The E-Myth Revisited

“The system isn’t something you bring to the business. It’s something you derive from the process of building the business.” - Michael Gerber, The E-Myth

INTRODUCTION

• That “Turn-Key” businesses (basically “The Franchise”) is the most powerful business model, because IT is the product. When you build a business, you * should be * “working on it, not in it”; designing it as a system that anyone can pick up and run at least as effectively as you.
• Finding balance in and recognizing the roles (and work) of The Entrepreneur, The Manager and The Technician
• The types of companies: infancy, adolescence, mature

KEY TAKEAWAYS

“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.” - Carlos Castaneda, A Separate Peace

• The problem with most failing businesses I’ve encountered is not that their owners don’t know enough about finance, marketing, management, and operations—they don’t, but those things are easy enough to learn—but that they spend their time and energy defending what they think they know. The greatest businesspeople I’ve met are determined to get it right no matter what the cost.
• the great ones I have known seem to possess an intuitive understanding that the only way to reach something higher is to focus their attention on the multitude of seemingly insignificant, unimportant, and boring things that make up every business.
• […] When it is systematized and applied purposely by a small business owner, the Business Development Process has the power to transform any small business into an incredibly effective organization.
• 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.
• That Fatal Assumption is: if you understand the technical work of a business, you understand a business that does that technical work. The technical work of a business and a business that does that technical work are two totally different things! In fact, rather than being their greatest single asset, knowing the technical work of their business becomes their greatest single liability.
• 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 energy behind every human activity. The imagination that sparks the fire of the future. The catalyst for change.
• The Entrepreneur lives in the future, never in the past, rarely in the present. The farther ahead he is, the greater the effort required to pull his cohorts along. This then becomes the entrepreneurial worldview: a world made up of both an overabundance of opportunities and dragging feet.
• 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. 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.
• As long as The Technician is working, he is happy, but only on one thing at a time. He knows that two things can’t get done simultaneously; only a fool would try. Thinking isn’t work; it gets in the way of work. The Technician isn’t interested in ideas; he’s interested in “how to do it.”
• Future Work: ‘I wonder’ is the true work of the entrepreneurial personality.” It’s the question that is at the heart of the work of an Entrepreneur. I wonder. I wonder. I wonder. “So the work of an Entrepreneur is to wonder,” I continued. “To imagine and to dream. To see with as much of herself as she can muster the possibilities that waft about in midair someplace there above her head and within her heart. Not in the past but in the future. That’s the work the entrepreneurial personality does at the outset of her business and at each and every stage along the way. I wonder.
• most businesses are operated according to what the owner wants as opposed to what the business needs.
• It’s easy to spot a business in Infancy—the owner and the business are one and the same thing. If you removed the owner from an Infancy business, there would be no business left. It would disappear! In Infancy, you are the business. 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.
• 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 begins at the point in the life of your business when you decide to get some help.
• Luck and speed and brilliant technology have never been enough, because somebody is always luckier, faster, and technologically brighter. Unfortunately, once on a fast track, there’s precious little time to listen. The race is won by reflex, a stroke of genius, or a stroke of luck. “Going for broke” is the high-tech equivalent of Russian Roulette, oftentimes played by people who don’t even know the gun is loaded!
• 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.
• “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.
• “But all the while, even while you’re guessing, the key is to plan, envision, and articulate what you see in the future both for yourself and for your employees. Because if you don’t articulate it—I mean, write it down, clearly, so others can understand it—you don’t own it!
• “Because in the process of defining the future, the plan begins to shape itself to reality, both the reality of the world out there and the reality you are able to create in here.
• A Mature company is started differently than all the rest. 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. And therein resides the true difference between an Adolescent company, where everything is left up to chance, and a Mature company, where there is a vision against which the present is shaped.
• Maturity is not an inevitable result of the first two phases. It is not the end product of a serial process, beginning with Infancy and moving through Adolescence.
• Companies like McDonald’s, Federal Express, and Disney didn’t end up as Mature companies. They started out that way! The people who started them had a totally different perspective about what a business is and why it works.

• The story about Tom Watson, the founder of IBM:
• Asked to what he attributed the phenomenal success of IBM, he is said to have answered: IBM is what it is today for three special reasons. The first reason is that, at the very beginning, I had a very clear picture of what the company would look like when it was finally done. You might say I had a model in my mind of what it would look like when the dream—my vision—was in place. The second reason was that once I had that picture, I then asked myself how a company which looked like that would have to act. I then created a picture of how IBM would act when it was finally done. The third reason IBM has been so successful was that once I had a picture of how IBM would look when the dream was in place and how such a company would have to act, I then realized that, unless we began to act that way from the very beginning, we would never get there. In other words, 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. From the very outset, IBM was fashioned after the template of my vision. And each and every day we attempted to model the company after that template. At the end of each day, we asked ourselves how well we did, discovered the disparity between where we were and where we had committed ourselves to be, and, at the start of the following day, set out to make up for the difference. Every day at IBM was a day devoted to business development, not doing business. We didn’t do business at IBM, we built one.

• most people who go into business don’t have a model of a business that works, but of work itself, a Technician’s Perspective, which differs from the Entrepreneurial Perspective
• The Entrepreneurial Perspective sees the business as a system for producing outside results
• The Entrepreneurial Perspective envisions the business in its entirety, from which is derived its parts. The Technician’s Perspective envisions the business in parts, from which is constructed the whole.
• The Entrepreneurial Perspective adopts a wider, more expansive scale. It views the business as a network of seamlessly integrated components, each contributing to some larger pattern that comes together in such a way as to produce a specifically planned result, a systematic way of doing business.
• The Entrepreneurial Model looks at a business as if it were a product, sitting on a shelf and competing for the customer’s attention against a whole shelf of competing products (or businesses). Said another way, 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.
• 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.
• To The Entrepreneur, the business is the product. To The Technician, the product is what he delivers to the customer.
• To The Entrepreneur, however, the customer is always an opportunity. Because The Entrepreneur knows that within the customer is a continuing parade of changing wants begging to be satisfied.

“Systems theory looks at the world in terms of the interrelatedness of all phenomena, and in this framework an integrated whole whose properties cannot be reduced to those of its parts is called a system.” - Fritjof Capra, The Turning Point

• But Ray Kroc created much more than just a fantastically successful business. He created the model upon which an entire generation of entrepreneurs have since built their fortunes—a model that was the genesis of the franchise phenomenon.
• Most business founders believe that the success of a business resides in the success of the product it sells. […] the Business Format Franchise is built on the belief that the true product of a business is not what it sells but how it sells it. The true product of a business is the business itself.
• The system runs the business. The people run the system.
• 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.
• The system isn’t something you bring to the business. It’s something you derive from the process of building the business.
• 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.
• 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.
• The problem isn’t your business; it never has been. The problem is you!
• to successfully develop a serious business you need a process, a practice, by which to obtain that information and, once obtained, a method with which to put that information to use in your business productively.
• Building the Prototype of your business is a continuous process, a Business Development Process. Its foundation is three distinct yet thoroughly integrated activities through which your business can pursue its natural evolution. They are Innovation, Quantification, and Orchestration.

“Creativity thinks up new things. Innovation does new things.” - Professor Levitt

• 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? For the Innovation to be meaningful it must always take the customer’s point of view. At the same time, Innovation simplifies your business to its critical essentials. It should make things easier for you and your people in the operation of your business; otherwise it’s not Innovation but complication.
• Quantification - 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. […] Because without the numbers you can’t possibly know where you are, let alone where you’re going. With numbers, your business will take on a totally new meaning.
• Orchestration is the elimination of discretion, or choice, at the operating level of your business.
• Because every founder of every great Business Format Franchise company, whether it is franchised or not, knows one thing to be true: if you haven’t orchestrated it, you don’t own it! And if you don’t own it, you can’t depend on it. And if you can’t depend on it, you haven’t got a franchise. And without a franchise no business can hope to succeed.
• by a franchise, you understand that I’m talking about a proprietary way of doing business that differentiates your business from everyone else’s. In short, the definition of a franchise is simply your unique way of doing business.
• “The problem is you can’t understand the value of an entire process by separating it from its parts, or its parts from the process. Because once you separate the parts of a process, once you take a process apart, there is no process. There is no movement whatsoever. There is only this thing or that. […] to fully understand the role any action—or any piece of work—plays in the business as a whole, you have to see it as a part of the whole, not as a thing in itself.
• As with Mature companies, I believe great people to be those who know how they got where they are, and what they need to do to get where they’re going. Great people have a vision of their lives that they practice emulating each and every day. They go to work on their lives, not just in their lives. Their lives are spent living out the vision they have of their future, in the present. They compare what they’ve done with what they intended to do. And where there’s a disparity between the two, they don’t wait very long to make up the difference.
• You invented a turn-key solution to your specific kind of business’s problems. A little money machine. An absolutely predictable little business that does what it promises to do every single time.
• Ask anyone what kind of business they’re in and they’ll instinctively respond with the name of the commodity they sell. 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.

• 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.” The commodity is cosmetics; the product, hope.”

• The System is the Solution. AT&T Page 187

• an effective Prototype is a business that finds and keeps customers—profitably—better than any other.
• Never expect the game to be self-sustaining. People need to be reminded of it constantly. At least once a week, create a special meeting about the game. At least once a day, make some kind of issue about an exception to the way the game has been played—and make certain that everyone knows about it.
• If you can’t think of a good game, steal one. Anyone’s ideas are as good as your own. But once you steal somebody else’s game, learn it by heart. There’s nothing worse than pretending to play a game.
• 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.
• the famous dictum that says, “Find a need and fill it,” is inaccurate. It should say, “Find a perceived need and fill it.” Because if your customer doesn’t perceive he needs something, he doesn’t, even if he actually does.
• if you’re doing tactical work all the time, if you’re working all the time devoting all your energy in your business, you won’t have any time or energy left to ask, let alone answer, all of the absolutely critical questions you need to ask. You’ll simply have no time or energy left to work on it.
• “And it is how well-integrated that process is, how totally and completely connected each part of the process appears in relation to the rest of the process, that will determine how successful you are at getting them to come back for more.
• A system is a set of things, actions, ideas, and information that interact with each other, and in so doing, alter other systems.
• There are three kinds of systems in your business: Hard Systems, Soft Systems, and Information Systems.
• Hard Systems are inanimate, unliving things.
• Soft Systems are either animate—living—or ideas.
• Information Systems are those that provide us with information about the interaction between the other two.

• Do you see how difficult it is to separate one from the other? Do you see how intertwined they are? Do you now understand what I mean by your business system? And why it is absolutely essential that you begin to think of your business as a fully integrated system? That to approach any part of your business as though it were separate from all the rest would be lunacy, because everything in your business affects everything else in your business.

“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

• Joe Hyams, in his book Zen in the Martial Arts, tells us what a dojo is:
• 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. It is a place where we can learn a great deal in a short time about who we are and how we react in the world. The conflicts that take place inside the dojo help us handle conflicts that take place outside. The total concentration and discipline required to study martial arts carries over to daily life. The activity in the dojo calls on us to constantly attempt new things, so it is also a source of learning—in Zen terminology, a source of self-enlightenment.

• old 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.

• determine the gap between where you are and where you need to be in order to make your dream a reality. […] the gap is always created by the absence of systems, the absence of a proprietary way of doing business that successfully differentiates your business from everyone else’s.

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