Wednesday, April 15, 2009

Another Book Review: The E-Myth Revisited

Book Information
Gerber, Michael E. (1995). The E-Myth Revisited: Why most small businesses don’t work and what to do about it. New York, NY: HarperCollins.

Although many believe that small business are started by entrepreneurs, Gerber contends that they are started by technicians—those who have abilities to create a product or service—and they are not able to cause their business to thrive and grow beyond the infancy stages. What is necessary are the dreams of a true entrepreneur and the systems of a manager to be allowed to surface in the company’s leader, and through these combined efforts, the small business owner performs the work of working on the business, not working in business.

Part I: The E-Myth and American Small Business
Most dreamers who start their own businesses share two characteristics: they want the freedom of not working for a boss, and they are technicians, meaning they cut hair, practice law, know an industry well enough to coach others, etc. They are the doers, and they do it all: chief cook and bottle washer.” If their efforts are initially successful, they grow to the point where they can’t do it all themselves, and the first employee joins the team. The technician now abdicates the tasks he or she doesn’t want to do, and continues doing the business of doing. What the technician needs, however, is not a worker-bee. He needs to tap into his own entrepreneurial spirit and systems manager to develop a plan for success—and succession. Gerber summarizes the limits of a company’s growth based on these three roles:
The Technician’s boundary is determined by how much he can do himself. The Manager 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 (51).
If a technician is not able to handle all the tasks that pile on during the adolescent phase, he becomes frustrated because those he hired do not share his skill or passion. In short, they are not taught and do not know how to play the game of his business. The owner, with disappointment, will try to shrink business back to a manageable size. This almost always results in the company’s demise. The Small Business Administration reports that 400,000 such business in the United States fold each year (54).
In order for a small business to grow from infancy through adolescence and into maturity, it needs to have an entrepreneurial perspective. Says Tom Watson, founder of IBM, “I had a clear picture of what the company would look like when it was finally done” (69). Then he acted that way from the beginning. This perspective is interested not so much in what work has to be done but how it is done; a place to produce results, not just income; it is interested in what the future looks like and adjusts the present to match it—not looks forward uncertainly toward the future. Successful small business leaders who hold the entrepreneurial perspective are able to grow past the tasks of today into the promise of a bright future.
Part II: The Turn-Key Revolution: A New View of Business
In the early 1900’s, the Industrial Revolution was born. In the mid 1900’s, 1952 to be exact, the Franchise Phenomenon surfaced. McDonalds was and is the model of a systematic way to do business. The hamburgers are always prepared the same way. The friendly staff is always able to deliver your order in a short amount of time. The restaurant is clean and bright. You know what to expect when you walk into McDonalds because systems are in place to train, deliver, and measure success. Every company would do well to mimic McDonalds in this important respect: their delivery methods are consistent and their customers’ expectations are met every time. How? By developing a system that is replicable. Each employee knows what is expected of him or her, and he or she is held to that standard. From the uniform they wear to the uniformity of their burgers, all members of the Mc-Team understand the roles they are to play. This is more than just the conveyor belt of the Industrial Revolution. This is the franchise revolution that made expanding small businesses possible.
An important aspect of this approach is the owner’s need to work on the business, not in the business. What does this mean? He or she must step back from being a technician and step into the role of the entrepreneur long enough to see what his or her primary aim in life and how the company will serve that purpose. He or she also needs to become the manager and see what processes need to happen in order for the business to grow and be replicable. “[the] Proprietary Operating System [is] at the heart of every extraordinary business around you, franchised or not” (95). Note that the idea is not for the business owner to become a franchisor, but to create a product or service that is predictable to his or her ideal customer. This system or model of doing business is to be documented in Operations Manuals so that the work has standards that are understood by even the employee with the lowest possible skills. By working in the business, the owner’s vision and abilities are limited. By working on the business, he or she is able to guide the company to its preferred future that he or she has envisioned from the start.
Finally, the Turn-Key approach allows the business to grow in a way that the owner has the freedom to do what he or she loves doing, whether visioning, managing, or being the technician—or sipping Mai Tais in Mexico! Once processes are in place and the business has grown to support an eager and energized staff, the owner is free to enjoy work inside or outside the business.

Part III: Building a Small Business That Works!
The remaining one-half of the book gives strategies for implementing this approach and stories to reinforce the “whys” and “hows.” Innovation is the foundation: Is your business doing new things? “For the Innovation to be meaningful, it must always take the customer’s point of view” (121). What is the best way to serve your customer? How do they access your information, products and services? How can you serve or create a product that is the best for their needs? These questions can be answered with the next pointer: Quantification. How many calls do you receive a day? What time? What do you say to your customer when you greet them? Try different phrases and quantify which ones are most likely to produce sales. Once you have improved your processes as a result of making adjustments to your practice based on the data, you can begin to orchestrate the process. “Orchestration is the elimination of discretion, or choice, at the operating level of your business” (124). The purpose of being this methodical is that you give your customer what he wants every single time. Although these three steps may appear to result in automatons rather than energized employees, nothing can be further from the truth, provided the owner and managers are able to instill purpose and vision into their activities. Just like a child wants to understand his or her boundaries, so a valued employee wants to know how and where he or she can make the greatest contribution, provided they believe in the owner and his or her vision.
One of the best examples of this process played out is the story Gerber tells of his hotel experience. He calls it, “A Match, a Mint, a Cup of Coffee, and a Newspaper.” A weary traveler in his quest for lodging for the night, finds himself at the front desk of a hotel. After a friendly and efficient clerk processes his admittance, he takes her recommendation to dine at the nearby restaurant. When he returns to the room, the fireplace is lit, a mint rests on his pillow, and a drink is poured for him with a note from his room attendant, Kathi: “Welcome to your first night at Venetia…” The next morning, his brand of coffee is brewing in his in-room coffee maker, and next to it is another note from Kathi, informing him that this is his brand of coffee. How did they know? AH, they asked him last night at the restaurant. When he opened his door, there was The New York Times, his edition of the newspaper. This information was casually obtained when he checked in the night before. The message he received: “We care about you and are showing our care in the little things we do.” The result: He returned time and again, and received the same careful treatment each time. The magic was explained by the checklists found in Operations Manuals and the work the employees perform willingly at the behest of the owner.
The book comes to a close with a definition of a system: “A system is a set of things, actions, ideas, and information that interact with each other, and in so doing, alter other systems” (234). Some systems we can understand (how our business works), some we can’t (the Universe!). The task, then, is to understand the smaller systems and how they work with other systems and create a Systems Strategy. It, along with your Primary Aim, your Strategic Objective, your Organizational Strategy, Management Strategy, People Strategy, and Marketing Strategy create an interpedently prototype of how your business is to operate. Once these systems are identified and processes developed, the company is ready to be franchised or sold – or just allowed to grow. This Business Development Program is what E-Myth Worldwide is all about.

How does one know whether or not her reaction is overall negative or positive? I will start of by answering simply, “both.” First of all, allow me to share my positive reactions: I resonated with this book and the message, perhaps because I am almost an equal mixture of technician, manager, and entrepreneur. I am a visionary: I am a big picture person, and can I see possibilities, often coming up with new, fresh ideas. I am a manager: I can see all the steps in the big picture and enjoying breaking them down into manageable pieces, coming up with processes and working with those who will implement them. And yes, I am also a technician in the sense that I will take back a project and just do it myself. Some may call this “controlling,” while I call it “being responsible.” Where do I find myself most often? Currently, I am in the midst of management projects. I am happy. I also find myself dreaming with the boss in the role of entrepreneur. I am energized. At times, I am also the worker-bee, since I enjoy the rhythm of some of the so-called mundane tasks, like sorting through names on a database. I am fulfilled. Recognizing these three roles and the importance of each of these is essential. It also helps to know that the many I work with are strictly one or the other. Or at least they have preferences. But since I share all three, I can see the necessity of having a strategic aim. I can see the importance of working on the business so that it will grow. And I know all the technical “stuff,” though I must admit I am most happy to let some of this fall to capable others.
I had other positive reactions as well. I enjoyed the stories. Following Sarah and her pie shop personalized the principles. I especially enjoyed the story of the hotel, and having heard it at other times, I have shared it many times myself. I appreciated the systematic approach to the book. Every business owner, whether widget maker or in a service industry, can find the story of Jack and Murray and their organizational chart powerful and practical. The stories brought life to the principles.
Were all stories helpful? For that matter, was the entire book applicable? No, not all stories were meaningful. Michael Gerber’s own personal story of his failures and successes, while helpful, become tedious. 5 pages! He certainly didn’t—and apparently still doesn’t—live a virtuous, Christ-like life. Some of the ideas shared can only be described as “New Agey.” Awaken your spirit and find your comfort zone? Sounds like something from a Hindu guru, not a business book.
The other thing I found occasionally disturbing was that the E-Myth business pitch reared its ugly head through out the pages. I could have lived without that. The principles and recommendations were applicable. If one wanted more, he or she could look to the back flap, which is the correct place for pesky sales pitches.
As far as developing the thesis, I would suggest that Mr. Gerber did accomplish what he set out to do: reveal “Why Most Small Business Don’t Work and What to Do About It.” They don’t work because technicians are trying to run a business while working in it. What they should do is to better know their aims and then come up with a way of doing business that is systems oriented, replicable, allowing them to work on the business.
Did I appreciate the message and find it helpful? Yes, as evidenced by the fact that I have bought books for two of my cohorts and an MP3 audio file for my busy boss’s iPod. I look forward to strategizing with these three, mostly individually, and coming up with a plan to implement some of these relevant principles. The most powerful take-aways from this book are on page 74: “…the Entrepreneurial Model dos not start with a picture of the business to be created but of the customer for whom the business will be created.” And “The product is what your customer feels as he walks out of your business. What he feels about your business, not what he feels about the commodity.” What are we at IEW selling? A voice. We are training teachers to give their students a voice, teaching them how to say what they want or need to say so that can be heard and understood. This is powerful. This is life changing. This is world changing. Who can we next tell??

When I was first read the book, I thought that it might have been helpful to have this information available last term, when we were coming up with our entrepreneurial idea. However, after further thought, I think keeping this book during the 2nd term is more applicable. The pages I reference above may be helpful to copy and pass out for the 1st term, when ideas are first being tossed around. But the rest of the work of implementing the steps to make a dream a reality really won’t happen until the second term, and most of the work the book requires one to implement would be now, after an idea is thought through. Having said that, I would put the book on the syllabus for first term, refer to it occasionally in class, and give the students the option of pre-reading it for the second term.

1 comment:

  1. I'm Interested in your thoughts.. Does 37signals or E-myth have the right philosophy for business start-ups today?