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Don’t Just Build a Strategy. Build A Strategy-Making Machine.

These three questions can drive the process.
COLLABORATORS Keith McFarland
Build a strategy-making machine at your company

When it comes to creating a business strategy, the main mistake that organizations and leaders make is simple: They craft just one strategy that governs the company’s activity and thinking for a long time, says Keith McFarland, author of The Breakthrough Company: How Everyday Companies Become Extraordinary Performers. As a result, these companies cannot adequately adjust to competitive conditions — which change far more rapidly than their strategy and its tactics.

What should leaders do instead? They should build an always-on, ever-evolving, “strategy-making machine.” Speaking to growth-company executives at the 2012 Inc. 5000 Conference, McFarland describes “strategy” as essentially “a collection of ideas about how you’re going to win.”

The goal of an effective strategy-making machine, he says, should be to execute three steps in a continuous cycle: Develop insights yielding ideas about how to win; decide which of those ideas to pursue; and act on those decisions. After that, you should glean your next round of insights from the market’s response to your actions.

The path to instilling that strategy-making routine in an organization isn’t complicated, but it also isn’t easy. First you have to break the old strategy routine, which is probably too long, too exclusive, and too CEO-centric, says McFarland, who advocates implementing 90-day cycles in place of annual ones and involving more than a few top managers. “Any time you’re talking about ‘where we’re going’ and ‘how we’re going to get there,’ you want as many people in the room as possible,” he says.

To change your routine—and kick-start the process of building your strategy-making machine—begin modestly, McFarland advises. Get somebody who isn’t the CEO to gather 20 to 30 people and ask them to answer the questions above.

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THE PLUS

McFarland served as CEO of two-time Inc. 500 company Collectech Systems before turning his full attention to how the most successful companies sustain growth. His research led to his first book, The Breakthrough Company. In an interview on Inc.com by Mike Hofman, McFarland summarizes what he discovered.

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