NEW YORK (MarketWatch) -- Given the sad fate of General Motors, Fannie Mae, Bear Stearns and scores of other companies that fell on hard financial times, it's a smart time for a best-selling business writer to pen a book titled "How the Mighty Fall."

And that's just what Jim Collins has done. Collins is an acclaimed management guru who earlier wrote "Good to Great" and was co-author of "Built to Last," which have sold seven million copies combined.

In his latest cautionary tale, Collins concludes that there are more ways for a company to fall than to become great. Or as Tolstoy wrote in "Anna Karenina:" "All happy families are alike; each unhappy family is unhappy in its own way."

Still, just about all failed companies go through most or all of five stages of decline defined by Collins:

Stage 1 is hubris born of success. The company's people become arrogant, regarding success as virtually an entitlement.

The company's people become arrogant, regarding success as virtually an entitlement. Stage 2 is the undisciplined pursuit of more -- more scale, more growth, more acclaim. Companies 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.

Companies 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. Stage 3 is denial of risk and peril. Leaders of the company 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.

Leaders of the company 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. Stage 4 is grasping for salvation. Common "saviors" include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a "game changing" acquisition or any number of other silver-bullet solutions.

Common "saviors" include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a "game changing" acquisition or any number of other silver-bullet solutions. Stage 5 is capitulation to irrelevance or death. Accumulative setbacks and expensive false starts erode financial strength and individual spirits to such an extent that leaders abandon all hope of building a great future. In some cases their leaders just sell out. In other cases the institution atrophies to utter insignificance.

Collins identifies 10 companies that took at least one tremendous fall at some point in their history, but recovered. They are: Xerox XRX, +1.49% , Nucor NUE, +1.60% , IBM IBM, +1.30% , Texas Instruments TXN, +1.40% , Pitney Bowes PBI, , Nordstrom JWN, +3.39% , Disney DIS, -0.31% , Boeing BA, +3.43% , HP HPQ, +1.48% and Merck MRK, +1.22% .

Still others never recovered. Take the case of giant A&P. Collins writes, "A&P's arrogant stance that 'we will continue to keep things just the way they are, and we will be successful because -- well, we're A&P!!' left it vulnerable to new store formats developed by companies like Kroger KR, +0.90% . [A&P executives] failed to ask the fundamental question, Why was A&P successful in the first place? Not the specific practices and strategies that worked in the past, but the fundamental reasons for its success? It retained its aging Depression-generation customers but became utterly irrelevant to a new generation."

Eventually, shaken out of its torpor by fierce new competitors, A&P GAP, -0.10% converted more than 4,000 stores to a format called WEO, (Where Economy Originates), driving down prices to regain market share in a desperation move described by one industry observer as a Kamikaze dive. The move proved catastrophic to profitably. Then A&P abandoned the strategy and hired a charismatic savior from the outside who produced a brief return to profitability, only to resign when A&P collapsed yet again into a string of losses."

From 10,000 stores in 1955 and sales that ran more than $1 billion above its nearest competitor, the company ran less than 500 outlets in 2008.

Wal-Mart WMT, +2.72% avoided such problems, thanks largely to the self-deprecating, low profile David Glass, who followed founder Sam Walton as CEO. As Collins writes, "[Glass] learned from Walton that Wal-Mart does not exist for the aggrandizement of its leaders; it exists for its customers. Glass fervently believed in Wal-Mart's core purpose (to enable people of average means to buy more of the same things previously available only to wealthier people)."

Too much growth

On the other hand, look at the terrifying demise of Rubbermaid NWL, +1.84% , the housewares products company that aimed to introduce more than one new product every day -- and proved only that a company can grow too fast. "As Rubbermaid realized too late, innovation can fuel growth, but frenetic innovation -- growth that erodes consistent tactical excellence -- can just as easily send a company cascading through the stages of decline." Newell Co. acquired Rubbermaid in 1999.

Also, discontinuous leaps into areas for which you have no burning passion is undisciplined. David Packard, co-founder of Hewlett-Packard, had the insight that a great company is more likely to die of indigestion from too much opportunity than starvation from too little.

Finally, take the case of Ames, the small town retailer. Collins writes, "Ames hired CEOs and jettisoned CEOs, and hired new CEOs, at one point churning through three management teams in 33 months -- lurching from strategy to strategy, program to program, looking for a fundamental transformation." The company ultimately failed.

"The signature of mediocrity," Collins concludes, "is not an unwillingness to change. The signature of mediocrity is chronic inconsistency."