In How The Mighty Fall, Collins defines and focuses on five stages of decline for a business. These stages (in order) are: hubris born of success, undisciplined pursuit of more, denial of risk and peril, grasping for salvation, and capitulation to irrelevance or death. As in his previous works, Collins uses real world examples to make his points in this book. And the story stuck with me after reading How The Mighty Fall is the story of the rise and ultimate fall of the Ames department stores.

Many younger folks won’t know about Ames and I admit that I was only in an Ames once in 2000 or 2001 (can’t remember). The store reminded me of the old Jamesway and Caldor chains, but Collins recounts how the Ames chain of discount department stores was actually the innovator in the industry before any other store brand. That’s right, Ames was the leader in discount stores before a certain Walmart was the top dog.

However, Collins tells the story of how Ames fell into the second stage of decline – the undisciplined pursuit of more. Specifically, Collins talks about how Ames’ acquisition of the Zayre department stores led to a 98% drop in stock prices and, ultimately, destroyed the company. By pursuing an acquisition/merger with one of its rivals, Ames took its focus off of doing what it did very well and eventually wound up in bankruptcy.

Those are the types of stories that you’ll find in How The Mighty Fall. The other story that really stayed with me after reading this book was a discussion brought up as Collins went over the third stage of decline – denial of risk and peril. For your understanding, this is the stage of decline where the company actually begins is descent from its high point. Specifically, the story that I remember (and which I assume most folks will remember after reading this chapter) is the explosion of the Challenger space ship in 1986.

Now, I was too young to remember the Challenger explosion, though somewhere in the recesses of my mind I seem to recall seeing some type of coverage about it on the news. My young memory was helped by Collins’ full review of the hours leading up to the launch and the reasons why certain decisions were made by NASA. What made this story stick in my mind is that there was an extended discussion regarding a certain ring/seal that was singled out as faulty in the Challenger. The discussion revolved around whether or not the seal would be able to withstand the trauma of takeoff and, eventually, the people at NASA decided to go ahead with the launch even with the knowledge that the seal wasn’t sufficient.

The rest, as they say, is history. The seal failed, the space ship exploded, and a national tragedy was created.

It’s that denial of risk that rattled around my head. And, frankly, it had me wondering whether or not the company that I work for is denying any risks at the moment and, thus, readying itself for a fall. It’s a scary thought when you read about how some of these great companies and initiatives achieved amazing success, but were ultimately unsuccessful because of getting caught in these stages of decline. If you’re a business reader or the type of person who likes to study the American economy, then I think How The Mighty Fall is nearly required reading. Although if you’re a casual reader and are interested in learning more about what makes strong companies strong and weak companies weak, then you’ll want to pick up a copy of this book and give it a once over, too. This is the type of book that will continue to occupy space on my bookshelf even after I’ve read through it two or three times.

Good to Great is, in short, a study of why some companies become megastars in the business world and why other ones seem to fall by the wayside. I use the term “study” because this book really is nothing more than the discussion around a set of findings from an actual academic study into a variety of companies – both those that made the jump to being “great” and those who either stayed in the middle of the industry or failed.

In a moment, I’ll write about some issues that I have with the companies that were used in the study, but it would only be proper to state how impressed I was with the findings of the study. Collins defines his results as: Level 5 Leadership, First Who…Then What, Confront the Brutal Facts (Yet Never Lose Faith), The Hedgehog Concept, A Culture of Discipline, Technology Accelerators, and The Flywheel and the Doom Loop. In fact, if you read just the table of contents for Good to Great, you’ll notice that this is their exact listing. The two findings that I enjoyed reading the most were Level 5 Leadership and Confront the Brutal Facts (Yet Never Lose Faith).

As a reader who is engaged in reality (and thus I apply real-world experiences to what I read), I liked reading about Level 5 Leadership for both selfish and professional reasons. Professionally, it is amazing how many people that I have worked for who are not the type of leaders that my companies have needed to exceed. I’ve worked for people who didn’t know a thing about leadership, yet managed to become the President or Executive Director of the company. It’s sickening, really. What makes someone a Level 5 Leader? As Collins suggested, it’s the unique combination of professional will and personal humility. In other words, you have to always have the best interests of the organization in mind, yet be able to be self-effacing about your success; always put the company’s success before your own.

How many people can honestly say that they’ve worked for people who acted that way about their company’s success? Few, I’m sure. Better yet, how many people have worked for bosses that considered the company’s success as a direct result of their own contributions? Much more, I’m sure.

The other finding of this study that I liked was the Confront the Brutal Facts (Yet Never Lose Faith) chapter. From my experience, this is something that far too few companies are comfortable with doing – and who can blame them. Who really wants to sit down as a company and look into the proverbial mirror? That’s a tough task and one that many companies cannot accomplish because their leadership is either too concerned about their professional reputation or they refuse to see any flaws that their leadership could have created.

I also like how Collins adds a summary to the end of each chapter showing the findings and the unintended findings. A very nice touch.

Now then… I have a problem with this companies in this book being heralded as “great.” Why, you ask? Two answers – Circuit City and Fannie Mae. Both of these companies are defined as “great” in the study, which shows one of the obvious flaws of the study – namely, that the confines of the research did not take into account whether or not the results that were being generated were built on a legit financial system. In other words, did Circuit City beat the pants off of the rest of the electronics stores because it truly had a better overall corporate structure? I think recent history would suggest the answers is a resounding no.

The same can be said of Fannie Mae. Here’s an organization that some suggest was implicit in the housing bust that literally wrecked the American and global economies. How can these companies be considered great in the long run if they were such miserable failures?

On the other hand, Wells Fargo is touted as a “great” company (and rightfully so), but it is contrasted with the Bank of America as a company that never made the leap to “great.” Well, having worked with the Bank of America (not as an employee, but as a business partner), I can tell you that they are a great organization. Sure, they may not have fit Collins’ definition during the period of the study, but rest assured that Bank of America is a great financial institution. For those of you who are naysayers due to its current bailout from the federal government, I get it. However, the Bank of America is one of the few financial firms that wants to repay the TARP funds ASAP.

All in all, I though Collins book was very well written and that the findings of the study were accessible. I would also argue that the findings are applicable to the business world despite my last few paragraphs. However, I would argue that the public can have a legit complaint about Fannie Mae and Circuit City being heralded as “great.” If you can get your hands on a copy of Good to Great, I recommend reading it.