“A crisis is a terrible thing to waste.” Have you heard that line lately? Rahm Emanuel, President-elect Barack Obama’s new chief of staff, recently used it. So did Merck CEO Dick Clark, noted management guru Jim Collins, who used the line as the centerpiece of a talk at the Fortune 500 Forum in Washington, D.C. on Monday.

Collins delivered a mega-dose of passion and pragmatic ideas, starting with the message that “good is the enemy of great.”  That idea, of course, is the premise of his best-selling management guide, Good to Great: Why Some Companies Make the Leap…and Others Don’t (2001). But now Collins is reaching beyond to study how great companies decline to mere “goodness” — or worse, irrelevance or death. Turbulence exposes weakness, as he notes, and now we see evidence in so many once-great companies that have fallen fast — Circuit City, Fannie Mae FNM , Motorola…the list goes on.

There’s a wealth of lessons here — and you’ll read them in the book that Collins plans to begin writing soon. A brief preview: Decline is typically self-inflicted, he has found. Decline usually occurs in stages. Stage 1 begins with hubris. Then comes undisciplined pursuit of big bets. Stage 3 is denial, followed by a grasping for salvation. (Sound familiar?) The lucky — or smart — companies don’t reach stage 5, which is capitulation to irrelevance or death.

An encouraging note from Collins: Companies can reach stage 4, grasping for salvation, and turn around. It happened to IBM and Hewlett-Packard . And to Disney DIS and Xerox too. Xerox’s Anne Mulcahy, Collins believes, is one of the best CEOs of the past 20 years. Each of these companies used decline, he noted, as a productive catalyst for change.

And what is the key to recovery when things turn so bad? If you’re a student of Collins, you can probably guess. Talent! As Collins has said often and repeated Monday, you need to figure out who is on your bus before you decide where the bus is going. Obama seems to be taking that guideline to heart. CEOs must too, particularly as turbulence spreads. As Collins said, “The best hedge against uncertainty is to have the best people on board.”