Here is an excerpt from an article written by Chris Zook for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.

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At any given moment, about 5%–7% of companies either are in free fall or are about to be. Free fall is a crisis of obsolescence and decline that can happen at any point in a company’s life cycle, but most often it affects maturing incumbents whose business model has come under competitive attack from insurgents or is no longer viable in a changing market. And here’s a sobering fact: Only about 10%–15% of those companies will ever pull out of it. Of those who do, about half have to fundamentally redefine at least a part of their core business in order to save themselves.

At first, the causes of free fall appear to be external: a global financial crisis, a banking system collapse, government deregulation, or, more common, a new business model or technology harnessed by a nimble insurgent competitor. But these forms of external turbulence tend to be the trigger of free fall, not the cause.

Think of Kodak, which in the 1990s was the apparently unassailable leader in its market, with 80% market share in its core film business. By now everyone knows the story: Kodak went into a free fall that led to bankruptcy in 2012 because it failed to respond to the disruption of digital technology — even though one of its own engineers invented a technology for capturing a digital image in 1975. Clearly, something else, beyond the disruptive technology itself, is behind the demise of companies like Kodak.

We set out to understand why once successful companies enter these deadly tailspins, and found that the root causes are usually internal. Leaders did not prepare for the external problem, did not adapt fast enough, or did not have a second-generation engine for the business ready to go when the first-generation engine became obsolete. Systemic dysfunction on the inside prevented the company from being able to adapt to profound strategic challenges on the outside.

We also found that free-fall situations are responsible for some of the largest swings in value — not only down but also up. If handled properly, free fall represents an enormous opportunity. Just think of Apple, which pulled itself out of catastrophic free fall in the late 1990s and has since risen to spectacular new heights.

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Here is a direct link to the complete article.

Chris Zook is a partner in Bain & Company’s Boston office and has been a co-head of the firm’s global strategy practice for twenty years. He is a co-author of a number of bestselling books including Profit from the Core and The Founder’s Mentality: How to Overcome the Predictable Crises of Growth (Harvard Business Review Press, June 2016).