The E-Myth Revisited – Michael E. Gerber (Part 3 of 3)

February 29, 2012

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All organizations are hierarchical. At each level people serve under those above them. An organization is therefore a structured institution. If it is not structured, it is a mob. Mobs do not get things done, they destroy things.

-Theodore Levitt, Management for Business Growth

 

Draw up an Organization Chart that outlines all of the positions that will exist in your company once it has reached its full potential.

At the beginning, not only will you be working in each position, you will be working on each position; basically, you’ll be doing the work that the position requires but you should also be evaluating and improving the position itself.

If everybody is doing everything, no one is responsible for anything.

Once you’ve refined the procedure for fulfilling a position, document it in an Operations Manual – then your employee prospects theoretically don’t even need experience.

Job procedures that are documented in Operations Manuals should primarily be Technician jobs (fairly straightforward labour work).

Two keys to working with employees are to treat them seriously and with respect, and to take your business seriously. When you treat your employees respectfully, they’ll want to return the favour; by demonstrating how seriously you take your business, the only way for your employees to reciprocate your respect is to respect your business (and the jobs they currently hold in it!).

Gerber shares a story about an amazing hotel he visited that embodied every great characteristic a small business can hold. He asked to talk to the manager and some of the employees in order to understand why this business was so great:

“The first thing that surprised me when I came to work here,” the Manager said, “was that the owner took me seriously. I mean, think about it. Here I was, a kid, with absolutely no experience in this business. But he never treated me that way. He treated me as though I were a serious adult. Somebody worth talking to about what he obviously considered important.” (197-198)

“It was like the hotel was an expression of who he was, a symbol of what he believed in. So if I hadn’t taken the hotel seriously, it would have looked like I wasn’t taking him seriously, as a man whose values I respected.”

People do not simply want to work for exciting people. They want to work for people who have created a clearly defined structure for acting in the world, where they can test themselves and be tested – a “game”.

Hiring experienced managers can be a downside because they will manage by the standards they learned at someone else’s business, not your standards.

 

You need people who want to play your game, not people who believe they have a better one.

-Michael E. Gerber

 

People that attribute their problems externally seek to fix the world so that they can remain the same.

 

When you hear something, you will forget it.
When you see something, you will remember it.
When you do something, you will understand it.

-Chinese proverb

The E-Myth Revisited – Michael E. Gerber (Part 2 of 3)

February 18, 2012

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“Pretend the business you own – or want to own – is the prototype for 5,000 more just like it.” (98)

If you create a solid foundational system for your business that employees can follow, it will make your business more system-oriented and less dependent on the whims and quirks of your employees. The better your system, the less that the quality of your employees matters.

One of the main benefits of having a written Operations Manual and a structure behind your business is that it helps the customer get a uniformly predictable, reliable service. This means that if the customer likes the service, he knows the next time he purchases it, it will be just as good.

The basic expectation of customers is that they will get a consistent experience. Do not regularly violate this expectation.

Basically, think of your business itself as a product.

 

“Creativity thinks up new things. Innovation does new things.” -Theodore Levitt, Harvard professor

Anytime you improve anything about your business, you will make more money than you would have otherwise.

“Innovation continually poses the question: ‘What is standing in the way of my customer getting what he wants from my business?’” (121)

Quantification – numerically measuring the impact of an innovation.

The only way to know the exact impact of an innovation is through rigorous quantification (ex: counting how many people came through the door at the time of a promotion).

Orchestration – ensuring that a good innovation is implemented every single time by eliminating employee discretion.

Without orchestration, you can’t have a franchise.

 

If you don’t know what your Primary Aim is, you can’t know if you’re moving toward it.

Ask yourself the following questions:

  • What do I wish my life to look like?
  • How do I wish my life to be like on a day-to-day basis?
  • How much money will I need to do the things I wish to do? By when?

Strategic Objective – a clear statement of what your business must do to reach its Primary Aim.

The first standard of your strategic objective is money: how much money do you expect your business to make? Unexpected circumstances always happen, but some estimate is better than no estimate.

Focus on core values when defining your business. Commodities are just the things that your customer walks out with, your product is what your customer feels after dealing with your business.

The E-Myth Revisited – Michael E. Gerber (Part 1 of 3)

December 20, 2011

Devon Sampson Business , , , , 1 Comment

 

Michael Gerber’s The E-Myth Revisited should be required reading for anyone thinking about starting a business or for those who have already taken that fateful step. The title refers to the author’s belief that entrepreneurs–typically brimming with good but distracting ideas–make poor businesspeople. He establishes an incredibly organised and regimented plan, so that daily details are scripted, freeing the entrepreneur’s mind to build the long-term success or failure of the business. You don’t need an MBA to understand or follow its directives; Gerber takes time to explain buzzwords and complex theories. Written in a clear and well-paced manner, The E-Myth Revisited is like receiving advice from an old friend.
-Amazon.com review

_____________________________________________________________________

Just because you understand the technical work of a business doesn’t mean that you understand how to run a business that does technical work.

Gerber argues that we have three different business personality types: the Entrepreneur, the Manager, and the Technician. When these three elements of your personality are balanced, things work. However, too often the Technician, finally happy to be his own boss, takes over. The wrong personality is in charge!

“If you watch long enough, you’ll begin to understand how devastating the tyranny of your strongest personality is to your life.” (31)

Gerber also describes the three stages of a business:

    Infancy
    Adolescence
    Maturity

In the Infancy stage of a business, the owner IS the business. It is the phase of the Technician.

What Technicians fail to understand is that businesses are much more than the aggregate of the various types of work done in it.

Adolescence is the phase where you get some help.

Management by Abdication (rather than by Delegation) is a trap that many owners get caught in during this stage – they let their employees handle everything so they have more time and freedom. Inevitably, when it becomes impossible to juggle all the balls in the air, everything collapses and the Technician takes over again.

“Every Adolescent business reaches a point where it pushes beyond its owner’s Comfort Zone – outside of which he begins to lose control.” (51)

    -The Technician’s boundary is determined by how much he can do himself
    -The Manager’s boundary is defined by how many Technicians he can supervise effectively
    -The Entrepreneur’s boundary is a function of how many managers he can engage in pursuit of his vision

“As a business grows, it invariably exceeds its owner’s ability to control it.” (51)

Any limitation you put on growth is unnatural because instead of being shaped by market forces (or lack of capital), the limitation comes from your own personal limitations.

It is possible, however, to launch your business as a Mature company.

The Mature company still goes through Infancy and Adolesence, but it goes through them in an entirely different way. It’s his perspective – The Entrepreneurial Perspective – that makes the difference.

I realized that for IBM to become a great company it would have to act like a great company long before it ever became one.”
-Tom Watson, founder of IBM

Most people who start a business just think about the work that they’ll have to do in it, rather than thinking about the business model itself. The former is the Technician’s Perspective, the latter is the Entrepreneurial Perspective.

Entrepreneur: Thinks, “How must the business work?”
Technician: Thinks, “What work has to be done?”

Entrepreneur: Starts with a picture of a well-defined future, and then comes back to the present with the intention of changing it to match that vision.
Technician: Starts with the present, and then looks forward to an uncertain future with the hope of keeping it much like the present.

Entrepreneur: Envisions the business in its entirety, from which the parts are derived.
Technician: Envisions the business in parts, from which is constructed the whole.

Entrepreneur: The present-day world is modeled after his vision.
Technician: The future is modeled after his present day world.

Poke the Box – Seth Godin

December 2, 2011

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If you’re stuck at the starting line, you don’t need more time or permission. You don’t need to wait for a boss’s okay or to be told to push the button; you just need to poke.

Poke the Box is a manifesto by bestselling author Seth Godin that just might make you uncomfortable. It’s a call to action about the initiative you’re taking-– in your job or in your life. Godin knows that one of our scarcest resources is the spark of initiative in most organizations (and most careers)-– the person with the guts to say, “I want to start stuff.” -Amazon.com description

 

A study showed that when people are placed in a forest without a map, they end up walking in circles instead of taking a clear path. People need a map. Be brave enough to draw one for them.

Our culture has become more about waiting to be picked than stepping up and being a captain (ie: people being dependent on another person to employ them, not even considering the possibility of starting their own business.)

Just because you’re not a boss or an entrepreneur doesn’t mean you can’t take initiative. Organize meetings, parties, and other group initiatives. If your boss doesn’t encourage independent, self-directed action like this, your job sucks and you should actively seek a new one.

Calibrating your level of initiative is just like Jeopardy. Knowing how to use the buzzer is of the utmost importance – buzz too early and Alex won’t finish the question, but if you’re too unsure of yourself you’ll buzz in too late and someone else will have taken the points.

“Polishing” yourself for other people has an asymptotic effect. For example, having a shower every day improves your appearance dramatically, but having three showers a day does not make your appearance three times better. The moral here is that it is extremely inefficient to be overly preoccupied with “polishing.”

The guy who started the first Starbucks only sold coffee beans; he made a huge error in his business plan. But at least he started it. If he had been worried about it not working, it never would’ve even existed.

Having a success-only policy stifles creativity and risk-taking, because big, risky ideas fail most of the time (but they’re still worth it because when they do succeed, they SUCCEED.)

The rule of initiating is that if it cannot fail, it doesn’t count. Go all-in.

“Life is not about extinguishing fear. It’s about calling its bluff.”