E-Myth Revisited: An Overview

Michael E. Gerber explains in his book The E-Myth Revisited his concept of why small businesses don’t work. Something he calls the E-Myth or the entrepreneurial myth is the assumption that anyone who starts a business is an entrepreneur. An aspiring business person can have something he calls an entrepreneurial seizure, this is when a technician is suddenly struck by the urge to take their technical trade that are usually very good at and go into business for themselves. The fatal assumption is that just because someone has mastered their trade does not mean that they have the slightest clue of how a business works.Gerber is the founder and CEO of E-Myth Worldwide, in the book he is walking Sarah, a distressed small business owner through the steps of how a successful business needs to be ran. Sarah explains to Gerber that she went into the pie making business three long years ago, and things have not turned out the way she expected that they would by owning her own business. Sarah is like most small business owners, a technician who has mastered her trade who is now cursed by the fatal assumption of the E-Myth. She has made the mistake that almost people make when they go into business for themselves, to take on all the positions her business had to offer herself. Now unable to continue overworking in this way Gerber explains that every entrepreneur suffering from an entrepreneurial seizure will eventually experience the same thing. â€Å"First exhilaration; second terror; third exhaustion; and, finally, despair. †(Gerber, 17) Gerber explains that there are three different people inside a business owner the entrepreneur, the manager, and the technician. In most cases the technician is the most prevalent of all of a business owner’s personalities. The technician lives in the present. He is the worker, the labor, the one who gets things done. The work ethic of the technician is off the chart; the only problem is that he is so busy working in his business that he neglects the work that needs to be done on the business to become a success. The Manager represents the past, He is the one in control of all of the business planning, without him there would be no order, and everything would be unpredictable. More of a practical person he always has problems on his mind. When it comes to solving the problems the manager is the type of person that would feel more comfortable taking the proven approach, one that is safe and already tested. Then there is the entrepreneur, the guy who convinced you in the first place that there is no other way, you had to go into business for yourself and open up your own company. It is clear that he is the dreamer, living in the future dreaming of where he could take the business one day. He is the creative one who is always looking for new or innovative ways to do things. The problem with all of this is they usually don’t work well together. As the entrepreneur in you is fighting with the manager about some new innovative way the technician won’t even listen because he is too busy at work trying to make money for the company the only way he knows how; to physically do the job himself. When in harmony with each other these different personalities will make your business run efficient and effectively, but in most cases people aspiring to become successful business owners are unable to balance them together. Gerber goes on to explain that there are also three different phases in a business’s life. If you want to understand how to repair your business you need to understand where your business is standing in its life. Infancy or the â€Å"technicians† stage is the first; this is when the technician who is the owner is in control of everything. If you took him away there would be no business, it cannot run without him. It is easy to see that in order to move up and onto the next stage things would need to change. When the owner realizes this, and he makes the notion to seek outside help this is known as the adolescence stage. When the right person is found this is when the owner’s personalities will be introduced to each other. The owner will now be forced to let other people do the things he only trusted himself to do before. When he starts to become comfortable is when he has moved into what Gerber calls the â€Å"comfort zone. † Eventually you will be forced to go outside your comfort zone, and either get small again, or to continue the way you are going and most likely fail. If they decide to move forward with the business they will then move into the final stage he calls maturity and the entrepreneurial perspective. Businesses will still grow forever but from this point on the business is like a machine, every part has its specific job and it all works together. At this point without the owner the business will still work, he is not unneeded but should spend his time looking at the business from an entrepreneurial perspective and spend his time working on his business not in it. The turn key revolution changed the many people perspectives of how a business should be ran and managed. The idea is that the business format franchises use should be what every business should be built off of whether they are going to franchise their company of not. Gerber argues that it’s not about what a business sells, that the real product of a business is its sales technique. Using the franchise prototype is what makes franchises so successful. It gives a business that chance to make sure it works, and if you’re buying a franchise you already know that it is going to work. Gerber explains to Sarah that she needs to be working on her business, and not in it. He stresses to her that in order to be successful she it is imperative that her business and her life are two completely different things. Once understood then she can use the franchise prototype model to build her business with. What he means by working on her business and not in it is to spend her time applying the rules of the franchise prototype to better her business. Not to be working in your business actually performing the labor it requires to operate. He refers to the Model as game and explains to Sarah the rules she will have to follow in order to win: 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 models will be documented in operations manuals. 5. The model will provide a uniformly predicable service to the customer. 6. The model will utilize a uniform color, dress, and facilities code. In order to build a small business that works you will need to use the usiness development process. A three part process that starts with innovation, to make sure that everything being done is in its absolute best way possible. Quantification is the next part, if you didn’t quantify everything that was done, how would you be able to know that your innovation made a difference in the numbers. â€Å"Orchestration is the elimination of discretion, or choice, at the operating level of your business. †(Gerber, 124) You need to be able to produce the same product, or service every time, by implementing the franchise prototype into orchestration. Once orchestrated you need to continue using the business development process, it is never ending. Sarah sits and listens to Gerber as he tells her what she will need to do in order to successfully implement the franchise prototype into her already existing business. The business development program is a systematic way of making the transition to the franchise prototype model. You must ask and document your answers to some questions. What is your primary aim? This is what the owner truly wants to get out of their life. What is you strategic objective? What you want your business to do for you, in reference to money, and if the opportunity is even worth pursuing. What is your organizational strategy? Organizing around peoples personalities, everyone is different, and prototyping the position. In this step you will need to make a positions contract identifying who is accountable for the various positions in the company. What is your management strategy? You will need to document your management system in detail how it will work to produce the results you desire. What is your people strategy? Making your people understand the importance of their job. What are the rules of the game? It is different for depending on what line of work you are in but develop rules that work for your game. What is your marketing strategy? Through a demographics and psychographics of your target market you need to maximize sales. There are three types of systems in Gerber’s system strategy. Hard systems he considers to be something with no life and inanimate. The soft system would be the opposite of the hard, anything with life. Information systems are any other system in business that provides you with data about soft and hard systems interacting. All of these systems never work independently, they are all co dependant on each other. Gerber’s point to Sarah was that they are just like his business development program. All parts of it need to work together, in order to work towards becoming a successful business. Before reading this book my definition of an entrepreneur was as it is defined in not only ours but just about every text book I have had throughout my education, someone who is a risk taker who starts their own business. Basically I would have considered an entrepreneur to be anyone who owned their own business. After reading this book I have come to realize that an entrepreneur is something completely different. The numbers don’t lie Gerber tells us that eighty percent of businesses fail in the first five years, and that seventy five percent of all franchise format businesses succeed. It would be hard for anyone to argue that his systems don’t work.