How the Mighty Fall: Signs of decline applied to the NBA

by Jesse Blanchard

Empires fall. The history books are littered with them. The Greeks. The Romans. Spain. Britain. Maybe someday even America. The same holds true for nearly every major power that’s ever risen to the top, be it nation, corporation, or basketball team.

Especially basketball teams. After all, unlike nations or corporations, basketball teams rely solely on physical assets (players) whose value depreciates relatively quickly. But does it have to be this way? If given the proper warning signs can a team stave off decline?

A year ago author Jim Collins of  How the Mighty Fall talked to Business Week explaining the five stages of decline. It’s an interesting read and one that is not only applicable to business. In it, he poses an interesting question:

“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 of decline.” That question—how would you know?

The premise of the book is simple-if you can identify signs of decline AND react accordingly, you can reverse the course of decline if not avoid it all together. The San Antonio Spurs have sat near or at the top of the NBA hierarchy for two decades.

Have the Spurs begun their own descent? Apparently. They’ve gone from perennial title favorite to merely just another good team. But with the latest offseason additions they are also far from fallen. And if you are to believe what’s written in the linked excerpt, the notion of the Spurs continuing their run with Gregg Popovich and R.C. Buford at the helm is not so far fetched.

Stage 1: Hubris Born of Success

Great enterprises can become insulated by success; accumulated momentum can carry an enterprise forward for a while, even if its leaders make poor decisions or lose discipline. Stage 1 kicks in when people become arrogant, 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 understanding and insight (“We’re successful because we understand why we do these specific things and under what conditions they would no longer work”), decline will very likely follow.

In my opinion, herein lies the greatest strength of the San Antonio Spurs enduring run. The common link between each member of the Spurs-and they’ve ranged from choir boys (Avery Johnson, David Robinson) to auto-tune hero to Stephen Jackson-is that they have, as Gregg Popovich puts it, “gotten over themselves”.

The book identifies one trait commonly found amongst all great leaders:

The best leaders we’ve studied never presume they’ve reached ultimate understanding of all the factors that brought them success. For one thing, they retain a somewhat irrational fear that perhaps their success stems in large part from fortuitous circumstance.

Popovich often jokes that when Tim Duncan retires, he will join him shortly out the door. Much of his success, Popovich quickly attributes to the lucky bounce of a few ping pong balls, which is the sort of attitude one would expect from a man who once lived in the dorms of Division III Pomona-Pitzer before rising up the NBA ranks.

Luck and chance are essential to any bit of success. Those who understand this, that retain that irrational fear, often drive themselves to be better positioned when that luck runs out.

Perhaps the best example of a team succumbing to stage 1 is the Shaq led Los Angeles Lakers. As great a dynasty as they were, there was the lack of condition on Shaq’s part. The massive egos tearing the team apart. And ultimately a team that lost sight of what carried them to success in the 2004 NBA Finals against a hungry Detroit Pistons team.

Popovich and Tim Duncan have created an identity in San Antonio. They understand why what they do is successful (jump shots come and go, but defense is a product of effort and as such can always be consistent), and under what circumstances they no longer work.

It can be argued that the Spurs have moved slightly away from this identity, but if they have, it was not due to hubris.

Stage 2: Undisciplined Pursuit of More

Hubris from Stage 1 (“We’re so great, we can do anything!”) leads right to Stage 2, the Undisciplined Pursuit of More—more scale, more growth, more acclaim, more of whatever those in power see as “success.” Companies 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.

Chris Paul wants out of New Orleans, and unless something drastic happens the Hornets will eventually find what could have been victimized by their own undisciplined pursuit of more. The New Orleans Hornets were never great, but they could have been.

Enticed by the promise of their young franchise point guard and a playoff appearance, the Hornets signed a slew of bad long-term contract for aging players in a market that could afford neither. Rather than putting a young team with cheap assets (i.e., draft picks) to grow around Chris Paul like the Oklahoma City Thunder have done with Kevin Durant, the Hornets reached a one-year peak and fizzled.

Chance has led to the Spurs success in this regard, but Popovich and Buford have done a masterful job of capitalizing on it. Pairing a rookie Tim Duncan with David Robinson put the Spurs immediately in the hunt as title contenders, meaning patience was a nice but unnecessary virtue.

Still, the team has done little to move beyond their means, always maintaining flexibility to upgrade around their core despite comparatively limited monetary resources. The patience to wait on developing foreign draft picks has landed them Manu Ginobili and Tiago Splitter.

And while the Spurs could have traded away any number of their assets to try and push them into championship contention for a one-year shot, their faith in the system and their young players has quietly left them with a promising young nucleus of George Hill, DeJuan Blair, Tiago Splitter, and James Anderson moving past the Tim Duncan Era.

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 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 responsibility. 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 outsize risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4.

The next two stages present an interesting case study between three NBA teams: the San Antonio Spurs, the Phoenix Suns, and the Cleveland Cavaliers. It is between stages three and four that visible signs of decline first begin to manifest themselves.

The Spurs have continued on their steady pace while the Suns and Cavaliers have each dealt with stage four in different ways with one holding off Stage 5 (at least temporarily) by returning to their roots and the other charging full force into ruin.

The book offers a risk-taking concept it calls the “waterline principle”:

Think of being on a ship, and imagine that any decision gone bad will blow a hole in the side of the ship. If you blow a hole above the waterline (where the ship won’t take on water and possibly sink), you can patch the hole, learn from the experience, and sail on. But if you blow a hole below the waterline, you can find yourself facing gushers of water pouring in, pulling you toward the ocean floor. And if it’s a big enough hole, you might go down really fast, just like some of the financial firm catastrophes of 2008.

Successful powers take big risks, but never those that put holes below the waterline.

For the Suns, the waterline risks presented themselves in two ways: unwavering belief in a system to the point that the powers that be deemed it unnecessary to tweak, and the belief that the team could leverage all of its draft picks for financial gain and still succeed.

In Phoenix, the Suns playoff failures can be defined by Mike D’Antoni’s press conferences: “Our defense/system/effort was fine, we just need to push the ball more”, and pinning losses on external factors, injuries, suspensions, etc.

In short, the Suns management believed so much in its system that any failures had to be someone else’s fault and not the fact that the team had no depth because it sold off all of its draft picks, which helped contribute to injuries because the extended minutes a short rotation had to play, and the failure to take responsibility for their player’s own actions (coming off the bench).

In Cleveland, regular season success and the growth of LeBron James led Danny Ferry to continuously build on to the team in the belief that the Cavaliers were merely one piece away without considering the possibility that their might be a fundamental flaw to their system, core, or even their superstar.

In Stage 3, success had led to the demise of self evaluation and in turn has led to risks without consideration of consequences-mostly because of the organizations own self delusions of where they stand.

In San Antonio, the Spurs experience their share of peaks and valleys, but the team always gives an honest evaluation of itself and acts accordingly. Popovich refuses to allow the team to blame external factors, always keeping focus on what it can control.

The team identifies and attempts to correct fundamental weaknesses, sometimes taking risks, but never at the expense of punching a hole below the waterline. Even in the Richard Jefferson trade, the team a.) gave up little to acquire him, and b.) gave themselves an out (his opt-out that resulted in a reasonable deal when you consider what they gave Splitter).

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.

The obvious example of Stage 4 is the Phoenix Suns, who experienced new leaders (Terry Porter/Steve Kerr), a radical transformation, a dramatic cultural revolution, and a hoped-for blockbuster product in the “game-changing” acquisition of Shaq.

As the decline of the Phoenix Suns became apparent, they reacted by going in a drastically different direction to try and put them over the top, moving away from what made them so successful.

In Cleveland, it was always about that one more piece. If only they could get a high scoring point guard to pair with LeBron James, or a big man to contend with Dwight Howard, or an increasingly popular “stretch four”. Their grasp for salvation led to the acquisitions of Mo Williams, Shaq, and Antawn Jamison, limited flexibility to rebuild around LeBron, and the departure of LeBron.

In the Spurs, the Richard Jefferson trade is the lone move that might be interpreted as a sign of Stage 4, but even then it’s hard to fault the move and this summer they quickly returned to their roots.

If there remains any panic in Spurs fans, they need to simply take Collins advice under consideration and look at how the Phoenix Suns reversed course last season by returning to what made them great and staying the course. Which has always been my argument for not trading away a piece of the Big Three in haste.

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 the company’s leader just sells out; in other cases the institution atrophies into utter insignificance; and in the most extreme cases the enterprise simply dies outright.

Sadly, for the Cleveland Cavaliers, this appears to be where their beloved basketball franchise has landed. The organization’s leader, LeBron James, abandoned all hope of building a great future and “sold out”, taking his talents to South Beach.

The Spurs might not be at the height of their powers, but they are not mortgaging their future because of it. And because of that, there is always an opportunity for a triumphant return.