fall: And Why Some Companies Never Give In
Book Review: How To Diagnose Decline
Summary: 5 Stars
Collins' latest book is based on a four-year study. Examples occur from both industry and major states. Historical examples include, of course, Rome, Spain, and Great Britain. More recent examples from industry include U.S. and Bethlehem Steel, G.M., Chrysler, Bank of America (1998), Motorola, Fannie Mae, Circuit City, and every company (except G.E.) that was in the DJIA at the turn of the last century.
Collins' research led him to posit five stages of decline that he contends help early diagnosis and cure: 1: Hubris Born of Success. 2: Undisciplined Pursuit of More. 3: Denial of Risk and Peril. 4: Grasping for Salvation. 5: Capitulation to Irrelevance or Death. The "bad news," however, is that you can be fully into stage 3 or even stage 4 before the malady is recognized.
My experience includes years within a government organization that was protected from competition by focusing on poor patients that no other provider wanted. Thus, I found it interesting to review their experience in parallel with Collins' analysis.
Phase I: Maricopa County Health Services (MCDHS - Phoenix, AZ.) management was arrogant in the early 1990s, and saw no need to change - they were on a "special mission" and had a monopoly doing it. "Success" was explained by their "caring attitude," and especially competent doctors - with no attempt to measure either. Those who wanted to discuss improvement (eg. lower costs, measured and improved service) were tolerated, but slowly driven out by lack of interest. MCDHS' used these years to lobby successfully for control of indigent patient treatment, and transfer as many as possible to its system; however, there was no long range thinking about where things were headed.
Phase II: Meanwhile, the county grew and grew and grew, and suddenly it became obvious to most that centralized provision of hospital, emergency, and specialty care no longer made sense - especially for indigent patients cared for in outlying nursing homes. MCDHS, however, did not respond - claiming scale economies were key to their key contribution to the community. (Actually, the physicians did not want to travel out to outlying areas, the County did not want to pay other providers to provide more conveniently located care, and "competing" or reducing the monopoly on poor patients were unthinkable.) Or, to use Collins' words - management and physicians were using the organization primarily as a vehicle to increase their own personal success -- more wealth, more fame, more power.
Phase III: The Arizona Legislature, however, propelled by other health care providers and those altruistically interested in improving care for the poor, decided to act. They enacted Medicaid for Arizona, and forced the County Hospital to compete for patient business based on customer satisfaction and cost (to the state).
Maricopa County Health Services, however, saw no problem - it "knew" its services were by far the cheapest, and patients said they loved the system (when compared to no service at all). Yet, it was obvious to any warm body that there were problems - long delays for specialty care, E.R. and urgent care, and scandalous transportation expenses and delays in providing care for indigent nursing home patients from areas away from the center of Phoenix. No conversations took place with major insurers or the State's Medicaid program on how to significantly increase business, collections efforts continued to be minimal ("they can't pay") and known computer-system collection problems were not addressed, and no benchmarking took place.
After the health system lost thousands of patients in the initial round of competitive allocation, panic set in. Legislators were contacted for help (little or none provided), and a few personnel were laid off. A major, major mistake was to assume competitors' could not beat MCDHS' (average) prices, not realizing that competitors could look at this as added business and bid on marginal, not average costs. Worse yet, in a sudden frenzy to "improve service," MCDHS' average costs rose substantially and became higher than those major competitors. (Even worse, internal measures of service quality and customer satisfaction did not improve.)
The key question, per Collins, is whether management sought to restore the organization's competitiveness - eg. lowering costs, and improving access to service in outlying areas (contracting with other providers), OR did they lurch for quick salvation? Examples of the latter, per Collins, include charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution, a hoped-for blockbuster product, a "game-changing" acquisition, or any number of other silver-bullet solutions.
At this point, years after Medicaid came to Arizona, MCDHS was limping, but still unworried. The "best" patients, from a reimbursement point of view, were those indigents covered by Medicare, and MCDHS still had a monopoly on them. Money no longer freely flowed, but it wasn't that hard to come by either - until the Legislature added nursing home, Medicare-covered patients into the competitive bidding process via its Medicaid program.
MCDHS then went with six attempts at quick salvation. 1)The first was to focus again on the unwanted - illegal aliens not covered by Arizona's Medicaid. 2)The second was an attempt to "sell" the system - however, so many constraints were placed on potential buyers (to preserve its "mission"), and its competitive positioning offered so little that no bidders were interested. 3)The third was to contract out management - hoping that "private sector leadership" would cure all its problems, failing to realize again that their competitive positioning and self-imposed mission made financial success impossible. 4)The fourth was to ask for a special tax levy to support their "special work." (The public focus was on "saving" its excellent Burn Unit - recently in the news for saving a severely burned police officer, that could have been moved to another nearby hospital.) This passed, but was not enough for MCDHS' ambitions. 5)The fifth was to bring in a political personage to manage the organization, one that hopefully could wheedle more money out of the Legislature. (No success there either.) 6)The sixth was blame its problems on an outdated hospital facility (millions had been spent on other projects) and to assert that the new downtown Phoenix U. of Arizona College of Medicine campus needed an adjacent teaching hospital (like MCHDS), despite two others only 3 miles away - and that MCDHS would relocate if given the money to rebuild a NEW facility. (No progress there, either.)
These Stage Four behaviors (per Collins) have continued for about a decade after the first five years of denial when Medicaid came to Arizona, and allowed MCDHS to become increasingly irrelevant to the community and to slide into Stage Five as its finances deterioriated. Success now became defined downward as simply "survival," - just like Collins predicts.
And that's how MCDHS, once a leader in health care provision in the Phoenix area, has become irrelevant and a financial drag to the community - just like Collins tells of others in "How the Mighty Fall." A good book, illustrated by a sad story.
Summary of How The Mighty Fall: And Why Some Companies Never Give In
Decline can be avoided. Decline can be detected. Decline can be reversed.
Amidst the desolate landscape of fallen great companies, Jim Collins began to wonder: How do the mighty fall? Can decline be detected early and avoided? How far can a company fall before the path toward doom becomes inevitable and unshakable? How can companies reverse course?
In How the Mighty Fall, Collins confronts these questions, offering leaders the well-founded hope that they can learn how to stave off decline and, if they find themselves falling, reverse their course. Collins' research project?more than four years in duration?uncovered five step-wise stages of decline:
Stage 1: Hubris Born of SuccessStage 2: Undisciplined Pursuit of More
Stage 3: Denial of Risk and Peril
Stage 4: Grasping for Salvation
Stage 5: Capitulation to Irrelevance or Death
By understanding these stages of decline, leaders can substantially reduce their chances of falling all the way to the bottom. Great companies can stumble, badly, and recover.
Every institution, no matter how great, is vulnerable to decline. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall and most eventually do. But, as Collins' research emphasizes, some companies do indeed recover?in some cases, coming back even stronger?even after having crashed into the depths of Stage 4.
Decline, it turns out, is largely self-inflicted, and the path to recovery lies largely within our own hands. We are not imprisoned by our circumstances, our history, or even our staggering defeats along the way. As long as we never get entirely knocked out of the game, hope always remains. The mighty can fall, but they can often rise again.
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