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

February 18, 2012

Devon Sampson Business , , , , , , Leave a comment

“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

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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.