The BusinessThe BusinessLife CycleLife Cycle

The BusinessThe BusinessLife CycleLife Cycle

FocalPoint 2010 Conference

EverythingEverythingmoves in moves in

predictable cyclespredictable cycles

Life CyclesLife CyclesLife CyclesLife Cycles

FocalPoint 2010 Conference

Knowing what part of the Knowing what part of the cycle you are in is a cycle you are in is a

prerequisite to choosing prerequisite to choosing effective strategieseffective strategies

Life CyclesLife CyclesLife CyclesLife Cycles

FocalPoint 2010 Conference

LEARNING LEARNING PHASEPHASE

Business Life CycleBusiness Life CycleBusiness Life CycleBusiness Life Cycle

FocalPoint 2010 Conference

GROWTHGROWTHPHASEPHASE

DECLINE DECLINE PHASEPHASE

XXXX Founder’s Trap

Every institutionEvery institutionis is vulnerablevulnerable

no matter how great.no matter how great.

– – Jim CollinsJim Collins

FocalPoint 2010 Conference

There is no There is no law oflaw ofnature nature that the most that the most

powerful will inevitably powerful will inevitably remain at the top.remain at the top.

– – Jim CollinsJim Collins

FocalPoint 2010 Conference

AnyAny business businesscan fail.can fail.

Most do!Most do!

FocalPoint 2010 Conference

FocalPoint 2010 Conference

Bank of AmericaBank of America

The World’s Largest Bank, Admired for its Management

Yet on the Cusp of Catastrophic Decline

From How the Mighty Fall by Jim Collins

600

400

200

0

-200

-400

-800

1972 1976 1980 1984 1987

Net Income 1972-1987 (in $ Millions)Net Income 1972-1987 (in $ Millions)

STAGE 1Hubris Born of Success

Five Stages Five Stages of Declineof DeclineFive Stages Five Stages of Declineof Decline

FocalPoint 2010 Conference

STAGE 2Undisciplined

Pursuit of More

STAGE 3Denial of Risk

and Peril STAGE 4Grasping for

Salvation

STAGE 5Capitulation

to Irrelevance or Death

From How the Mighty Fall by Jim Collins

Stage Stage 11Stage Stage 11

FocalPoint 2010 Conference

HubrisHubris Born of Born of SuccessSuccess

From How the Mighty Fall by Jim Collins

STAGE 1Hubris Born of Success

STAGE 2Undisciplined

Pursuit of More

STAGE 3Denial of Risk

and Peril STAGE 4Grasping for

Salvation

STAGE 5Capitulation

to Irrelevance or Death

Stage Stage 1 1 –– Hubris Hubris Born of Born of SuccessSuccessStage Stage 1 1 –– Hubris Hubris Born of Born of SuccessSuccess

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

1.1. Success Entitlement, Success Entitlement, ArroganceArrogance

2.2. Neglect of Neglect of Core Core BusinessBusiness

3.3. “What” “What” replacesreplaces “Why “Why””

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 1 1 –– Hubris Hubris Born of Born of SuccessSuccessStage Stage 1 1 –– Hubris Hubris Born of Born of SuccessSuccess

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

Diagnostic ChecklistDiagnostic Checklist

4.4. Decline in Decline in LearningLearning OrientationOrientation

5.5. Discounting the Role Discounting the Role of of LuckLuck

Stage Stage 1 1 –– Hubris Hubris Born of Born of SuccessSuccessStage Stage 1 1 –– Hubris Hubris Born of Born of SuccessSuccess

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

Diagnostic ChecklistDiagnostic Checklist

4.4. Decline in Decline in LearningLearning OrientationOrientation

5.5. Discounting the Role Discounting the Role of of LuckLuck

Stage Stage 22Stage Stage 22

FocalPoint 2010 Conference

UndisciplinedUndisciplined Pursuit of Pursuit of MoreMore

From How the Mighty Fall by Jim Collins

STAGE 1Hubris Born of Success

STAGE 2Undisciplined

Pursuit of More

STAGE 3Denial of Risk

and Peril STAGE 4Grasping for

Salvation

STAGE 5Capitulation

to Irrelevance or Death

Stage Stage 2 2 –– Undisciplined Undisciplined Pursuit Pursuit of of MoreMore

Stage Stage 2 2 –– Undisciplined Undisciplined Pursuit Pursuit of of MoreMore

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

1.1. ConfusingConfusing “Big” “Big” with with “Great”“Great”

2.2. Undisciplined Undisciplined Discontinuous LeapsDiscontinuous Leaps

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 2 2 –– Undisciplined Undisciplined Pursuit Pursuit of of MoreMore

Stage Stage 2 2 –– Undisciplined Undisciplined Pursuit Pursuit of of MoreMore

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

3.3. Declining proportion of Declining proportion of right people right people in in key seatskey seats

4.4. Easy cash Easy cash erodes cost erodes cost disciplinediscipline

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 2 2 –– Undisciplined Undisciplined Pursuit Pursuit of of MoreMore

Stage Stage 2 2 –– Undisciplined Undisciplined Pursuit Pursuit of of MoreMore

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

5.5. BureaucracyBureaucracy subverts subverts disciplinediscipline

6.6. Problematic Problematic successionsuccession of powerof power

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 2 2 –– Undisciplined Undisciplined Pursuit Pursuit of of MoreMore

Stage Stage 2 2 –– Undisciplined Undisciplined Pursuit Pursuit of of MoreMore

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

7.7. Personal interests Personal interests placed placed above organizational above organizational interestsinterests

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 33Stage Stage 33

FocalPoint 2010 Conference

Denial Denial ofof Risk Risk andand PerilPeril

From How the Mighty Fall by Jim Collins

STAGE 1Hubris Born of Success

STAGE 2Undisciplined

Pursuit of More

STAGE 3Denial of Risk

and Peril STAGE 4Grasping for

Salvation

STAGE 5Capitulation

to Irrelevance or Death

Stage Stage 3 3 –– Denial Denial of of RiskRisk & & PerilPerilStage Stage 3 3 –– Denial Denial of of RiskRisk & & PerilPeril

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

1.1. Amplify the Amplify the positivepositive, , discount the negativediscount the negative

2.2. Big bets and bold goals Big bets and bold goals withoutwithout empirical empirical validationvalidation

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 3 3 –– Denial Denial of of RiskRisk & & PerilPerilStage Stage 3 3 –– Denial Denial of of RiskRisk & & PerilPeril

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

3.3. Incurring huge downside risk Incurring huge downside risk based on based on ambiguous dataambiguous data

4.4. Erosion of healthy Erosion of healthy teamteam dynamicsdynamics

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 3 3 –– Denial Denial of of RiskRisk & & PerilPerilStage Stage 3 3 –– Denial Denial of of RiskRisk & & PerilPeril

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

5.5. Externalizing blameExternalizing blame

6.6. Obsessive Obsessive reorganizationsreorganizations

7.7. Imperious Imperious detachmentdetachment

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 44Stage Stage 44

FocalPoint 2010 Conference

GraspingGrasping forfor SalvationSalvation

From How the Mighty Fall by Jim Collins

STAGE 1Hubris Born of Success

STAGE 2Undisciplined

Pursuit of More

STAGE 3Denial of Risk

and Peril STAGE 4Grasping for

Salvation

STAGE 5Capitulation

to Irrelevance or Death

Stage Stage 4 4 –– Grasping Grasping forfor Salvation SalvationStage Stage 4 4 –– Grasping Grasping forfor Salvation Salvation

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

1.1. A series of A series of silver bulletssilver bullets

2.2. Grasping for a Grasping for a leader-leader-as-savioras-savior

3.3. Panic Panic and and hastehaste

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 4 4 –– Grasping Grasping forfor Salvation SalvationStage Stage 4 4 –– Grasping Grasping forfor Salvation Salvation

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

4.4. Radical change and Radical change and “revolution” “revolution” with fan farewith fan fare

5.5. HypeHype precedes results precedes results6.6. Initial upswing followed by Initial upswing followed by

disappointmentsdisappointments

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 4 4 –– Grasping Grasping forfor Salvation SalvationStage Stage 4 4 –– Grasping Grasping forfor Salvation Salvation

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

7.7. ConfusionConfusion and and cynicismcynicism

8.8. Chronic restructuring Chronic restructuring and and erosionerosion of of financial financial strengthstrength

Diagnostic ChecklistDiagnostic Checklist

Stage Stage 55Stage Stage 55

FocalPoint 2010 Conference

Capitulation Capitulation to to Irrelevance Irrelevance oror DeathDeath

From How the Mighty Fall by Jim Collins

STAGE 1Hubris Born of Success

STAGE 2Undisciplined

Pursuit of More

STAGE 3Denial of Risk

and Peril STAGE 4Grasping for

Salvation

STAGE 5Capitulation

to Irrelevance or Death

Stage Stage 5 5 –– Capitulation Capitulation toto Irrelevance Irrelevance oror Death Death

Stage Stage 5 5 –– Capitulation Capitulation toto Irrelevance Irrelevance oror Death Death

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

Two Immutable Laws of BusinessTwo Immutable Laws of Business

1.1. A business can be both A business can be both profitable profitable andand bankrupt bankrupt

2.2. Cash Cash is is KING!KING!

Stage Stage 5 5 –– Capitulation Capitulation toto Irrelevance Irrelevance oror Death Death

Stage Stage 5 5 –– Capitulation Capitulation toto Irrelevance Irrelevance oror Death Death

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

As a business moves through the As a business moves through the first 4 stages of decline:first 4 stages of decline:

Resources Resources erodeerode Cash Cash tightenstightens Hope Hope fadesfades Options Options disappeardisappear

Stage Stage 5 5 –– Capitulation Capitulation toto Irrelevance Irrelevance oror Death Death

Stage Stage 5 5 –– Capitulation Capitulation toto Irrelevance Irrelevance oror Death Death

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

When youWhen youabandon hopeabandon hope,,begin preparingbegin preparing

for the for the endend

Alternative to Irrelevance and DeathAlternative to Irrelevance and DeathAlternative to Irrelevance and DeathAlternative to Irrelevance and Death

FocalPoint 2010 Conference

Well-Founded HopeWell-Founded Hope

From How the Mighty Fall by Jim Collins

STAGE 1Hubris Born of Success

STAGE 2Undisciplined

Pursuit of More

STAGE 3Denial of Risk

and Peril STAGE 4Grasping for

Salvation

STAGE 5Capitulation

to Irrelevance or Death

Recoveryand

Renewal

Recoveryand

Renewal

Alternative to Irrelevance and Alternative to Irrelevance and DeathDeath

Alternative to Irrelevance and Alternative to Irrelevance and DeathDeath

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

Any great company Any great company can can toppletopple

Some Some rise rise againagain

Well-Founded HopeWell-Founded Hope

Alternative to Irrelevance and Alternative to Irrelevance and DeathDeath

Alternative to Irrelevance and Alternative to Irrelevance and DeathDeath

FocalPoint 2010 Conference From How the Mighty Fall by Jim Collins

Success After the FallSuccess After the Fall XeroxXerox NucorNucor IBMIBM

Tex. Instr.Tex. Instr. Pitney Pitney

BowesBowes NordstromNordstrom

DisneyDisney BoeingBoeing MerckMerck

FocalPoint 2010 Conference

““A crisis isA crisis isa terrible thinga terrible thing

to waste!”to waste!”Not by Rahm Emanuel, Not by Rahm Emanuel, Presidential Chief of StaffPresidential Chief of Staff

By Dick Clark, CEO, MerckBy Dick Clark, CEO, Merck