How the Mighty Fall by Jim Collins Part 3 of 6: Overreaching (Stage 2)
September 2, 2009 by dr. lam
What naturally follows stage 1 (hubris) is overreaching, or an undisciplined pursuit of more. When a company begins to leave its core competencies in pursuit of bigger and bigger things, the peril of descent is imminent. Interestingly, Collins argues it is NOT complacency, which we tend to often blame or think to blame as the reason for a company’s downfall. Of course, a refusal or denial to change can clearly cripple a company and be a reason for collapse but Collins only saw that problem in one of the eleven case studies that he evaluated, A & P Stores. In fact, he found that HP and Merck were the busiest in patented innovations the years that they were in sharp decline. So complacency is not the answer.
The example of Circuit City versus Best Buy is perhaps the best example in my opinion of stage 2 differences. Circuit City launched new programs like Divx and Carmax that ultimately failed. Collins argues that it was not the failed experimentation that led to Circuit City’s eventual bankruptcy but instead the failure to improve its core business, electronic sales. Many companies try new things that fail but they continue to improve their core business model. The opposite example is Best Buy that slowly and quietly consumed market share. Best Buy worked through refinements of its core business, or concepts. Concept 1 was based on a traditional commission-based sales model. Concept 2 compelled the sales person to give the consumer as much information as possible to help consumer purchase. Concept 3 established in room showcases that let consumers experience the technology first hand. Concept 4 helped consumers navigate the sea of choices available to them when evaluating potential electronic purchases. Then they added the Geek Squad that facilitated home installation and remedy of technology snafus. They worked their core and refined the concept that led to their growth.
An owner of multiple businesses (building, salon, spa, facial plastic surgery center), I have to grow each business but keep my focus on my core business, facial cosmetic surgery. I have enough talented leaders who have helped me grow each of my other sectors but I simply must continue to push my core business and professional model that helps me sustain any downturns in my other sectors and facilitates their potential for growth. In short, continue to focus on your core business and do not overextend yourself due to unbridled hubris.
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4 Responses to “How the Mighty Fall by Jim Collins Part 3 of 6: Overreaching (Stage 2)”
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Very interesting, Dr. Lam. Very helpful information too, even for me. Thanks!
I love Best Buy! And I love lam facial plastics! lol
cool. thanks heather!
I loved CarMax, think we bought a couple cars there. Didn’t realize they’re gone. Did I read correctly?
A&P used to be nearly another word for grocery store (how do you call that Dr. L, I trust you’ll know–when a word becomes generic for what it is, like Kleenex..?) Updike wrote a story called A&P, just a bit of trivia.
Good read. Thanks.
1. no, i think carmax is still here. it just became a liability for circuit city and had them take their eye off the ball.
2. i actually do not know. i googled it and found one place calling it “proprietary eponyms”. that sounds pretty stupid.
thanks for the comments nord!
sml