Why Do Great Companies Fall?

Lotus and Ashton-Tate used to be the two of the “Big Three” software companies, Microsoft being the third. Sun Microsystems, Compaq, DEC used to be huge technology companies that have since disappeared as independent entities. AOL was once a leader in online service providers in the world and America, but just as quickly as it grew, it fell. It was also in that decade when venerable IBM was also struggling and needed to change and reinvent themselves – a subject that was related by non other than the CEO himself, Louis V. Gerstner in Who Says Elephants Can’t Dance?: Leading a Great Enterprise through Dramatic Change.

My first PDA was a Palm Pilot and in my opinion, a great piece of personal hardware. Palm was once the strong leader in PDA products, and a great many users used to like their smartphones. Now, some analysts are actually thinking that Palm’s stocks will dive to zero. Jean-Louis Gassée, once of Apple, has this to say about Palm’s future: “I’m afraid Palm will be twisting in the wind for a short while and then call it a day.”

Why do once-great companies fail? Jim Collins’ How The Mighty Fall: And Why Some Companies Never Give In talks about the five typical stages of decline of such companies:

  • Stage 1: Hubris Born of Success
  • Stage 2: Undisciplined Pursuit of More
  • Stage 3: Denial of Risk and Peril
  • Stage 4: Grasping for Salvation
  • Stage 5: Capitulation to Irrelevance or Death

Great book, if you like to read about succeeding in business.

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One thought on “Why Do Great Companies Fall?

  1. Pingback: Google’s Hubris « frog on a wire

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