103
US homeowners were prey to
companies such as Lehman, which made
big profits in mortgage-backed securities
in the 2000s. Lehman’s managers ignored
warnings of unrepayable mortgages.
other brands. The once-mighty
company has finally fallen. A
management buy out, merger, or
takeover may save the business
and protect some jobs, but the
company is unlikely to ever
recapture its former glory. Most,
having slipped this far, survive (if
they survive at all) as niche brands
trading on past history.
Return to glory
Decline is, of course, not inevitable
for all successful companies. Those
that reach the later stages of
corporate decline do so because
managers failed to heed the early
warning signs of change or were
irrationally sure of their ability to
“beat the odds.” However, it is
possible to reach stage 4 and
recover. According to Collins,
this involves taking a calm, clear-
headed approach and reaching not
for savior strategies, but for the
basic core values and disciplines
that made the organization great
in the first place.
Steve Jobs did just that at
Apple. In the late 1980s and early
1990s, the company’s management
perceived Apple as vastly superior,
ignored increasing competition
from PC manufacturers, and
expected customers to dismiss
quality and compatibility issues as
“quirks.” After the 1995 release of
Microsoft’s Windows 95 operating
system, Apple fell into decline.
Sales, profits, and Apple’s image
tumbled. BusinessWeek called it
“the fall of an American icon.” The
CEO, Gil Amelio, cut costs,
reorganized the company, and
added a new Internet Services
Group. By 1997, Apple was months
from bankruptcy, as the business
continued to spiral out of control.
A new board assembled and called
for the return of one of the
cofounders—Steve Jobs—as CEO.
Many expected him to respond
with a slew of new products, but
he did the opposite. He shrank the
company to a size that reflected
its niche position, and cut back the
desktop computer models from
15 to one. He ended production of
printers, cut software development,
and moved production abroad. He
redesigned the company around aLIGHTING THE FIRE
simplified product line, sold through
a limited number of outlets. He
stabilized Apple and allowed a
return to its core values—a focus
on innovation and quality—that
later brought iconic products such
as the iMac, iPod, iPhone, and iPad.The pursuit of less
Hubris is not the single cause of
business failure. Even the most
skilled management may fail when
faced with turbulent markets, the
collapse of a key supplier, or other
factors beyond their control (the
2008 credit crunch, for example,
was the final blow for an already
struggling Woolworths). Hubris
may occasionally be a factor in
corporate decline, but failure may
also result from poor business
practice or simply from bad luck.
However, if overconfidence
leads to an “undisciplined pursuit
of more,” the remedy seems to be
the disciplined pursuit of less—a
return to a company’s strategic
roots. Ego, though, is a powerful
thing, and humility is too rarely
the tool managers reach for when
fighting for survival. ■Success comprises in
itself the seeds of its
own decline.
Pierre de Coubertin
French educator (1863 –1937)