Five Stages of Decline - This was a group project presentation, originally powerpoint but had to transfer PDF

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This was a group project presentation, originally powerpoint but had to transfer to work doc. ...

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Five Stages of Decline The Research Process ●

Collins and his team collected information from prior research studies, boxes and binders of historical documents, and spreadsheets of financial information going back more than 70 years.

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The process started with 60 major companies from the good-to-great and built-to-last archives. Given the selection criteria, only 11 companies were chosen. ○

Specifically, A&P, Addressograph, Ames Department Stores, Bank of America (before it was acquired by NationsBank), Circuit City, Hewlett-Packard, Merck, Motorola, Rubbermaid, Scott Paper, and Zenith.

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Focusing on these companies, they examined financial ratios and patterns, vision and strategy, organization, culture, leadership, technology, markets, environment, and competitive landscape.

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Overall, what happened leading up to the point at which decline became visible and what did the company do once it began to fail.

Companies In Recovery ●

During the research, some of the companies mentioned may have turned around. ○

For example, HP and Merck.

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Even though companies fall, some can rise again.

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The purpose of this is studying historical eras of performance to understand what is needed when building success or losing it.

Fannie Mae & other Financial Meltdowns ●

Fannie Mae climbing from Good to Great occured between the years of 1969-1999.

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This company took a large increase in performance during the early 1980s. Their leader, David Maxwell formed into a powerful market enterprise.

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In the early 2000’s Fannie Mae had a drastic downfall from great to nearly gone, causing them to go from being a great company to having one of the most drastic meltdowns in history.

Success Comparison Set

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Collins and team constructed a set of success which has risen in the same industries during the era when primary companies declined. Early 1970s, both Walmart and Ames Department Stores came off to be identical. Identical meaning having the same business model, and similar revenues and profits. Both companies have experienced tremendous growth. Both companies climbed until suddenly, Ames made a drastic fall.

Correlations, not causes ● ● ● ●

Collins shows the Ratio of Cumulative Stock Returns to General Market in relation to the Performance Patterns of Wal-mart and Ames. Events surrounding a company cannot completely be isolated and tested. One cannot prove a cause and effect relationship exists between the selected variables and the performance of a company beyond a reasonable doubt. Contrasting the performance of different companies is more reliable.

Strength of Historical Analysis ● ● ● ●

Collins shows the Ratio of Cumulative Stock Returns to General Market in relation to the Performance Patterns of Wal-mart and Ames. Events surrounding a company cannot completely be isolated and tested. One cannot prove a cause and effect relationship exists between the selected variables and the performance of a company beyond a reasonable doubt. Contrasting the performance of different companies is more reliable.

The Results: A Five-Stage Framework “All models are wrong; some models are useful” - George E.P. Box. ●

Although this framework is not definite of corporate decline, it is the most accurate description based on the companies studied.

The Five Stages ●

Stage 1: Hubris Born of Success

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Stage 2: Undisciplined Pursuit of More

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Stage 3: Denial of Risk and Peril

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Stage 4: Grasping for Salvation

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Stage 5: Capitulation to Irrelevance or Death

Is there a way out ●

To answer the question being asked, there is a way out once you enter the 5 stages of decline. However, as you move deeper into the 5 stages it does become progressively harder to pull your company back to success.

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Companies will learn more from studying successful businesses that failed rather than successful ones that keep succeeding. There is definitely points to learn from the successful companies, but if you can see what made these once successful companies eventually fail, then that is very valuable information for your own company to ensure that they don’t follow the steps of the companies that failed.

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A couple super successful companies actually fell to the depths of stage 4 and came out of the 5 stages of decline stronger than when they went in. ●

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Examples of these are Nucor, Nordstrom, Disney, and IBM. All are companies that have been around for decades, and are very powerful. Even all of them at one point were not sure of their companies future and almost fell into the 5th stage.

All companies will face ups and downs throughout their histories. Look at examples like Proctor & Gamble, and Johnson & Johnson. You cannot be in business for as long as these companies were without facing some of the stages....