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Decline can be avoided. Decline can be detected. Decline can be reversed.

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Amidst the desolate landscape of fallen great companies, Jim Collins began to wonder: How do the mighty fall? Can decline be detected early and avoided? How far can a company fall before the path toward doom becomes inevitable and unshakable? How can companies reverse course?

In How the Mighty Fall, Collins confronts these questions, offer- ing leaders the well-founded hope that they can learn how to stave off decline and, if they find themselves falling, reverse their course. Collins' research project- more than four years in duration-uncovered five step-wise stages of decline,

Stage L 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

By understanding these stages of decline, leaders can substan- tially reduce their chances of falling all the way to the bottom.

Great companies can stumble, badly, and recover.

Every institution, no matter how great, is vulnerable to decline. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall and most eventually do. But, as Collins' research emphasizes, some companies do indeed recover- in some cases, coming back even stronger-even after having crashed into the depths of Stage 4.

(continued on back flap)

(continued from front flap)

Decline, it turns out, is largely self-inflicted, and the path to recovery lies largely within our own hands. We are not imprisoned by our circumstances, our history, or even our staggering defeats along the way. As long as we never get entirely knocked out of the game, hope always remains. The mighty can fall, but they can often rise again.

JIM CO L LIN S is a student of companies- great ones, good ones, weak ones, failed ones- from young start-ups to ven- erable sesquicentenarians. The author of the national bestseller Good to Great and coauthor of Built to Last, he serves as a teacher to leaders throughout the corporate and social sectors. His work has been featured in Fortune, BusinessWeek, The Economist, USA Today, and Harvard Business Review. You can find more information about Jim and his work at his e-teaching site, www.jimcollins.com.

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CONTENTS

Acknowledgments

Preface

The Silent Creep of Impending Doom

ix

xiii

Five Stages of Decline 13

Stage 1: Hubris Born of Success 27

Stage 2: Undisciplined Pursuit of More 45

Stage 3: Denial of Risk and Peril 65

Stage 4: Grasping for Salvation 83

Stage 5: Capitulation to Irrelevance or Death 103

Well-Founded Hope 113

Appendices and Notes 125

Index 213

ACKNOWLEDGMENTS

lowe a debt of gratitude to many people for their hand in help-

ing this work come to life.

I thank my ChimpWorks home team for their role in this

project and for their ongoing effort to keep the system running:

Susan Barlow Toll for her extensive fact checking and citations,

Michael Lane for his superb editing and conceptual contribu-

tions, Taffee Hightower for her happy binders and management

of the critical-reader process, Judi Dunckley for her making

sure everything balances (and keeping us all very afraid), Vicki

Mosur Osgood for her years of service turning the ChimpWorks

flywheel, and Kathy Worland-Turner for her cheerful effective-

ness serving as my right arm so that I can focus on creative work

and teaching.

I thank members of my research team for their contribu-

tions to this project: Robyn Bitner for her analyses and fact

checking, Kyle Blackmer for his work on Merck, Brad Caldwell

for his work on HP and IBM, Lauren Cuje for her work on Nord-

x ACKNOWLEDGMENTS

strom, Terrence Cummings for his many projects and his con-

tribution to the study-set selection, Todd Driver for his work on

financial analyses and IBM and his fact checking, Ryan Hall for

his study-set selection analyses and collection of key data, Lori-

lee Linfield for her work on Best Buy and Circuit City and

her fact checking, Catherine Patterson for her analyses, Mat-

thew Unangst for his study-set selection analyses and work on

Xerox, and Nathaniel (Natty) Zola for ongoing analysis and

criticism.

I thank my editor, Deborah Knox, for her hundreds of hours

of dedicated work to challenge, edit, fact check, polish, and im-

prove the manuscript through dozens of iterations, and for her

extensive examination into Merck and Fannie Mae.

I thank my critical readers, whose intelligent critiques helped

sharpen the concepts and writing immeasurably. Thank you to

Bill Achtmeyer, Jerry Belle, Ed Betof, Ann S. Bowers, William P.

Buchanan, Scott Cederberg, Dr. Alan G. Chute, Ken Coleman,

Alan J. Dabbiere, Brian Deevy, Jeff Donnelly, Salvatore D. Faz- zolari, Andrew Feiler, Claudio Fernandez-Araoz, Christopher

Forman, Dick Frost, Denis Godcharles, Wayne H. Gross, Eric

Hagen, Pamela Hemann, Liz Heron, John B. Hess, Frank High-

tower, Phil Hodgkinson, Kimberley Hollingsworth Taylor,

John A. Johnson, Alan Khazei, Betina Koski, Kevin McGarvey,

Thomas W. Morris, Tom Nelson, Michael Prouting, Bobby Rao,

Gloria A. Regalbuto Bentley, PhD, Jim Reid, Neville Richard-

son, Kevin Rumon, Kim Sanchez Rael, Dirk Schlimm, Roy

Spence, Frank Sullivan, Kevin Taweel, Jean Taylor, Tom Tier-

ney, Alan Webber, Jim Weddle, and Walter Wong. I thank Frank

Sullivan also for suggesting the title How the Mighty Fall.

ACKNOWLEDGMENTS xi

I thank Betty Grebe and Carol Krismann at the University of

Colorado William M. White Business Library for their able and

enthusiastic assistance, helping all my research assistants with

their death marches. I thank the Center for Research in Securi-

ties Pricing (CRSP) at the University of Chicago for its quality

data and excellent service. I thank Dennis Bale and Lori Draw-

baugh for their professionalism and for the roving office that

allows me to keep doing creative work while in transit.

I thank Frances Hesselbein and Dick Cavanagh for the invita-

tion to speak at West Point that inspired me to dive deeply into

this topic. I thank Breck England for coming up with the term

"well-founded hope" as a way to describe our research findings.

I thank Bob Buford for his continued insistence that I pursue

questions that ignite my curiosity and for his belief that less is

more. I thank Alan Wurtzel and David Maxwell for their helpful

perspectives on the stages framework, and for their continued

friendship and belief in our work.

I thank Peter Ginsberg for his years of support, challenge,

and professionalism, and for his extraordinary ability to come

up with publishing ideas that have never been tried before-and

to make them work. I thank Hollis Heimbouch for her editorial

instincts, her advocacy, and her willingness to join me in an

adventure.

I thank Janet Brockett for her design genius and friendship.

I thank Caryn Marooney for her extraordinary wisdom and

creative perspective.

I thank my friend and research colleague Morten T. Hansen,

who continues to inspire and challenge me by providing critical

feedback and helpful guidance.

xii ACKNOWLEDGMENTS

thank my Personal Band of Brothers for their ongoing

support and inspiration, and my # 1 brother, Michael Collins.

Finally, and always, I thankJoanne Ernst, my life partner and

best friend, for inspiring me, for being my most severe critic,

and for her unyielding belief in me. After twenty-nine years,

which I consider to be a nice start to an enduring marriage, I still

feel lucky every single day.

PREFACE

I feel a bit like a snake that swallowed two watermelons at the same time. I'd started this project to write only an article, a di-

version to engage my pen while completing the research for my

next full-sized book on what it takes to endure and prevail when

the world around you spins out of control (based on a six-year

research project with my colleague Morten Hansen). But the

question of how the mighty fall defied the constrictions of an

article and evolved into this small book. I'd considered setting

this piece aside until we'd finished the turbulence book, but

then the mighty began to fall, like giant dominoes crashing

around us.

As I write this preface, on September 25, 2008, I'm looking

out at the Manhattan skyline from a United Airlines Airbus,

marveling at the cataclysmic events. Bear Stearns fell from #156

on the Fortune 500 to gone, bought out by JPMorgan Chase in a

desperation deal engineered over a weekend. Lehman Brothers

collapsed into bankruptcy after 158 years of growth and success.

xiv PREFACE

Fannie Mae and Freddie Mac, crippled, succumbed to govern-

ment conservatorship. Merrill Lynch, the symbol of bullish

America, capitulated to a takeover bid. Washington Mutual tot-

tered on the edge of becoming the largest commercial bank fail-

ure in history. The U.S. government embarked on the most

extensive takeover of private assets in more than seven decades

in a frenetic effort to stave off another Great Depression.

To be clear, this piece is not about the 2008 financial panic on

Wall Street, nor does it have anything to say about how to fix the

broken mechanisms of the capital markets. The origins of this

work date back to more than three years earlier, when I became

curious about why some of the greatest companies in history,

including some once-great enterprises we'd researched for Built

to Last and Good to Great, had fallen. The aim of this piece is

to offer a research-grounded perspective of how decline can

happen, even to those that appear invincible, so that leaders

might have a better chance of avoiding their tragic fate.

This work is also not about gloating over the demise of once-

mighty enterprises that fell, but about seeing what we can learn

and apply to our own situation. By understanding the five stages

of decline discussed in these pages, leaders can substantially

reduce the chances of falling all the way to the bottom, tum-

bling from iconic to irrelevant. Decline can be avoided. The

seeds of decline can be detected early. And as long as you don't

fall all the way to the fifth stage, decline can be reversed. The

mighty can fall, but they can often rise again.

Jim Collins

Boulder, Colorado

THE SILENT CREEP OF IMPENDING DOOM

·1 n the autumn of 2004, I received a phone call from Frances Hesselbein, founding president of the Leader to Leader Insti-

tute. "The Conference Board and the Leader to Leader Institute

would like you to come to West Point to lead a discussion with

some great students," she said.

'~nd who will be the students?" I asked, envisioning perhaps

a group of cadets.

"Twelve U.S. Army generals, twelve CEOs, and twelve social

sector leaders," explained Frances. "They'll be sitting in groups

of six, two from each sector-military, business, social-and

they'll really want to dialogue about the topic."

"And what's the topic?"

"Oh, it's a good one. I think you'll really like it." She paused.

"America."

America? I wondered, What could I possibly teach this es-

teemed group about America? Then I remembered what one of

my mentors, Bill Lazier, told me about effective teaching: don't

2 JIM COLLINS

try to come up with the right answers; focus on coming up with

good questions.

I pondered and puzzled and finally settled upon, Is America

renewing its greatness, or is America dangerously on the cusp of

falling from great to good?

While I intended the question to be simply rhetorical (I be-

lieve that America carries a responsibility to continuously renew

itself, and it has met that responsibility throughout its history),

the West Point gathering nonetheless erupted into an intense

debate. Half argued that America stood as strong as ever, while

the other half contended that America teetered on the edge of

decline. History shows, repeatedly, that the mighty can fall.

The Egyptian Old Kingdom, the Minoans of Crete, the Chou

Dynasty, the Hittite Empire, the Mayan Civilization-all fell.!

Athens fell. Rome fell. Even Britain, which stood a century

before as a global superpower, saw its position erode. Is that

America's fate? Or will America always find a way to meet

Lincoln's challenge to be the last best hope of Earth?

At a break, the chief executive of one of America's most suc-

cessful companies pulled me aside. "I find our discussion fasci-

nating, but I've been thinking about your question in the context

of my company all morning," he mused. "We've had tremen-

dous success in recent years, and I worry about that. And so,

what I want to know is, How would you know?"

"What do you mean?" I asked.

"When you are at the top of the world, the most powerful

nation on Earth, the most successful company in your industry,

the best player in your game, your very power and success might

cover up the fact that you're already on the path to decline. So,

how would you know?"

HOW THE MIGHTY FALL 3

The question-How would you knowr-captured my imagi-

nation and became part of the inspiration for this piece. At our

research laboratory in Boulder, Colorado, we'd already been dis-

cussing the possibility of a project on corporate decline, spurred

in part by the fact that some of the great companies we'd pro-

filed in the books Good to Great and Built to Last had subsequently

lost their positions of excellence. On one level, this fact didn't

cause much angst; just because a company falls doesn't invali-

date what we can learn by studying that company when it was at

its historical best. (See the sidebar for an explanation.) But on

another level, I found myself becoming increasingly curious:

How do the mighty fall? If some of the greatest companies in his-

tory can collapse from iconic to irrelevant, what might we learn

by studying their demise, and how can others avoid their fate?

I returned from West Point inspired to turn idle curiosity

into an active quest. Might it be possible to detect decline early

and reverse course, or even better, might we be able to practice

preventive medicine? I began to think of decline as analogous

to a disease, perhaps like cancer, that can grow on the inside

while you still look strong and healthy on the outside. It's not a

perfect analogy; as we'll see later, organizational decline, unlike

cancer, is largely self-inflicted. Still, the disease analogy might

be helpful. Allow me to share a personal story to illustrate.

On a cloudless August day in 2002, my wife,Joanne, and I set

out to run the long uphill haul to Electric Pass, outside Aspen,

Colorado, which starts at an altitude of about 9,800 feet and ends

above 13,000 feet. At about 11,000 feet, I capitulated to the thin

air and slowed to a walk, while Joanne continued her uphill

assault. As I emerged from tree line, where thin air limits vege-

tation to scruffy shrubs and hardy mountain flowers, I spotted

4 JIM COLLINS

WHY THE FALL OF PREVIOUSLY GREAT COMPANIES ODES NOT NEGATE PRIOR RESEARCH

The principles we uncovered in prior research do not depend

upon the current strength or struggles of the specific companies

we studied. Think of it this way, if we studied healthy people in

contrast to unhealthy people, and we derived health-enhancing

pnnciples such as sound sleep, balanced diet, and moderate

exercise, would it undermine these principles If some of our pre-

viously healthy subjects started sleeping badly, eating poorly,

and not exercising? Clearly, sleep, diet, and exercise would still

hold up as principles of health.

Or consider this second analogy, suppose we studied the

UCLA basketball dynasty of the 1960s and 1970s, which won

ten NCAA championships in twelve years under coach John

Wooden' Also suppose that we compared Wooden's UCLA

Bruins to a team at a similar school that failed to become a great

dynasty during the exact same era, and that we repeated this

matched-pair analysis across a range of sports teams to develop

a framework of principles correlated with building a dynasty. If

the UCLA basketball team were to later veer from the principles

exemplified by Wooden and fail to deliver championship results

on par with those achieved during the Wooden dynasty, would

this fact negate the distinguishing principles of performance ex-

emplified by the Bruins under Wooden?

Similarly, the principles in Good to Great were derived pri-

manly from studying specific periods in history when the good-

to-great companies showed a substantial transformation into an

era of superior performance thaI lasled fifteen years. The re-

search did nol attempt to predict which companies would remain

great after Iheir fifteen-year run. Indeed, as this work shows,

even the mightiest of companies can self-destruct.

HOW THE MIGHTY FALL 5

her far ahead in a bright-red sweatshirt, running from switch-

back to switchback toward the summit ridge. Two months later,

she received a diagnosis that would lead to two mastectomies. I

realized, in retrospect, that at the very moment she looked like

the picture of health pounding her way up Electric Pass, she

must have already been carrying the carcinoma. That image of

Joanne, looking healthy yet already sick, stuck in my mind and

gave me a metaphor.

I've come to see institutional decline like a staged disease:

harder to detect but easier to cure in the early stages, easier to

detect but harder to cure in the later stages. An institution

can look strong on the outside but already be sick on the inside,

dangerously on the cusp of a precipitous fall.

We'll turn shortly to the research that bore this idea out, but

first let's delve into a terrifying case, the rise and fall of one of

the most storied companies in American business history.

ON THE CUSP, AND UNAWARE

At 5:12 a.m. on April 18, 1906, Amadeo Peter Giannini felt an

odd sensation, then a violent one, a slight, almost imperceptible

shift in his surroundings coupled with a distant rumble like far-

away thunder or a train! Pause. One second. Two seconds.

Then-bang!-his house in San Mateo, California, began to

pitch and shake, to, fro, up, and down. Seventeen miles north in

6 JIM COLLINS

San Francisco, the ground liquefied underneath hundreds of

buildings, while heaving spasms under more solid ground cata-

pulted stones and facades into the streets. Walls collapsed. Gas

mains exploded. Fires erupted.

Determined to find out what had happened to his fledgling

company, the Bank of Italy, Giannini endured a six-hour odys-

sey, navigating his way into the city by train and then by foot

while people streamed in the opposite direction, fleeing the con-

flagration. Fires swept toward his offices, and Giannini had to

rescue all the imperiled cash sitting in the bank. But criminals

roamed through the rubble, prompting the mayor to issue a

terse proclamation: "Officers have been authorized by me to

KILL any and all persons found engaged in Looting or in the

Commission of Any Other Crime." With the help of two em-

ployees, Giannini hid the cash under crates of oranges on two

commandeered produce wagons and made a nighttime journey

back to San Mateo, where he hid the money in his fireplace.

Giannini returned to San Francisco the next morning and found

himself at odds with other bankers who wanted to impose up

to a six-month moratorium on lending. His response: putting a

plank across two barrels right in the middle of a busy pier and

opening for business the very next day. "We are going to rebuild

San Francisco," he proclaimed.4

Giannini lent to the little guy when the little guy needed it

most. In return, the little guy made deposits at Giannini's bank.

As San Francisco moved from chaos to order, from order to

growth, from growth to prosperity, Giannini lent more to the

little guy, and the little guy banked even more with Giannini.

The bank gained momentum, little guy by little guy, loan by

loan, deposit by deposit, branch by branch, across California,

HOW THE MIGHTY FALL 7

renaming itself Bank of America along the way. In October 1945,

it became the largest commercial bank in the world, overtaking

the venerable Chase National Bank.5 (Note of clarification:

in 1998, NationsBank acquired Bank of America and took

the name; the Bank of America described here is a different

company than NationsBank.)

Over the next three decades, Bank of America gained a repu-

tation as one of the best managed corporations in America.6 An

article in the January 1980 issue of Harvard Business Review

opened with a simple summary: "The Bank of America is per-

haps best known for its size-it is the world's largest bank, with

nearly 1,100 branches, operations in more than 100 countries,

and total assets of about $100 billion. In the opinion of many

close observers, an equally notable achievement is its quality of

management ... " 7

Were anyone to have predicted in 1980 that in just eight years

Bank of America would not only fall from its acclaimed position

as one of the most successful companies in the world, but would

also post some of the biggest losses in U.S. banking history,

rattle the financial markets to the point of briefly depressing the

U.S. dollar, watch its cumulative stock performance fall more

than 80 percent behind the general stock market, face a serious

takeover threat from a rival California bank, cut its dividend for

the first time in fifty-three years, sell off its corporate headquar-

ters to help meet capital requirements, see the last Giannini

family board member resign in outrage, oust its CEO, bring a

former CEO out of retirement to save the company, and endure

a barrage of critical articles in the business press with titles like

"The Incredible Shrinking Bank" and "Better Stewards (Corpo-

rate and Otherwise) Went Down on the Titanic"-were anyone

8 JIM COLLINS

to have even suggested this outcome-he or she would have

been viewed as a pessimistic outlier. Yet that's exactly what hap-

pened to Bank of America. 8

If a company as powerful and well positioned as Bank of

America in the late 1970s can fall so far, so hard, so quickly, then

any company can fall. If companies like Motorola and Circuit

City-icons that had once served as paragons of excellence-

can succumb to the downward forces of gravity, then no one is

immune. If companies like Zenith and A&P, once the unques-

tioned champions in their fields, can plummet from great to

irrelevant, then we should be wary about our own success.

Every institution is vulnerable, no matter how great. No mat-

ter how much you've achieved, no matter how far you've gone,

no matter how much power you've garnered, you are vulner-

able to decline. There is no law of nature that the most power-

ful will inevitably remain at the top. Anyone can fall and most

eventually do.

I can imagine people reading this and thinking, "Oh my

goodness-we've got to change! We've got to do something

bold, innovative, and visionary! We've got to get going and not

let this happen to us!"

Not sofast!

In December 1980, Bank of America surprised the world with

its new CEO pick. Forbes magazine described the process as

"rather like choosing a new pope," the twenty-six directors hud-

dled behind closed doors like cardinals in conclave" You might

HOW THE MIGHTY FALL 9

Bank of America Net Income 1972-1987 (in $ Millions)

The World's Largest Bank, Yet on the Cusp of Admired for Its Management Catastrophic Decline

600

400

200

0 1972 1976 1980 1987

- 200

- 400

- 600

- 800

think that Bank of America ultimately fell because they ended

up crowning a fifty-something gentleman, a faceless bureau-

crat and banker's banker who couldn't change with the times,

couldn't lead with vision, couldn't make bold moves, couldn't

seek new businesses and new markets.

But in fact, the board picked a vigorous, forty-one-year-old,

tall, articulate, and handsome leader who told the Wall Street

Journal that he believed the bank needed a "good kick in the

fanny." Seven months after taking office, Samuel Armacost

bought discount brokerage Charles Schwab, an aggressive move

that pushed the edges of the Glass-Steagall Act and energized

Bank of America with not only a new business, but also a cadre

of irreverent entrepreneurs. Then he engineered the largest in-

terstate banking acquisition to date in the nation's history,

10 JIM COLLINS

buying Seattle-based Seafirst Corp. He launched a $100 million

crash program to blast past competitors in ATMs, allowing the

bank to leap from being a laggard to boasting the largest net-

work of ATMs in California. "We no longer have the luxury of

sitting back to learn from others' mistakes before we decide on

what we will do," he admonished his managers. "Let others

learn from us." Here, finally, Bank of America had a leader.lO

Armacost ripped apart outmoded traditions, closed branches,

and ended lifetime employment. He instituted more incentive

compensation. "We're trying to drive a wedge between our top

performers and our nonperformers," noted one executive about

the new culture. l1 He allowed Schwab's leaders to continue their

practice ofleasing BMWs, Porsches, and even a Jaguar, irritating

traditional bankers limited to more traditional Fords, Buicks,

and Chevrolets.lZ He hired a high-profile change consultant and

shepherded people through a transformation process that Busi-

ness Week likened to a religious conversion (describing the bank

as "born again") and that the Wall Street Journal depicted as "its

own version of Mao's Cultural Revolution." 13 Proclaimed Arma-

cost, "No other financial institution has had this much change." 14

And yet, despite all this leadership, all this change, all this bold

action, Bank of America fell from its net income peak of more

than $600 million into a decline that culminated from 1985 to

1987 with some of the largest losses up to that point in banking

history.

To be fair to Mr. Armacost, Bank of America was already

poised for a downward turn before he became CEO.* My point

* For an excellent account, see Gary Hector's well-written and authoritative book, Breaking the Bank: The Decline of Bank America.

HOW THE MIGHTY FALL 11

is not to malign Armacost, but to show how Bank of America

took a spectacular fall despite his revolutionary fervor. Clearly,

the solution to decline lies not in the simple bromide "Change or

Die"; Bank of America changed a lot, and nearly killed itself in

the process. We need a more nuanced understanding of how de-

cline happens, which brings us to the five stages of decline that

we uncovered in our research project.

FIVE STAGES OF DECLINE

I n one sense, my research colleagues and I have been studying failure and mediocrity for years, as our research methodology

relies upon contrast, studying those that became great in con-

trast to those that did not and asking, "What's different?" But

the primary focus of our quest had been on building greatness,

an inherently bright and cheery topic. After my West Point ex-

perience, I wanted to turn the question around, curious to un-

derstand the decline and fall of once-great companies. I joked

with my colleagues, "We're turning to the dark side."

TH E RESEARCH PROCESS

We had a substantial amount of data collected from prior re-

search studies, consisting of more than six thousand years of

combined corporate history-boxes and binders of historical

documents, and spreadsheets of financial information going

back more than seventy years, along with substantial research

14 JIM COLLINS

chronologies and financial analyses. We expected that a rigor-

ous screening of this data would yield a set of robust cases of

companies that rose to greatness and then subsequently fell. We

began with sixty major corporations from the good-to-great

and built-to-last research archives, and systematically identified

eleven cases that met rigorous rise-and-fall criteria at some point

in their history: A&P, Addressograph, Ames Department Stores,

Bank of America (before it was acquired by NationsBank), Cir-

cuit City, Hewlett-Packard (HP), Merck, Motorola, Rubbermaid,

Scott Paper, and Zenith. (In Appendix 1, I've outlined the selec-

tion process.) We updated our research data archives and then

examined the history of each fallen company across a range of

dimensions, such as financial ratios and patterns, vision and

strategy, organization, culture, leadership, technology, markets,

environment, and competitive landscape. Our principal effort

focused on the two-part question, What happened leading up

to the point at which decline became visible and what did the

company do once it began to fall?

Before we delve into the five-stage framework we derived

from this analysis, allow me to make a few important research

notes.

Companies in Recovery: Some of the companies in our analysis

may have regained their footing by the time you read this. Merck

and HP, for instance, appeared to have reversed their steep de-

clines as we were working on this piece; whether they sustain

their recovery remains to be seen, but both show improved re-

sults at the time of this writing. This brings me to an important

sub-theme of this work to which we will return: just as great

companies can topple, some rise again. It's important to under-

stand that the point of our research is not to proclaim which

HOW THE MIGHTY FALL 15

companies are great today, or which companies will become

great, remain great, or fall from greatness in the future. We study

historical eras of performance to understand the underlying

dynamics that correlate with building greatness (or losing it).

Fannie Mae and Other Financial Meltdowns of 2008: When we

selected the study set of fallen companies in 2005, Fannie Mae

and other financial institutions in our original database had not

yet fallen far enough to qualify for this analysis. It would lack

rigor to tack any of these companies onto our study as an after-

thought, but at the same time, it would lack common sense to

ignore the fact that some well-known financial companies (and

in particular, Fannie Mae, which had been a good-to-great com-

pany) have succumbed to one of the most spectacular financial

meltdowns in history. Instead of throwing these companies into

the research study at the last minute because they happened to

be in the news, I've included a brief commentary about Fannie

Mae in Appendix 3.

Success Comparison Set: All our research studies involve a con-

trol comparison set. The critical question is not "What do suc-

cesses share in common?" or "What do failures share in

common?" The critical question is "What do we learn by study-

ing the contrast between success and failure?" For this analysis,

we constructed a set of "success contrasts" that had risen in the

same industries during the era when our primary study compa-

nies declined. (See Appendix 2 for comparison-company selec-

tion methodology.) For an illustration, consider the chart "A

Study of Contrasts" below. In the early 1970s, the two compa-

nies in this chart, Ames Department Stores and Wal-Mart (a

contrast we'll discuss in a few pages), stood as almost identical

twins. They had the same business model. They had similar rev-

16 JIM COLLINS

enues and profits. They both achieved tremendous growth.

Both had strong entrepreneurial leaders at the helm. And as you

can see in the chart, both achieved exceptional investor returns

far in excess of the general stock market for more than a decade,

the two curves tracking each other very closely. But then the

curves diverge completely, one company plummeting while the

other continues to rise. Why did one fall, while the other did

not? This single contrast illustrates our comparison method.

Correlations, Not Causes: The variables we identify in our re-

search are correlated with the performance patterns we study,

but we cannot claim a definitive causal relationship. If we could

30

25

20

15

10

o

A Study of Contrasts Why Does One Company FaiL .. Wa l-Mart

And the Other Does Not?

f ~ " i ... While the " Other Climbs 0

" .. '" S '" Two Companies Achieve Great Results ~ with the Same Business Model ~

~ u 0 0

'"

Ames

1974 1977 1980 1983 1986 1989 1992 Source fOf all stock returns c~lcu lat ions in this work: C200601 CRSpe, Center for Research in Security Prices. Graduate School of Business, The UOIversity of Chicago. Used with permission. All rights reserved . www.crsp.Chicagobooth.edu

HOW THE MIGHTY FALL 17

conduct double-blind, prospective, randomized, placebo-

controlled trials, we would be able to create a predictive model

of corporate performance. But such experiments simply do not

exist in the real world of management, and therefore it's impos-

sible to claim cause and effect with lOO-percent certainty. That

said, our contrast method does give us greater confidence in our

findings than if we studied only success, or only failure.

Strength of Historical Analysis: We employ a historical method,

studying each company from its founding up to the end point of

our investigation, focusing on specific eras of performance. We

gather a range of historical materials, such as financial and

annual reports, major articles published on the company, books,

academic case studies, analyst reports, and industry reference

materials. This is important because drawing solely upon

backward-looking commentary or retrospective interviews

increases the chances of fallacious conclusions. Using a well-

known success story to illustrate, if we relied on only retrospec-

tive commentary about Southwest Airlines after it had become

successful, those materials would be colored by the authors'

knowledge of Southwest's success and would therefore be biased

by that knowledge. For example, some retrospective accounts

attribute Southwest's success to pioneering a unique and inno-

vative airline model (in part, because the authors believe the

winners must be the innovators); but in fact, a careful reading of

historical documents shows that Southwest largely copied its

model from Pacific Southwest Airlines in the late 1960s. If we

were to rely on only retrospective accounts, we would be led

astray about why Southwest became a great company.

We therefore derive our frameworks primarily from evidence

from the actual time of the events, before the outcome is known, and

18 JIM COLLIN S

we read through the evidence in chronological order, moving

forward through time. Documents published at each point in

time are written without foreknowledge of the company's even-

tual success or failure, and thereby avoid the bias of knowing the

outcome. So, for instance, the materials we have on Zenith that

were published in the early 1960s, when Zenith sat on top of its

world, give us perspective on Zenith at that time, uncolored by

the fact that Zenith would eventually fall. Interviews playa min-

imal part in our research method, and in this study (where people

might have a strong need for self-justification), we conducted no

interviews with current or recent members of management. Not

that historical information is perfect-corporations can selec-

tively exclude unhappy information from their annual reports,

for example, and journalists may write with a preconceived point

of view. Nor am I entirely immune from having some retrospec-

tive bias of my own, as I always know the success or failure of the

company I'm studying, and I cannot erase that from my brain.

But even with these limitations, our comparative historical

method helps us see more clearly the factors correlated with the

rise and fall of great companies.

This process of looking at historical evidence created at the

time, before a company falls, yields one of the most important

points to come from this work: it turns out that a company

can indeed look like the picture of health on the outside yet al-

ready be in decline, dangerously on the cusp of a huge fall , just

like Bank of America in 1980. And that's what makes the pro-

cess of decline so terrifying; it can sneak up on you, and then-

seemingly all of a sudden-you're in big trouble.

HOW THE MIGHTY FALL 19

This raises a fascinating set of questions: Are there clearly

distinguishable stages of decline? If so, can you spot decline

early? Are there telltale markers? Can you reverse decline, and if

so, how? Is there a point of no return?

THE RESULTS: A FIVE-STAGE FRAMEWORK

Surrounded by research papers at our dining room table one

day, clicking away on my laptop while trying to make sense of

the chronologies of decline, I commented to my wife, Joanne, "I

find this much harder to get my head around than studying how

companies become great." No matter how I assembled and reas-

sembled conceptual frameworks to capture the process of de-

cline, I'd find counterexamples and different permutations of

the pattern.

Joanne suggested I look at the first line of Tolstoy's novel

Anna Karenina. It reads, "All happy families are alike; each un-

happy family is unhappy in its own way." In finishing this piece,

I kept coming back to the Anna Karenina quote. Having studied

both sides of the coin, how companies become great and how

companies fall, I've concluded that there are more ways to

fall than to become great. Assembling a data-driven frame-

work of decline proved harder than constructing a data-driven

framework of ascent.

Even so, a staged framework of how the mighty fall did

emerge from the data. It's not the definitive framework of corpo-

rate decline-companies clearly can fall without following this

framework exactly (from factors like fraud, catastrophic bad

luck, scandal, and so forth)-but it is an accurate description of

20 JIM COLLINS

the cases we studied for this effort, with one slight exception

(A&P had a different type of Stage 2). In the spirit of statistics

professor George E. P. Box, who once wrote, "All models are

wrong; some models are useful," this framework is helpful for

understanding, at least in part, how great companies can fall."

Equally important, I believe it can be useful to leaders who seek

to prevent, detect, or reverse decline.

The model consists of five stages that proceed in sequence.

Let me summarize the five stages here and then provide a more

detailed description of each stage in the following pages.

STAGE 1: HUBRIS BORN OF SUCCESS. Great enterprises can become insu-

lated by success; accumulated momentum can carry an enter-

Stage 1 Hubris Born of Success

Five Stages of Decline

Stage 2 Undisciplined

Pursuit of More I

Stage 3 Denial of Risk

and Peril

Stage 4 Graspi n~ for

Salvation

Stage 5 Capitulation to Irrelevance or

Death

HOW THE MIGHTY FALL 21

prise forward, for a while, even ifits leaders make poor decisions

or lose discipline. Stage 1 kicks in when people become arro-

gant, regarding success virtually as an entitlement, and they

lose sight of the true underlying factors that created success in

the first place. When the rhetoric of success ("We're successful

because we do these specific things") replaces penetrating un-

derstanding and insight ("We're successful because we under-

stand why we do these specific things and under what conditions

they would no longer work"), decline will very likely follow.

Luck and chance playa role in many successful outcomes, and

those who fail to acknowledge the role luck may have played in

their success-and thereby overestimate their own merit and

capabilities-have succumbed to hubris.

STAGE 2: UNDISCIPLINED PURSUIT OF MORE. Hubris from Stage 1 ("We're

so great, we can do anything!") leads right into Stage 2, the Un-

disciplined Pursuit of More-more scale, more growth, more

acclaim, more of whatever those in power see as "success." Com-

panies in Stage 2 stray from the disciplined creativity that led

them to greatness in the first place, making undisciplined leaps

into areas where they cannot be great or growing faster than

they can achieve with excellence, or both. When an organiza-

tion grows beyond its ability to fill its key seats with the right

people, it has set itself up for a fall. Although complacency and

resistance to change remain dangers to any successful enter-

prise, overreaching better captures how the mighty fall.

STAGE 3: DENIAL OF RISK AND PERIL. As companies move into Stage 3,

internal warning signs begin to mount, yet external results

remain strong enough to "explain away" disturbing data or to

22 JIM COLLINS

suggest that the difficulties are "temporary" or "cyclic" or "not

that bad," and "nothing is fundamentally wrong." In Stage 3,

leaders discount negative data, amplify positive data, and put a

positive spin on ambiguous data. Those in power start to blame

external factors for setbacks rather than accept responsibil-

ity. The vigorous, fact-based dialogue that characterizes high-

performance teams dwindles or disappears altogether. When

those in power begin to imperil the enterprise by taking out-

sized risks and acting in a way that denies the consequences of

those risks, they are headed straight for Stage 4.

STAGE 4: GRASPING FOR SALVATION. The cumulative peril and/ or risks-

gone-bad of Stage 3 assert themselves, throwing the enterprise

into a sharp decline visible to all. The critical question is, How

does its leadership respond? By lurching for a quick salvation or

by getting back to the disciplines that brought about greatness

in the first place? Those who grasp for salvation have fallen

into Stage 4. Common "saviors" include a charismatic visionary

leader, a bold but untested strategy, a radical transformation, a

dramatic cultural revolution, a hoped-for blockbuster product, a

"game changing" acquisition, or any number of other silver-

bullet solutions. Initial results from taking dramatic action may

appear positive, but they do not last.

STAGE 5: CAPITULATION TO IRRELEVANCE OR DEATH. The longer a company

remains in Stage 4, repeatedly grasping for silver bullets, the

more likely it will spiral downward. In Stage 5, accumulated

setbacks and expensive false starts erode financial strength and

individual spirit to such an extent that leaders abandon all hope

of building a great future. In some cases, their leaders just sell

HOW THE MIGHTY FALL 23

out; in other cases, the institution atrophies into utter insignifi-

cance; and in the most extreme cases, the enterprise simply dies

outright.

It is possible to skip a stage, although our research suggests

that companies are likely to move through them in sequence.

Some companies move quickly through the stages, while others

languish for years, or even decades. Zenith, for example, took

three decades to move through all five stages, whereas Rubber-

maid fell from the end of Stage 2 all the way to Stage 5 in just

five years. (The collapse of financial companies like Bear Stearns

and Lehman Brothers that happened just as we were finishing

up this work highlights the terrifying speed at which some com-

panies fall.) An institution can stay in one stage for a long time,

but then pass quickly through another stage; Ames, for instance,

spent less than two years in Stage 3 but more than a decade in

Stage 4 before capitulating to Stage 5. The stages can also over-

lap, the remnants of earlier stages playing an enabling role

during later stages. Hubris, for example, can easily coincide with

Undisciplined Pursuit of More, or even with Denial of Risk and

Peril ("There can't be anything fundamentally wrong with us-

we're great!"). The following diagram shows how the stages

can overlap.

IS THERE A WAY OUT?

When I sent a first draft of this piece to critical readers, many

commented that they found our turn to the dark side grim, even

a bit depressing. And you might have the same experience as

24

Stage 1 Hubris Born of

Success

JI M COL LINS

Five Stages of Decline

Stage 2 Undisciplined Pursui t

of More

l Stage 3 Deni al of Risk and Peri l Stage 4

Graspin~ for Sa lva tion

Stage 5 Capitulat ion to

Irrelevance or Death

you read through the five stages of decline, absorbing story upon

story of once-great companies that precipitated their own

demise. It's a bit like studying train wrecks-interesting, in a

morbid sort of way, but not inspiring. So, before you embark on

this dark journey, allow me to provide two points of context.

First, we do ourselves a disservice by studying only suc-

cess. We learn more by examining why a great company fell

into mediocrity (or worse) and comparing it to a company that

sustained its success than we do by merely studying a successful

enterprise. Furthermore, one of the keys to sustained perfor-

mance lies in understanding how greatness can be lost. Better to

HOW THE MIGHTY FALL 25

learn from how others fell than to repeat their mistakes out of

ignorance.

Second, I ultimately see this as a work of well-founded hope.

For one thing, with a roadmap of decline in hand, institu-

tions heading downhill might be able to apply the brakes early

and revers!'; course. For another, we've found companies that

recovered-in some cases, coming back even stronger-after

having crashed down into the depths of Stage 4. Companies like

Nucor, Nordstrom, Disney, and IBM fell into the gloom at some

point in their histories yet came back.

Great companies can stumble, badly, and recover. While you

can't come back from Stage 5, you can tumble into the grim

depths of Stage 4 and climb out. Most companies eventually fall ,

and we cannot deny this fact. Yet our research indicates that

organizational decline is largely self-inflicted, and recovery

largely within our own control.

All companies go through ups and downs, and many show

signs of Stage 1 or 2, or even Stage 3 or 4, at some point in their

histories. Yet Stage 1 does not inevitably lead to Stage 5. The

evidence simply does not support the notion that all companies

must inevitably succumb to demise and disintegration, at least

not within a lOO-year time frame. Otherwise, how could you

explain companies with ten to fifteen decades of achievement,

companies like Procter & Gamble (P&G), 3M, and Johnson

& Johnson? Just because you may have made mistakes and

fallen into the stages of decline does not seal your fate. So long

26 JIM COLLINS

as you never fall all the way to Stage 5, you can rebuild a great

enterprise worthy oflasting.

As you read the following pages, you might wonder, But

what should we do if we find ourselves falling? It turns out that

much of the answer lies in adhering to highly disciplined man-

agement practices, and we'll return to the question of recovery

at the end of this piece. But for now, we need to descend into the

darkness to better understand why the mighty fall, so that we

might avoid their fate.

STAGE 1: HUBRIS BORN OF SUCCESS

Slap 1 Hubris Born of Success

Slage 3 Denial of Risk

and Peril

Slage 4 Graspin~ for

Salvation

Slage 5 Capitulation to Irrelevance or

Death

In December 1983, the last U.S.-made Motorola car radio rolled off the manufacturing line and into Chairman Robert Galvin's

hands as a reminder. Not as a sentimental memento, but as a

tangible admonition to continue to develop newer technologies

in an ongoing process of creative self-renewal. Motorola's his-

tory taught Galvin that it's far better to create your own future,

28 JIM COLLINS

repeatedly, than to wait for external forces to dictate your

choices.16 When the fledgling Galvin Manufacturing Corpora-

tion's first business, battery eliminators for radios, became obso-

lete, Paul Galvin (Robert's father) faced severe financial distress

in 1929. In response, he experimented with car radios, changed

the name of the company to Motorola, and started making a

profit. But this near-death experience shaped Motorola's found-

ing culture, instilling a belief that past accomplishment guaran-

tees nothing about future success and an almost obsessive need

for self-initiated progress and improvement. When Jerry Porras

and I surveyed a representative sample of 165 CEOs in 1989, they

selected Motorola as one of the most visionary companies in the

world, and we included Motorola in our Built to Last research

study. Amongst the eighteen visionary companies we studied

at that time, Motorola received some of the highest scores on

dimensions such as adherence to core values, willingness to

experiment, management continuity, and mechanisms of self-

improvement. We noted how Motorola pioneered Six Sigma

quality programs and embraced "technology road maps" to

anticipate opportunities ten years into the future.

By the mid-1990s, however, Motorola's magnificent run of

success, which culminated in having grown from $5 billion to

$27 billion in annual revenues in just a decade, contributed to a

cultural shift from humility to arrogance. In 1995, Motorola ex-

ecutives felt great pride in their soon-to-be-released StarTAC cell

phone; the then-smallest cell phone in the world, with its sleek

clamshell design, was the first of its kind. There was just one

problem: the StarTAC used analog technology just as wireless

carriers began to demand digital. And how did Motorola re-

HOW THE MIGHTY FALL 29

spond? According to Roger O. Crockett, who closely covered

the company for Business Week, one of Motorola's senior leaders

dismissed the digital threat: "Forty-three million analog cus-

tomers can't be wrong." 17 Then Motorola tried to strong-arm

carrier companies like Bell Atlantic. If you want the hot StarT AC,

explained the Motorola people, you'll need to agree to our rules:

a high percentage (along the lines of 75 percent) of all your

phones must be Motorola; and you must promote our phones

with stand-alone displays. Bell Atlantic, irritated by this "you

must" attitude, blasted back that no manufacturer would dictate

how much of their product to distribute. "Do you mean to tell

me that [if we don't agree to the program] you don't want to sell

the StarTAC in Manhattan?" a Bell Atlantic leader reportedly

challenged the Motorola executives. Motorola's arrogance gave

competitors an opening, and Motorola fell from being the #1

cell phone maker in the world, at one point garnering nearly 50

percent market share, to having only 17 percent share by 1999.18

Motorola's fall from greatness began with Stage 1, Hubris Born

of Success.

ARROGANT NEGLECT

Dating back to ancient Greece, the concept of hubris is defined

as excessive pride that brings down a hero, or alternatively (to

paraphrase classics professor J. Rufus Fears), outrageous arro- gance that inflicts suffering upon the innocent.19 Motorola began

2001 with 147,000 employees; by the end of 2003, the number

dropped to 88,000-nearly 60,000 jobs gone.20 As Motorola de-

30 JIM COLLIN S

scended through the stages of decline, shareholders also suf-

fered as stock returns fell more than 50 percent behind the

market from 1995 to 2005.21

We will encounter multiple forms of hubris in our journey through

the stages of decline. We will see hubris in undisciplined leaps

into areas where a company cannot become the best. We will

see hubris in a company's pursuit of growth beyond what it can

deliver with excellence. We will see hubris in bold, risky deci-

sions that fly in the face of conflicting or negative evidence. We

will see hubris in denying even the possibility that the enterprise

could be at risk, imperiled by external threats or internal erosion.

And we will encounter one of the most insidious forms of hubris:

arrogant neglect.

In October 1995, Forbes magazine ran a laudatory story about

Circuit City's CEO. Under his leadership, Circuit City had grown

more than 20 percent per year, multiplying the size of the com-

pany nearly ten times in a decade. How to keep the growth

going? After all, as Forbes commented, in the end every market

becomes mature, and this energetic CEO had "no intention of

sitting around and waiting for his business to be overwhelmed

by the competition." 22 And so Circuit City sought The Next Big

Thing. The company had already piloted CarMax, a visionary

application of the company's superstore expertise to the used

car business. Circuit City also became enamored with an adven-

ture called Divx. Using a special DVD player, customers would

be able to "rent" a DVD for as long as they liked before playing

HOW THE MIGHTY FALL 31

it, using an encryption system to unlock the DVD for viewing.

The advantage: not having to return a DVD to the video store

before having had a chance to watch it. 23

In late 1998, the Wall Street Transcript interviewed Circuit

City's CEO. There came a telling moment when the interviewer

asked what investors should worry about at Circuit City. "[In-

vestors] can be fairly relaxed about our ability to run the busi-

ness well," he replied. Then he felt compelled to add, "I think

there has been some investor sentiment ... that our CarMax en-

deavor and our Divx endeavor is taking attention away from our

Circuit City business. I'd refer ... [to] our 44 percent earnings

growth in the Circuit City business in the first half of the year."

He concluded, "This is a company that's in great shape." 24

Yet Circuit City plummeted through all five stages of decline.

Profit margins eroded and return on equity atrophied from

nearly 20 percent in the mid-1990s to single digits, leading to the

company's first loss in more than a quarter of a century. And on

November 10, 2008, Circuit City announced that it had filed for

bankruptcy.

Circuit City originally made the leap from good to great, a

process that began to gain momentum in the early 1970s, under

the inspired leadership of Alan Wurtzel. As with most climbs to

greatness, it involved sustained, cumulative effort, like turning

a giant, heavy flywheel: each push builds upon previous work,

compounding the investment of effort-days, weeks, months,

and years of work-generating momentum, from one turn to

ten, from ten to a hundred, from a hundred to a thousand, from

a thousand to a million. Once an organization gets one flywheel

going, it might create a second or third flywheel. But to remain

successful in any given area of activity, you have to keep push-

32 JIM COLLINS

ing with as much intensity as when you first began building that

flywheel, exactly what Circuit City did not do. Circuit City in

decline exemplifies a cycle of arrogant neglect that goes like

this:

1. You build a successful flywheel.

2. You succumb to the notion that new opportunities will

sustain your success better than your primary flywheel,

either because you face an impending threat or because

you find other opportunities more exciting (or perhaps

you're just bored).

3. You divert your creative attention to new adventures

and fail to improve your primary flywheel as if your

life depended on it.

4. The new ventures fail outright, siphon off your

best creative energy, or take longer to succeed than

expected.

5. You turn your creative attention back to your pri-

mary flywheel only to find it wobbling and losing

momentum.

A core business that meets a fundamental human need-

and one at which you've become best in the world-rarely be-

comes obsolete. In this analysis of decline, only one company,

Zenith, fell largely because it stayed focused on its core business

too long and failed to confront its impending demise. Further-

more, in 60 percent of our matched-pairs, the success-contrast

company paid greater attention to improving and evolving its

core business than the fallen company during the relevant era of

comparison.

HOW THE MIGHTY FALL 33

My point here is not that you should never evolve into new

arenas or that Circuit City made a mistake by investing in

CarMax or Divx. Creating CarMax required an impressive leap

of imagination; Circuit City invented an entirely new business

concept, doing for used cars what it had done for consumer

electronics (bringing a professional chain-store approach to an

industry that had previously been unprofessional and frag-

mented).25 Indeed, Circuit City would have done well to keep

CarMax rather than sell it. And with Divx, while the idea ulti-

mately failed in the marketplace, it can be viewed as a relatively

small experiment that just didn't work in the end, a positive ex-

ample of the Built to Last principle "Try a Lot of Stuff and Keep

What Works." The real lesson is that Circuit City left itself ex-

posed by not revitalizing its electronics superstores with as

much passion and intensity as when it first began building that

business two decades earlier. The great irony is that one of its

biggest opportunities for continued growth and success lay in its

core business, and the proof rests in two words: Best Buy.

In 1981, a tornado touched down in Roseville, Minnesota,

blasting to pieces the showroom of the local Sound of Music

store. Customers hurled themselves away from the windows as

shards of glass and splintered wood flew about in the gale. Luck-

ily, the storeroom remained largely undamaged, leaving founder

Richard Schulze with boxes of stereos and TVs, but no store-

front. A resourceful entrepreneur, he decided to throw a "Tor-

nado Sale" in the parking lot. He spent his entire marketing

budget on a local ad blitz that created a two-mile traffic jam as

droves of customers converged on the lot. Schulze realized

that he'd stumbled upon a great concept: advertise like crazy,

have lots of name-brand stuff to sell in a no-frills setting (albeit a

34 JIM COLLINS

step up from a parking lot), and offer low prices. Based on his

discovery, he invested all his money into creating a consumer

electronics superstore that he dubbed Best Buy. 26

From 1982 to 1988, Best Buy opened forty superstores (what

it called its Concept I stores) in the Midwest. In 1989, after sys-

tematically asking customers what would make for a better ex-

perience, Best Buy created its Concept II store model, which

replaced a commission-driven sales culture with a consultative

help-the-customer-find-the-best-answer culture.27 In 1995, Best

Buy created Concept III superstores chock-full of snazzy ways to

learn about products-touchscreen information kiosks, simu-

lated car interiors for checking out sound systems, CD listening

posts to sample music, "fun & games" areas for testing video

games-and then in 1999 moved on to Concept IV stores, de-

signed to help customers navigate the confusing myriad of new

electronics products flooding the market. Then it evolved yet

again in 2002, and in 2003 added Geek Squads to help customers

baffled by technology. 28

We found little evidence that Circuit City senior leaders took

seriously the threat from Best Buy until the late 1990s. Yet if

Circuit City had invested as much creative energy into making

its superstore business a superior alternative to Best Buy and had

captured half of Best Buy's growth from 1997 (when the compa-

nies had the same revenues) to 2006, Circuit City would have

grown to nearly twice the revenues it actually achieved dur-

ing that period.29 But instead, Best Buy eclipsed Circuit City by

more than 2.5 times, in both revenues and profit per employee.

Every dollar invested in Best Buy in 1995 and held to 2006

outperformed a dollar invested in Circuit City by four times. 30