2009 Volume 12 Issue 2

What Determines Which Businesses Win and Which Lose?

What Determines Which Businesses Win and Which Lose?

Insights from Keith McFarland, author of The Breakthrough Company

Relationships often bring opportunities. I have known Keith McFarland for 20 years, since he was Associate Dean for the Pepperdine’s Graziadio School of Business and Management. Back then, the school was facing enrollment challenges. Dean Dr. James R. Wilburn brought Keith on to help with these issues he was just 26 years old at the time and several faculty had doubts about what he could do. As Keith focused his considerable energy on attracting new students, faculty doubts were quickly dispelled. He was a major factor in the successful launching of the graduate business programs on Pepperdine’s Malibu campus and he led the way in recruiting MBA students from several major cities in the East and West.

In January 2008, Keith published the The Breakthrough Company: How Everyday Companies Become Extraordinary Performers. Prominent business author and speaker Harvey MacKay wrote, “Keith McFarland is about to be added to the list of the top business thinkers.” The book was quickly praised by many other business writers, including, Stanford University distinguished professor Bill Barnett, Mattel CEO Bob Eckert, Stephen Covey, retired Motorola CEO Bob Galvin, and Steve Forbes, editor-in-chief of Forbes magazine. Since then, it has become a Wall Street Journal #1 best seller.

Editor’s Note: Click here to read the GBR’s review of Breakthrough Company.

Keith McFarland

My talk with Keith began a few days before he spoke to a gathering of Presidential and Key Executive (PKE) MBA students in Westlake Village in December 2008. Interviewing Keith McFarland was a distinct pleasure. He has an exceptionally quick mind and he is constantly looking for new opportunities to learn. His manner is rather straight-forward and matter-of-fact, with a bit of humor and a warm smile. Keith has the ability to quickly assess a situation and decide whether or not to press forward. With some frequency, he does press forward. That is probably why he is becoming an adept rock-climber!

Would you give me an overview of what you did from the time you left Pepperdine until you wrote The Breakthrough Company?

I started working as a management consultant, and then I was asked to run a company called Collectech Systems. We doubled in size every year for 10 years, and then we had a terrible thing happen, and I learned about resilience. We nearly went bankrupt. We were able to rebuild it. Eventually we sold it to GE Capital and Harvest Partners. Then I moved to Utah, where I live now, and I ran a business for Microsoft. We ran our 2000 testing centers for Microsoft around the world. We had a baby at the time I was working for Microsoft, I was 40-something, and soon I realized that having a company in 56 countries wasn’t good for being father to a newborn. I had to make a living, so I slowly got back into consulting because we love Utah. So, that’s kind of my story.

Where did the idea for your book, The Breakthrough Company, come from?

When I was enrolled in the doctoral program at the Peter Drucker Center, I had the good fortune to have Peter Drucker as my professor. I’ll never forget, one day we went to class and he asked this question I’ll spend the rest of my life working on this question. It’s an awesome question. Drucker said:

If you were going to make a list thats as short as possible but as long as necessary of the things that determine which businesses win and which lose, what would be on your list?

That question planted the seed for what eventually became the book in my mind. I continue to ask that question of every audience I speak to.

It really is a great question! It was 16 or 17 years ago, when I first heard this question asked. By the way, everyone asks me, “Well, what did Drucker say?” What happened is we talked about it in class for 90 minutes. Then someone raised their hand and said, “Professor Drucker, what’s the answer?” He said, “That’s what you should spend the rest of your life figuring out.”

Taking the lead from Drucker, I continue to ask that question. I actually have asked the same question of no less than 600 groups, the largest being 1,000 and the smallest being five people. I keep asking this question, partially because I’m interested, and whether or not I’ll ever discover anything new, and secondly, I did it for the first few years because I wanted to find out what the organizing principles of this answer were. All I can tell you is that my thinking continues to change as we go forward.

When you ask that question of groups, what kinds of things typically show up in their responses?

Several ideas show up most of the time. I would put the responses into three categories: Strategy, People, and Execution. I sometimes speak of these as three levers on the executive’s desk. The PKE students’ response to my question was like the responses from other groups.

Editor’s Note: The answers from McFarland’ session with the PKE-MBA students included: management, innovation, ethics, talent, leadership, alignment, risk-taking, culture, brand, DNA, flexibility, creativity that triggers innovation, motivation, profit, great product, good financing, customer service, focus, adaptability, and clear mission.

In my view, as we go into work every day, we should think about the three levers on a leader’s desk and ask ourselves, “Hey, isn’t my job really to optimize these three things?”These are the things that determine whether a business wins or loses.

You have worked with many companies that want to improve their performance. How do you approach that question?

Smart leaders know one of their main jobs is to help their business, and where appropriate, break out of routines. When people get into a routine, their brains often shift into neutral: They become less likely to spot changes in the environment and less likely to question what they are doing and how they are doing it. Embedded in routines are assumptions about the world and how it works, assumptions we often mistake for reality. When the world changes faster than our assumptions about it, danger lies ahead.

How do you get people to question their assumptions?

I ask questions, like, “In the past 90 days, what were your three most important strategic accomplishments?” I do not simply accept answers like, “We met our revenue budget.” A strategic accomplishment is one which changes the field of play in a company’s favor.

Another question I ask is, “In the past 90 days, what were the three most important ways you fell short of your potential?” The answers give insight into what people think the company should be emphasizing, but isn’t.

I also ask, “In the past 90 days, what are the three most important things you have learned about your strategy.” This is a tough question because it asks people to learn and adapt the strategy and tactics of the company.

At Pepperdine we give a lot of attention to teams. What do you think about teaming in the workplace?

When I work with companies to help them set strategy, I begin by creating what I call a Mind Bank. For groups to be effective, they need to have a method of aggregating the opinions and insights of individual members in a way that doesn’t undermine their diversity and independence. I always send 30 to 50 people a “strategy sketch” document, and ask them to return it to me with their reflections on what they consider the most important issues facing the business. If you’re looking for a way to make better decisions in your company, you will find that the more minds you get working on the problem, the better the solution.

Are you working on another book?

Yes, it is titled Bounce: The Art of Turning Tough Times into Triumph. It will be published by Random House on September 15 [2009].

What inspires you?

My six- and nine-year-olds! They remind me to see life through their eyes, with the future being one big shiny opportunity. Children are born with a transparent or clear way of seeing things. They respond to the world as it is. They are transparent. What you see, is what you get.

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Author of the article
Wayne L. Strom, PhD
Wayne L. Strom, PhD, is a professor of behavioral science at Pepperdine’s Graziadio School of Business and Management. As an active consultant to executives and organizations, Dr. Strom has worked with a long list of local and multinational corporations in Europe, Asia, and the United States, including ABC-TV, Baxter Healthcare, CB-Richard Ellis, Citicorp, Consolidated Capital, The Culver Studios, SmithKline, Southern California Edison, Toshiba America, the U.S. Department of Agriculture, and Yamaha. His current focus is on leadership processes for corporate renewal and the development of businesses as continuous improvement/learning organizations. He has served as associate dean, director of graduate programs, and chair of various academic committees. In 1986, he founded the Pepperdine Civic Leadership project, and in 1991, he was selected as a Harriet and Charles Luckman Distinguished Teaching Fellow in 1991. Currently he enlists executives in coaching employable but unemployed and homeless men and women for job searching skills.
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