Book - The E-myth revisited: why most small businesses don't work and what to do about it

  • Metadata:
    • author: Michael E. Gerber
    • title: The E-myth revisited: why most small businesses don't work and what to do about it
    • year: 1995

Unprocessed highlights and reading notes (turn them into separate notes when revisiting the topic):

Yes, the simple truth about the greatest businesspeople I have known is that they have a genuine fascination for the truly astonishing impact little things done exactly right can have on the world.

This book is about such an idea—an idea that says your business is nothing more than a distinct reflection of who you are. If your thinking is sloppy, your business will be sloppy. If you are disorganized, your business will be disorganized. If you are greedy, your employees will be greedy, giving you less and less of themselves and always asking for more.

They intoxicate themselves with work so they won’t see how they really are. Aldous Huxley

Notes: 1) Ref?

It is an assumption made by all technicians who go into business for themselves, one that charts the course of a business—from Grand Opening to Liquidation—the moment it is made. That Fatal Assumption is: if you understand the technical work of a business, you understand a business that does that technical work. And the reason it’s fatal is that it just isn’t true.

The problem is that everybody who goes into business is actually three-people-in-one: The Entrepreneur, The Manager, and The Technician.

The entrepreneurial personality turns the most trivial condition into an exceptional opportunity. The Entrepreneur is the visionary in us. The dreamer.

The Entrepreneur lives in the future, never in the past, rarely in the present.

In business, The Entrepreneur is the innovator, the grand strategist, the creator of new methods for penetrating or creating new markets,

Every strong entrepreneurial personality has an extraordinary need for control. Living as he does in the visionary world of the future, he needs control of people and events in the present so that he can concentrate on his dreams.

To The Entrepreneur, most people are problems that get in the way of the dream.

The managerial personality is pragmatic. Without The Manager there would be no planning, no order, no predictability.

If The Entrepreneur lives in the future, The Manager lives in the past.

If The Entrepreneur lives in the future, The Manager lives in the past. Where The Entrepreneur craves control, The Manager craves order. Where The Entrepreneur thrives on change, The Manager compulsively clings to the status quo.

If The Entrepreneur lives in the future, The Manager lives in the past. Where The Entrepreneur craves control, The Manager craves order. Where The Entrepreneur thrives on change, The Manager compulsively clings to the status quo. Where The Entrepreneur invariably sees the opportunity in events, The Manager invariably sees the problems.

The Manager is the one who runs after The Entrepreneur to clean up the mess. Without The Entrepreneur there would be no mess to clean up. Without The Manager, there could be no business, no society. Without The Entrepreneur, there would be no innovation. It is the tension between The Entrepreneur’s vision and The Manager’s pragmatism that creates the synthesis from which all great works are born.

The Technician is the doer. “If you want it done right, do it yourself” is The Technician’s credo. The Technician loves to tinker. Things are to be taken apart and put back together again. Things aren’t supposed to be dreamed about, they’re supposed to be done.

If The Entrepreneur lives in the future and The Manager lives in the past, The Technician lives in the present.

So he works steadily and is happiest when he is in control of the work flow.

As a result, The Technician mistrusts those he works for, because they are always trying to get more work done than is either possible or necessary. To The Technician, thinking is unproductive unless it’s thinking about the work that needs to be done.

Everyone gets in The Technician’s way.

The Entrepreneur is always throwing a monkey wrench into his day with the creation of yet another “great new idea.” On the other hand, The Entrepreneur is always creating new and interesting work for The Technician to do, thus establishing a potentially symbiotic relationship.

The Entrepreneur is always throwing a monkey wrench into his day with the creation of yet another “great new idea.” On the other hand, The Entrepreneur is always creating new and interesting work for The Technician to do, thus establishing a potentially symbiotic relationship. Unfortunately, it rarely works out that way.

The Entrepreneur is always throwing a monkey wrench into his day with the creation of yet another “great new idea.” On the other hand, The Entrepreneur is always creating new and interesting work for The Technician to do, thus establishing a potentially symbiotic relationship. Unfortunately, it rarely works out that way. Since most entrepreneurial ideas don’t work in the real world, The Technician’s usual experience is one of frustration and annoyance at being interrupted in the course of doing what needs to be done to try something new that probably doesn’t need to be done at all.

The Manager is also a problem to The Technician because he is determined to impose order on The Technician’s work, to reduce him to a part of “the system.” But being a rugged individualist, The

The Manager is also a problem to The Technician because he is determined to impose order on The Technician’s work, to reduce him to a part of “the system.” But being a rugged individualist, The Technician can’t stand being treated that way.

To The Manager, then, The Technician becomes a problem to be managed. To The Technician, The Manager becomes a meddler to be avoided. To both of them, The Entrepreneur is the one who got them into trouble in the first place!

‘I wonder’ is the true work of the entrepreneurial personality.”

INFANCY: THE TECHNICIAN’S PHASE

You’re consumed by it; totally invested in doing whatever is necessary to keep it alive. But now you’re doing not only the work you know how to do but the work you don’t know how to do as well. You’re not only making it but you’re also buying it, selling it, and shipping it. During Infancy, you’re a Master Juggler, keeping all the balls in the air.

You’re consumed by it; totally invested in doing whatever is necessary to keep it alive. But now you’re doing not only the work you know how to do but the work you don’t know how to do as well. You’re not only making it but you’re also buying it, selling it, and shipping it. During Infancy, you’re a Master Juggler, keeping all the balls in the air. It’s easy to spot a business in Infancy—the owner and the business are one and the same thing.

But then it changes. Subtly at first, but gradually it becomes obvious. You’re falling behind. There’s more work to do than you can possibly get done. The customers are relentless. They want you; they need you. You’ve spoiled them for anyone else. You’re working at breakneck speed.

In a flash, you realize that your business has become The Boss you thought you left behind. There’s no getting rid of the Boss!

Notes: 1) The boss is dead long live the boss

Infancy ends when the owner realizes that the business cannot continue to run the way it has been; that, in order for it to survive, it will have to change. When that happens—when the reality sinks in—most business failures occur.

“It’s only a problem when The Technician consumes all the other personalities. When The Technician fills your day with work. When The Technician avoids the challenge of learning how to grow a business.

If your business depends on you, you don’t own a business—you have a job.

If your business depends on you, you don’t own a business—you have a job. And it’s the worst job in the world because you’re working for a lunatic!

ADOLESCENCE: GETTING SOME HELP

What kind of help do you, the overloaded Technician, go out to get? The answer is as easy as it is inevitable: technical help. Someone with experience. Someone with experience in your kind of business.

What kind of help do you, the overloaded Technician, go out to get? The answer is as easy as it is inevitable: technical help. Someone with experience. Someone with experience in your kind of business. Someone who knows how to do the technical work that isn’t getting done—usually the work you don’t like to do.

There’s a critical moment in every business when the owner hires his very first employee to do the work he doesn’t know how to do himself, or doesn’t want to do.

Every Adolescent business reaches a point where it pushes beyond its owner’s Comfort Zone—the boundary within which he feels secure in his ability to control his environment, and outside of which he begins to lose that control. The Technician’s boundary is determined by how much he can do himself.

Every Adolescent business reaches a point where it pushes beyond its owner’s Comfort Zone—the boundary within which he feels secure in his ability to control his environment, and outside of which he begins to lose that control. The Technician’s boundary is determined by how much he can do himself. The Manager’s is defined by how many technicians he can supervise effectively or how many subordinate managers he can organize into a productive effort. The Entrepreneur’s boundary is a function of how many managers

Every Adolescent business reaches a point where it pushes beyond its owner’s Comfort Zone—the boundary within which he feels secure in his ability to control his environment, and outside of which he begins to lose that control. The Technician’s boundary is determined by how much he can do himself. The Manager’s is defined by how many technicians he can supervise effectively or how many subordinate managers he can organize into a productive effort. The Entrepreneur’s boundary is a function of how many managers he can engage in pursuit of his vision.

causes the business to go into a tailspin. And as the business grows beyond the owner’s Comfort Zone—as the tailspin accelerates—there are only three courses of action to be taken, only three ways the business can turn. It can return to Infancy. It can go for broke. Or it can hang on for dear life.

It can return to Infancy. It can go for broke. Or it can hang on for dear life.

Because Sarah didn’t feel comfortable in this new role, this role of the owner, this role of The Entrepreneur, this role of a businessperson, she left everything up to chance. She abdicated her accountability as an owner and took on the role of just another employee.

Because Sarah didn’t feel comfortable in this new role, this role of the owner, this role of The Entrepreneur, this role of a businessperson, she left everything up to chance. She abdicated her accountability as an owner and took on the role of just another employee. She avoided fully participating in her relationship with Elizabeth, and, in the process, created a dynamic between herself and her employee built on a weak structure.

“Simply put, your job is to prepare yourself and your business for growth. “To educate yourself sufficiently so that, as your business grows, the business’s foundation and structure can carry the additional weight.

Maturity, the third phase of a company’s growth, is exemplified by the best businesses in the world. Businesses such as McDonald’s, Federal Express,

Every day at IBM was a day devoted to business development, not doing business. We didn’t do business at IBM, we built one

Perspective that says it’s not the commodity or the work itself that is important. What’s important is the business: how it looks, how it acts, how it does what it is intended to do.

The Entrepreneurial Perspective asks the question: “How must the business work?” The Technician’s Perspective asks: “What work has to be done?”

Thus, the Entrepreneurial Model does not start with a picture of the business to be created but of the customer for whom the business is to be created. It understands that without a clear picture of that customer, no business can succeed.

wouldn’t! Once he understood this, Ray Kroc’s problem became his opportunity. Forced to create a business that worked in order to sell it, he also created a business that would work once it was sold, no matter who bought it. Armed with that realization, he set about the task of creating a foolproof, predictable business. A systems-dependent business, not a people-dependent business. A business that could work without him.

Armed with that realization, he set about the task of creating a foolproof, predictable business. A systems-dependent business, not a people-dependent business. A business that could work without him.

Unlike the trade name franchise before it, Ray Kroc’s system left the franchisee with as little operating discretion as possible. This was accomplished by sending him through a rigorous training program before ever being allowed to operate the franchise. At McDonald’s, they called it the University of Hamburgerology, or Hamburger U.

There, the franchisee learned not how to make hamburgers but how to run the system that makes hamburgers—the system by which McDonald’s satisfied its customers every single time. The system that was to be the foundation of McDonald’s uncommon success.

Thus, the name: Turn-Key Operation. The franchisee is licensed the right to use the system, learns how to run it, and then “turns the key.” The business does the rest.

So, now you have it: the Franchise Prototype is the model you’ve been looking for. The Franchise Prototype is the model of a business that works. The balanced model that will satisfy The Entrepreneur, The Manager, and The Technician all at once. And it’s been there all the time!

In other words, pretend that you are going to franchise your business. (Note: I said pretend. I’m not saying that you should. That isn’t the point here—unless, of course, you want it to be.)

  1. The model will provide consistent value to your customers, employees, suppliers, and lenders, beyond what they expect. 2. The model will be operated by people with the lowest possible level of skill. 3. The model will stand out as a place of impeccable order. 4. All work in the model will be documented in Operations Manuals. 5. The model will provide a uniformly predictable service to the customer. 6.

  2. The model will provide consistent value to your customers, employees, suppliers, and lenders, beyond what they expect. 2. The model will be operated by people with the lowest possible level of skill. 3. The model will stand out as a place of impeccable order. 4. All work in the model will be documented in Operations Manuals. 5. The model will provide a uniformly predictable service to the customer. 6. The model will utilize a uniform color, dress, and facilities code.

way: How can I create a business whose results are systems-dependent rather than people-dependent? Systems-dependent rather than expert-dependent. How can I create an expert system rather than hire one?

It’s been said, and I believe it to be true, that great businesses are not built by extraordinary people but by ordinary people doing extraordinary things. But for ordinary people to do extraordinary things, a system—“a way of doing things”—is absolutely essential in order to compensate for the disparity between the skills your people have and the skills your business needs if it is to produce consistent results.

It’s your job—more accurately, the job of your business—to develop those tools and to teach your people how to use them.

It’s your people’s job to use the tools you’ve developed and to recommend improvements based on their experience with them.

There’s another reason for this rule—what I call the Rule of Ordinary People—that says the blessing of ordinary people is that they make your job more difficult. The typical owner of a small business prefers highly skilled people because he believes they make his job easier—he can simply leave the work to them.

There’s another reason for this rule—what I call the Rule of Ordinary People—that says the blessing of ordinary people is that they make your job more difficult. The typical owner of a small business prefers highly skilled people because he believes they make his job easier—he can simply leave the work to them. That is, the typical small business owner prefers Management by Abdication to Management by Delegation. Unfortunately, the inevitable result of this kind of thinking is that the business also grows to depend on the whims and moods of its people. If they’re in the mood, the job gets done. If they’re not, it doesn’t. In this kind of business, a business that relies on discretion, “How do I motivate my people?” becomes the constant question. “How do I keep them in the mood?” It is literally impossible to produce a consistent result in a business that depends on extraordinary people.

You will be forced to find a system that leverages your ordinary people to the point where they can produce extraordinary results over and over again.

A business that looks orderly says to your customer that he can trust in the result delivered and assures your people that they can trust in their future with you.

  1. All Work in the Model Will Be Documented in Operations Manuals

The Operations Manual—the repository of the documentation—is therefore best described as a company’s How-to-Do-It Guide.

  1. The Model Will Provide a Uniformly Predictable Service to the Customer

There was absolutely no consistency to the experience. The expectations created at the first meeting were violated at each subsequent visit.

There was absolutely no consistency to the experience. The expectations created at the first meeting were violated at each subsequent visit. I wasn’t sure what to expect. And something in me wanted to be sure. I wanted an experience I could repeat by making the choice to return.

Believe it or not, the colors and shapes of your model can make or break your business! Louis Cheskin, founder of the Color Research Institute, wrote about the power of colors and shapes in his book, Why People Buy.

Notes: 1) Note that down

Go to work on your business rather than in it. Go to work on your business as if it were the pre-production prototype of a mass-produceable product.

How can I get my business to work, but without me? How can I get my people to work, but without my constant interference? How can I systematize my business in such a way that it could be replicated 5,000 times, so the 5,000th unit would run as smoothly as the first?

Innovation, Quantification, and Orchestration.

Says Professor Levitt,

Says Professor Levitt, “Creativity thinks up new things. Innovation does new things.”1

“Creativity thinks up new things. Innovation does new things.”1 The Franchise Revolution has brought with it an application of Innovation that has been almost universally ignored by American business. By recognizing that it is not the commodity that demands Innovation but the process by which it is sold, the franchisor aims his innovative energies at the way in which his business does business. To the franchisor, the entire process by which the business does business is a marketing tool, a mechanism for finding and keeping customers. Each and every component of the business system is a means through which the franchisor can differentiate his business from all other businesses in the mind of his consumer. Where the business is the product, how

Innovation is the heart of every exceptional business. Innovation continually poses the question: What is standing in the way of my customer getting what he wants from my business?

But on its own, Innovation leads nowhere. To be at all effective, all Innovations need to be quantified. Without Quantification, how would you know whether the Innovation worked? By Quantification, I’m talking about the numbers related to the impact an Innovation makes.

Orchestration is the elimination of discretion, or choice, at the operating level of your business.

“Discretion is the enemy of order, standardization, and quality.”2 “If a blue suit works, wear it every single time you’re in front of a customer,” is the dictum of the disciples of Orchestration. “If ‘Hi, have you been in here before?’ works better than anything else you’ve tried, say it every single time you greet a customer,” is the rule of the day from the disciples of Orchestration.

In short, Innovation, Quantification, and Orchestration are the backbone of every extraordinary business.

In short, Innovation, Quantification, and Orchestration are the backbone of every extraordinary business. They are the essence of your Business Development Process.

Imagine yourself taking the potential buyer through your business, explaining each component and how it works with every other component.

Imagine yourself taking the potential buyer through your business, explaining each component and how it works with every other component. How you’ve innovated systems solutions to people problems, how you’ve quantified the results of those innovations, and how you’ve orchestrated the innovations so that they produce the same results every single time.

Don Juan in Carlos Castaneda’s A Separate Peace: “The difference between a warrior and an ordinary man is that a warrior sees everything as a challenge, while an ordinary man sees everything as either a blessing or a curse.”

Most companies organize around personalities rather than around functions. That is, around people rather than accountabilities or responsibilities. The result is almost always chaos.

Above the line they write in bold letters the word SHAREHOLDERS.

Above the line they write in bold letters the word SHAREHOLDERS. They have agreed with each other that is to be their role outside of the business. Inside of the business, they have agreed, they will from this time forward think of themselves as EMPLOYEES. They realize this will save them a lot of trouble later on.

The next job jack and Murray take on is writing a Position Contract for each position on their Organization Chart.

Hard Systems, Soft Systems, and Information Systems.

Hard Systems are inanimate, unliving things. My computer is a Hard System, as are the colors in this office’s reception area. Soft Systems are either animate—living—or ideas. You are a Soft System; so is the script for Hamlet. Information Systems are those that provide us with information about the interaction between the other two.

  1. Identification of the specific Benchmarks—or consumer decision points—in your selling process. 2. The literal scripting of the words that will get you to each one successfully (yes, written down like the script for a play!). 3. The creation of the various materials to be used with each script. 4. The memorization of each Benchmark’s script. 5. The delivery of each script by your salespeople in identical fashion. 6. Leaving your people to communicate more effectively, by articulating, watching, listening, hearing, acknowledging, understanding, and engaging each and every prospect as fully as he needs to be.