Why is discipline in management important? Can discipline save a business in decline?
In How the Mighty Fall, Jim Collins has a few suggestions to help a floundering company thrive and succeed. One of his prescriptions is to uphold disciplined management practices so you can evaluate big business decisions with a clear head.
Continue reading for more on why discipline in management can be a lifesaver for businesses.
How to Be a Disciplined Manager
Collins stresses the importance of adhering to time-tested management principles as soon as you realize your company is in a state of decline. He recommends reviewing the work of experts like Peter F. Drucker and Michael Porter to brush up on the importance of discipline in management.
(Shortform note: Collins doesn’t go into great detail about management principles, instead citing authors who’ve written classic books on the subject. Peter F. Drucker is the author of many management books, including The Effective Executive, where he writes that managing yourself leads to individual and organizational success. This entails managing your time, focusing on just a few key tasks, making a unique contribution, maximizing your strengths, and making sound decisions. Michael Porter is a Harvard Business School professor who wrote Competitive Strategy, which covers advice for increasing a company’s profit potential, anticipating competitors’ strategies, and outperforming competitors.)
One proven management principle that Collins emphasizes is calmly and rationally evaluating business decisions. He writes that you should carefully weigh risks and only bet on something if it isn’t big enough to sink the company if things don’t work out. This means not going all-in on an idea that may turn things around quickly while exposing the company to catastrophic risks.
(Shortform note: In Great by Choice, Collins goes into more detail about how enduring companies safeguard against risk. One method is the “bullets before cannonballs” approach, wherein a company fires “bullets” first, testing to see where they land. These bullets can come in the form of a new product, service, technology, process, or acquisition, as long as they have three characteristics: They don’t cost much, they don’t expose the company to much risk, and they don’t disrupt the company. Once a company has gathered convincing data from its bullets, it concentrates its firepower into a calibrated cannonball and launches that in the direction where bullets have shown the greatest potential.)
Collins says that strong companies should be disciplined as well. This means staying the course and keeping an eye out for the warning signs of deterioration: The earlier you recognize that the company is in trouble, the sooner you can get back on course.
| Are Discipline and Vigilance All a Company Needs to Survive? In Great by Choice, Collins similarly posits that successful companies have: 1) fanatic discipline, which means adhering consistently to their values, long-term goals, standards, and methods, and 2) productive paranoia, which means considering every kind of nightmare scenario so they can prepare for the worst. However, some argue that there are some scenarios you simply can’t foresee. Nassim Nicholas Taleb calls these “Black Swans”—extremely unpredictable events that have massive impacts on society. In The Black Swan, he cites the fall of the Berlin Wall, the creation of the Internet, and the 2008 financial crisis as examples of these events. He offers some advice for dealing with uncertainty, including preparing for the widest range of contingencies rather than predicting specific events. He explains that even though we can’t predict Black Swans, we can predict their effects, and thus safeguard against those. Similar to Taleb, the authors of Lead From the Future write that no one can predict the future. Thus, they suggest future-proofing your business through visionary planning—changing your focus from short-term concerns to the future you want to see five to 10 years from now. This process encourages you to think outside your company’s established processes and approaches and to reinvent your business, whether in whole or in part. Finally, in addition to discipline, vigilance, and planning, your company should build up its resilience. Some experts say that for an enterprise to be resilient, it should have backup systems, diverse employees with varied ways of thinking, a segmented structure so that the failure of one segment won’t cause the entire organization to crumble, and alignment of its goals with those of wider-ranging systems (such as the economy and society). |
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Here's what you'll find in our full How the Mighty Fall summary:
- How formidable companies can lose their footing and fall
- The five phases that lead to a company's downfall
- How to rechart your course if you're facing the threat of failure
