How to stop your company doing a Tesco

BUSINESS CLASSIC: Read this book to stop your company going the same way as RBS or Lehman Brothers, says Stefan Stern.

by Stefan Stern
Last Updated: 10 Nov 2014

RBS, Lehman Brothers, Tesco – new names join the list of stumbling titans every year. Jim Collins, who made his name studying firms that were Built to Last or who had gone from Good to Great, turned his mind to failure a few years back, to powerful effect.

Collins charts five stages in the arc of calamity. These are: 'hubris born of success', 'undisciplined pursuit of more', 'denial of risk and peril' (this may come just when you think you have 'cracked it' for good), followed by 'grasping for salvation', and 'capitulation to irrelevance or death'.

How do you avoid falling into this death spiral? Never settle for what you have achieved. Keep asking difficult questions. Do not ban bad news; on the contrary, seek it out. Explore what is going wrong and encourage a spirit of openness. Do not shoot messengers: reward and encourage them.

This may not be enough to save you. But the war on complacency must be fought from and at the top. 'The best leaders we've studied never presume that they've reached ultimate understanding of all the factors that brought them success,' Collins says. 'They retain a somewhat irrational fear that perhaps their success stems from luck.'

How the Mighty Fall – And why some companies never give in, by Jim Collins

Random House Business Books, 2009

Stefan Stern is visiting professor at Cass Business School. Follow him on Twitter: @StefanStern

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