BookBabble #23: "The E-Myth Revisited" by Michael Gerber

"Why Most Small Businesses Don't Work and What to Do About It"

Ah, the entrepreneurial journey. Where to start? I can barely spell it let alone act it out in the real world, and that's the same with everyone who attempts this whimsical endeavour. I believe it was Elon Musk who said, being an entrepreneur is like eating glass and staring into the abyss of death. Steady on Elon, but you get the point…

So how can we chew on something a bit more palatable and look in a more healthy direction? Well, this book gives a great angle and on it all and will help guide the budding business owner to a more enjoyable and fruitful experience.

The 'E' if you haven't guessed stands for 'entrepreneur' and the myth is perhaps what we've been taught and/or what we believe about the word and its implications.

Michael Gerber initially wrote The E-Myth back in 1986 and Revisited came out a few years later which I believe they have updated every few years (it's a bit difficult to find the dates in these things). He founded his company E-Myth Worldwide in 1977 so this book distills a lot of his work working with people over the years.

So this isn't someone who's just had a stab with a bit of recent success, but someone who has been in the trenches for decades and seen the developments. Tools may change but principles remain the same.

Some great quotes from the book followed by my additional thoughts…

Don Juan said in Tales of Power, that “The basic difference between an ordinary man and a warrior is that a warrior takes everything as a challenge while an ordinary man takes everything either as a blessing or a curse”

It's all neutral. The warrior knows this, takes the challenge and cracks on. The ordinary gets pushed around in the winds.

have attempted to answer the most important questions I have been asked about the principles covered in each chapter by means of a running dialogue with a wonderful woman named Sarah (not her real name) with whom I’ve spent quite a bit of time over the past year

This was a nice way of laying out the book. Similar in a sense to the Go-Giver story and generally makes it more personable. 'Sarah' is the woman he is mentoring so to speak, and Sarah is also you, the reader.

my experience has shown me that the people who are exceptionally good in business aren’t so because of what they know but because of their insatiable need to know more

Relentless in their pursuit of knowledge and development. No-one knows anything to begin with but many people draw the line at a certain stage. The top people are never content.

Anthony Greenbank, who said in The Book of Survival, “To live through an impossible situation, you don’t need the reflexes of a Grand Prix driver, the muscles of a Hercules, the mind of an Einstein. You simply need to know what to do"

A plan. A strategy. A simple A to B, this is what you need to do and how to go about it. With all those things mentioned in the quote you will struggle without that roadmap. And without them you will fare far better with that roadmap.

"I think that maybe inside any business, there is someone slowly going crazy" ~ Joseph Heller, 'Something Happened'

Totally and utterly insane. Maybe not so slowly.

The Entrepreneurial Seizure

This is that flash of inspiration. Where you get taken over to go on this path. It is like a seizure in that it takes over your whole mind and body and may cause you to act rashly. Many people get that urge… it's what comes next that separates the people that make it.

That Fatal Assumption is: if you understand the technical work of a business, you understand a business that does that technical work

The technical aspects of the work is a different kettle of fish to the overall business. Sure, it's part of it but a completely different hat to be worn. That is what a lot of this book discusses.

First, exhilaration; second, terror; third, exhaustion; and, finally, despair

The life cycle of a lot of Es. (E = entrepreneur from now on, the spell check is about to break). There's that exhilaration after the 'seizure' but it can take you in a downward spiral if not done right.

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

The E = the CEO, the overseer, boss, strategiser etc
Manager = day-to-day running of the various moving parts
Technician = the actual work getting done, ie. the product or service getting produced

And the problem is compounded by the fact that while each of these personalities wants to be the boss, none of them wants to have a boss

There can be some discord among these 3 characters.

The Skinny Guy / The Fat Guy

The analogy of someone wanting to lose weight and get fit. The 'skinny guy' has all these plans to get up and move and eat right. The 'fat guy' pops up eventually and takes over… as in, 'we're not doing that'. Another disharmonious relationship ;)

In other words, when you’re The Skinny Guy you’re always making promises for The Fat Guy to keep

Writing skinny cheques that fatty can't keep.

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

The E is a visionary. A big picture player.

Without The Manager there would be no planning, no order, no predictability

They keep it all together. They, well, manage.

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

A few differentiations and there are more in the book.

Put another way, while The Entrepreneur dreams, The Manager frets, and The Technician ruminates

Yes, the E is a dreamer, the M is the operational fiend, and the T is in the trenches.

It is self-evident that business, like people, are supposed to grow; and with growth, comes change

If you're not growing, you're dying… I hate to use such a cliché but it is one as it's true! There is no choice in it all, everything is in a state of flux of change, especially business so best to keep evolving.

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!

Indeed. It turns out it can just be a glorified job. Oh, you're the boss alright, but that brings its own challenges… and perhaps he/she is worse than the last one!

The purpose of going into business is to get free of a job so you can create jobs for other people

Bigger picture thinking. Not making a bit of cash on the side, but creating an empire for others to benefit from.

Management by Abdication rather than by Delegation

This is a (poor) form of management where you don't specifically delegate, track and hold people accountable. But rather just neglect your duties and hope the others in your organisation keep on top of it. They probably won't. And not because they are bad people or employees, but because they need direction.

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

I've said it before (perhaps here) - A successful leader is not in how many followers he has, but in the number of leaders he creates. This is what a good E does and is. As a technician you can only do so much and the manager keeps that ticking. There are 3 layers in this structure.

A Mature company is founded on a broader perspective, an entrepreneurial perspective, a more intelligent point of view. About building a business that works not because of you but without you

A mature company isn't (necessarily) one that has been around for many years and naturally became that way over time. It's more in how its set up from the start along with its attitude and vision.

companies like McDonald’s, Federal Express, and Disney didn’t end up as Mature companies. They started out that way!

There you go. These big boys were always 'mature' as that was how they were set up.

The Entrepreneurial Perspective starts with a picture of a well-defined future, and then comes back to the present with the intention of changing it to match the vision. The Technician’s Perspective starts with the present, and then looks forward to an uncertain future with the hope of keeping it much like the present.

Thinking with the end in mind and working backwards rather than the other way round. That's the E's job. The technician plods along with the task at hand.

To The Entrepreneur, the present-day world is modeled after his vision. To The Technician, the future is modeled after the present-day world

Another way of putting the T & E dynamic. The M is the middle man.

the Entrepreneurial Model has less to do with what’s done in a business and more to do with how it’s done. The commodity isn’t what’s important—the way it’s delivered is

And why. The what is almost secondary.

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.

Understanding your target audience and creating/marketing accordingly.

In short, for this business model of ours to work, it must be balanced and inclusive so that The Entrepreneur, The Manager, and The Technician all find their natural place within it, so that they all find the right work to do

You can have and recognise the 3. It's just that they need to be doing the right things at the right time and not getting confused.

“The Most Successful Small Business in the World” That’s what McDonald’s calls itself today.

McDonalds is a small business that was franchised to become a worldwide behemoth.

The Franchise Prototype

A method of doing business. Not necessarily having a franchise but setting things up with that model in mind for an effective business.

The true product of a business is the business itself

A business produces products and/or services but the entity itself is the ultimate main product.

A systems-dependent business, not a people-dependent business.

This is key. You can get some great people, and some not so great. But the success of your business should not depend on the staff, especially at scale. Yes, you want the best people, but you more want the best systems in order to get a clear outline of what needs to be done. Then there will be less variables and people acting on their own whims, skills and personalities.

“I would say that Ray Kroc was a man with a purpose. His purpose was clear, undiluted, and sure. He lived in an ordinary world, like we all do, a world in which most things didn’t work the way they were supposed to. At McDonald’s, he saw something that did work, exactly as it was supposed to, time after time after time. To Ray Kroc, that was an inspiration. In fact, he was awed by it. He was a simple man. And he fell in love with the sheer enormity of the thing he called McDonald’s"

This was in response to 'Sarah' about how her aunt would be turning in her grave with McDonalds as an example to follow… and this was part of the author's explanation. This isn't about your opinion of their food or effect on our health or society. This is about the entrepreneurial zeal shown and the biggest version of what you could achieve.

Watch the movie The Founder. It doesn't really show Ray Kroc in a good light but I can appreciate his efforts. He did what he had to do and the McDonald brothers would have never expanded from that one location. And they were sitting on a goldmine (not just in monetary terms but in systems that simply hadn't been seen before).

“The only difference between the two of you is an order of magnitude"

Continuing the discussion. Sarah and her aunt's cake business is of course very different to good ol' Maccy Ds, but, only really in the sense of sheer scale.

The system runs the business. The people run the system.

Important distinction. Systems first and then the people. Ideally a monkey or machine could keep on top of it all when trained.

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

How McDs roll. There's a consistency throughout the world. Same with Starbucks. This isn't a discussion about fine dining and great coffee, it's about business and franchising. You're free to choose what you like but you also need to study the greats if you want to emulate them (albeit, on a smaller and perhaps more 'noble' path).

your business is not your life

Not sure. It is and it isn't. The point is separating the 2. But then again, it's an extension of who you are. Awareness and control would be the key.

Pretend that the business you own—or want to own—is the prototype, or will be the prototype, for 5,000 more just like it

Thinking ahead. Again, this is not to say you actually take it this route, but more as a planning and structuring exercise.

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

6 aspects of the franchise prototype model.

How can I create a business whose results are systems-dependent rather than people-dependent? Systems-dependent rather than expert-dependent

Again back to systems vs people. The quality of the systems dictate the success, rather than reliance on the people.

As Alvin Toffler wrote in his revolutionary book, The Third Wave, “…most people surveying the world around them today see only chaos. They suffer a sense of personal powerlessness and pointlessness.” He went on to say that, “Individuals need life structure. A life lacking in comprehensive structure is an aimless wreck. The absence of structure breeds breakdown. Structure provides the relatively fixed points of reference we need.”

One of the basic human needs is certainty. People need a sense of order which in turn, paradoxically, can give freedom. Without it, people become deranged. With it, you can do great things.

Innovation, Quantification, and Orchestration

The 3 aim aspects of the business. Put another way - creation, tracking and systems.

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

This once again goes back to systems over people (I think there's a theme here ;)). If there is discretion then there could be 100 different ways with 100 different employees. Make it one way for all to follow.

One. Your Primary Aim
Two. Your Strategic Objective
Three. Your Organizational Strategy
Four. Your Management Strategy
Five. Your People Strategy
Six. Your Marketing Strategy
Seven. Your Systems Strategy

7 step structure to your life and business.

If you were to write a script for the tape to be played for the mourners at your funeral, how would you like it to read? That’s your Primary Aim

Bit morbid, but you're primary aim is exactly that and what you want to be known/remembered for. That's more about you rather than the specifics of your business, so everything trickles down from there.

Your Strategic Objective is a very clear statement of what your business has to ultimately do for you to achieve your Primary Aim

This is the top level view of the business and how it enables you to realise number 1.

The commodity is the thing your customer actually walks out with in his hand. The product is what your customer feels as he walks out of your business.

Think about Apple and Harley Davidson. Is it just motorbikes and computers/phones? When people buy a car, are they really buying the features, or how it will make them feel and what they think they'll get?

Charles Revson, the founder of Revlon and an extraordinarily successful entrepreneur, once said about his company: “In the factory Revlon manufactures cosmetics, but in the store Revlon sells hope.”

Cosmetics is the commodity. Hope is what they're really selling.

Organization Chart

This is an actual chart of structure for your business. Even if it's just you and the same name in each position. From owner(s) to COO down to marketing and finances, there's a hierarchy that needs to be charted out and adhered to.

Because if you won’t follow the rules, why should anyone else?

Leading by example.

A match, a mint, a cup of coffee, and a newspaper!

A great story in the book about a hotel experience the author had. He had stopped at this place randomly and the experience was perfect. He's been back many times since and had the same great time with everything following the same pattern. Not things left to random happenstance and the whims of the staff, but the same routines and checklists. The match, mint, coffee and newspaper were part of this repertoire!

Your Marketing Strategy starts, ends, lives, and dies with your customer. So in the development of your Marketing Strategy, it is absolutely imperative that you forget about your dreams, forget about your visions, forget about your interests, forget about what you want—forget about everything but your customer! When it comes to marketing, what you want is unimportant. It’s what your customer wants that matters. And what your customer wants is probably significantly different from what you think he wants

A reminder that it's all about the customer, not our own desires when it comes to business. Yes, we can put forth our own wacky ideas as a hobby, but in terms of building a sustainable business, it really isn't about us but about them.

there is no such thing as reality. At least as we understand it. Reality only exists in someone’s perceptions, attitudes, beliefs, conclusions—whatever you wish to call those positions of the mind from which all expectations arise—and nowhere else

It's all perception.

There are three kinds of systems in your business: Hard Systems, Soft Systems, and Information Systems

From the big to the small. The book goes in to more detail.

Freedom does not come automatically; it is achieved. And it is not gained in a single bound; it must be achieved each day. Rollo May, 'Man’s Search for Himself'

Each and every day we must continue the process. It's not going to be given lightly.

Because Comfort overtakes us all when we’re least prepared for it. Comfort makes cowards of us all.

Be careful!

You should know now that a man of knowledge lives by acting, not by thinking about acting, not by thinking about what he will think when he has finished acting. A man of knowledge chooses a path with heart and follows it. Carlos Castaneda, 'A Separate Reality'

It's a tough one, but all in the actions we take.

A dojo is a miniature cosmos where we make contact with ourselves—our fears, anxieties, reactions, and habits. It is an arena of confined conflict where we confront an opponent who is not an opponent but rather a partner engaged in helping us understand ourselves more fully

Your 'opponent' is a partner in bringing out your (and their) best.

It is a place where questions are at least as important as answers, if not more so. It is a place where generalizations must give way to specifics

In the business world specificity is everything. No time for being vague. Again, a difficult one to grasp and implement, but it needs to be clear as day for all who come into contact with it.

Chinese proverb that says: When you hear something, you will forget it. When you see something, you will remember it. But not until you do something, will you understand it.

Snuck a Chinese proverb in at the end (because that's how we roll)!

Thanks Mike! Anything else?

A great book and worth a read for all people interested in business. It's not necessarily the way but a very good way to think about business and your place in it. You will certainly be able to apply some aspects or help you to think a little differently or clearly.

There are a number of other spin-off books (E-Myth Mastery, E-Myth Physician etc) so you can delve deeper on this particular series too.

If you are thinking of becoming an entrepreneur (or are one) or involved in business then it will by no means be a walk in the park as Musk so astutely pointed out at the start, but it can be a rewarding journey and outcome. It does need to be processed, you do need to know yourself and your place and have a solid strategy.

This book is a solid strategy and backbone.

Also, be sure to check out the Empire Podcast Show from Bedros Keuilian and Craig Ballantyne. I've watched a few of these recently and definitely some great stuff for budding and established entrepreneurs!

And you? Have you busted the E-myth??

Check out the others in the series…