Book SummaryHow the Mighty Fall, by Jim Collins

1-Page Summary1-Page Book Summary of How the Mighty Fall

How do formidable companies lose their footing and fall into irrelevance—or even cease to exist? And how can other companies avoid the same fate? These are the questions Jim Collins seeks to answer in How the Mighty Fall. Backed by years of research into once-mighty companies, Collins contends there are five phases leading to a company’s downfall: overconfidence, overreaching, ignoring the signs, overcorrecting, and surrendering.

While the book is a warning to companies that have grown complacent, it also serves as motivation for those in the throes of decline. Collins says that **by staying vigilant about the threat of failure, you can rechart your course, keep pushing forward, and ensure your company’s...

How the Mighty Fall Summary The Five Phases Leading to a Company’s Downfall

Collins analyzes companies’ performance through the lens of failure rather than success, arguing that understanding failure helps companies avoid it. To determine the causes of decline, he takes pairs of companies in the same industry, analyzes what the failed companies did differently from the successful ones, and determines what the failed companies had in common.

(Shortform note: Collins employs the opposite method in his other books, such as Built to Last and Good to Great—in those books, while he also takes pairs of companies in the same industry and compares them, he instead maps out what the successful companies have in common. Some argue that learning from success is more effective than learning from failure—in Rework, Jason Fried and David Heinemeier Hansson write that understanding failure only shows what we shouldn’t do, not what we should.)

Collins writes that companies don’t fail overnight. Instead,...

How the Mighty Fall Summary How to Turn Things Around

Collins contends that if a company still has a worthy goal and the potential to make a meaningful impact, it should commit to putting in the time and effort required to recover and rise. Collins emphasizes that reversing decline isn’t about looking for a miracle cure (such as a savior CEO or a revolutionary new product) but about playing a long, steady game.

(Shortform note: In Great by Choice, Collins writes that successful companies focus on consistent performance, in good times and bad. He calls this the 20 Mile March, which comes from the concept of reaching a destination by traveling 20 miles a day, no more, no less—no matter what. In contrast, companies that fail often go all out in good times by pursuing massive growth, which leaves them vulnerable in bad times.)

Here, we outline what Collins prescribes for a floundering company: putting the right people in place, sticking to what your company does best, and being disciplined.

Put the Right People in Place

As we earlier discussed, having the wrong people can plunge a company into decline....

Shortform Exercise: Keep Your Company From Declining

Companies typically don’t fail overnight—Collins writes that there are warning signs to watch out for. Evaluate whether your company is in danger of decline and come up with a plan to keep you from falling into the fifth phase (surrendering).

Collins says that companies fall into decline when they neglect their “flywheel,” the core business whose momentum keeps the company moving forward. What is your company’s flywheel? Does your company give it sufficient attention? How so?