As consultants, we spend all our time figuring out how to identify strengths and opportunities for growth but we rarely look for those weaknesses that are predictive of a company in trouble. What resources or models exist that can help us know when our client might be headed for trouble?
This is a great question and one all of us as consultants should be thinking about for each of our clients. It is easy to see companies that are in free fall or so damaged by competition or self inflicted wounds that they soon will be. However, who could have predicted that Circuit City, A&P and Xerox - all once high flying, well respected companies - would sink so fast? What was it about Xerox that allowed it to recover, and the others to resist all attempts to do the same? As consultants, are we able to divine the warning signs that our clients (or prospects) are entering the decline stage? Do we have the skills and experience to help companies on the way down in the same ways we help them on the way up (the latter is far easier, by the way)?
Jim Collins' recent book How The Mighty Fall: And Why Some Companies Never Give In
provides some clues to how to think about these companies in danger. Now, some of you might say that many of the companies in Collin's prior books Good to Great
and Built to Last
were not perfect. True, but, as Collins points out in How the Mighty Fall
, it is as much how companies respond to danger (as in Xerox's case) that defines their greatness. Collins talks about the five stages of decline: Hubris Born of Success, Undisciplined Pursuit of More, Denial of Risk and Peril, Grasping for Salvation, and Capitulation to Irrelevance or Death. If you recognize what stage you are in and act appropriately (with good consulting help) it is possible to come back from stage 4. Tip:
This is another characterization of the life and death of companies that consultants need to aware of. Take Collins' research how you will but the construct of stages of decline is a useful one. What kind of effective consulting services can you provide for each of these stages?