Notes on The E-Myth Revisited by Michael Gerber

Back in college I took a marketing class that recommend The E-Myth Revisited by Michael Gerber as additional/optional reading material. I hadn't heard of it much besides that, but I kept it on my list for a while anyways. After seven years, I decided to finally give it a try.

I found the book interesting and quite different from the entrepreneurship texts that have been become "popular" recently. It takes a much more "back to basics" approach and actually talks about how owners can make their businesses more predictable and better operationally by picking up some lessons from McDonald's.

At first I was skeptical, but then I got the point. The "business development process" and the "business model franchise/prototype" approach actually seems like a good idea after reading the entire book about it. In a nutshell, it's about doing intense experimentation and optimization of every component of a business model in order to find what works and removes the owner and his or her whims from the picture as much as possible. I found a lot of parallels between this book and lots of what Steve Blank and Alex Osterwalder write about the business model canvas.

Most of the book's examples were about retail establishments selling products. I'm curious how the book's lessons apply to service businesses, especially ones where talent and thinking are most of the product. The author said businesses should try to set themselves up so that systems run the show and you can hire the lowest skilled people possible; I'm wondering how whether that's valid across all types of businesses.

I also found the book to be much more about life and figuring out what you want (and following your spirit and your own personal values) just as much as it is about business techniques (some of the scripts and hiring practices in the book were nice and tangible techniques that are directly applicable). I also liked how the author spoke (essentially) of gamification of the enterprise (that word wasn't around when he wrote this, but his observations are exactly its essence). I did find that at times the book was a bit too sales-y (in terms of promoting the author's consulting business), but it wasn't blatant.

I recommend this book to anyone who's been heavily into all the lean startup stuff and wants a different perspective on things, and I'm curious what others think as well.

Intro

• Idea 1: entrepreneur myth (companies started by entrepreneurs who risk capital); not true; many start business not for entrepreneurship
  
• Idea 2: turnkey revolution in america
  
• Idea 3: biz Dev process 
  
• Idea 4: biz Dev process can be applied step by step
  
• E-myth Worldwide
  

Part 1 e-myth and small business in America

Ch 1 entrepreneur myth

• Entrepreneur only exists for a moment then gone
  
• Most don't go into business for dream
  
• Most small biz not started by entrepreneur
  
• Most initially doing tech work for someone else
  
• Entrepreneurial seizure moment
  
• Fatal assumption: if u understand the tech work of a biz, u still don't know how to run such a biz
  
• Biz not just about the work u love to do
  
• Million other tasks u don't know
  

Ch 2 the entrepreneur, the manager, the technician

• 3 people in one
  
• Tension between entrepreneurs vision and managers pragmatism
  
• Technician wants to work and only one at a time
  

Ch 3 infancy: technician's phase

• Overloaded technician who does all
  
• Can't just do tech work
  
• Kill the biz if all u want is tech work
  

Ch 4 adolescence: getting some help

• joy of getting someone to do work u don't want
  
• Management by abdication instead of delegation
  
• Trusting employee blindly and not giving enough direction and supervision
  

Ch 5 beyond the comfort zone

• Adolescent biz pushes beyond owner's comfort zone
  
• Exceeds ability to control it
  
• 3 reactions
  
• Back to infancy where you do it yourself; u don't own a biz but a job u can't leave
  
• Going for broke
  
• Adolescent survival
  

Ch 6 maturity

• Build biz to work without u
  
• Focus on customer and business not work
  

Part 2 turnkey revolution

Ch 7

• Business format franchise after McDonald's
  
• Provides entire system of doing biz
  
• True product of biz is how it sells it
  
• Systems not people dependent business
  
• Work on biz not in it
  
• The business as a product
  
• Franchise prototype with interchangeable parts
  
• Integrity about doing what u say u will do
  
• McDonald's always delivers what it promises
  
• Model to emulate
  

Ch 8 franchise prototype

• Vast majority of business format franchises succeed
  
• Unlike trade name franchise
  
• HamburgerU training program on how to run system
  
• Discipline and standards
  

Ch 9 working on your business, not in it

• Your business is not your life
  
• Primary purpose of biz is to serve ur life, not vice versa
  
• Pretend ur biz will serve as prototype clone for 5000 others exactly
  
• Requirements
  
• Model must provide consistent value to customers and employees beyond what expect
  
• Operated by ppl of lowest possible skill necessary; systems dependent not people dependent
  
• Model is example of impeccable order
  
• All work documented in operations manuals
  
• Provide uniformly predictable service to customer
  
• Utilize uniform color, dress, and facilities code
  
• Impact of colors, fonts on sales
  
• Work on biz not in it as prototype for mass market biz
  
• E myth mastery program
  
• Think of biz as the product
  

Part 3 building a business that works

Ch 10 biz Dev process

• Building prototype of biz iterative
  
• 3 steps
  
• Innovation; Creativity thinks; innovation does; how biz interacts more important than what sells; blue suits outsell brown suits on salespeople; touch softly on arm when ask someone; establishes individuality of ur biz based on customer needs; always asking what is the best way of doing this
  
• Quantification; Numbers related to impact of innovations; Establish all baselines and controls of experiment; key metrics
  
• Orchestration; elimination of discretion/choice in implementing innovations; standardization once know results of experiments; order and logic behind human craving for reason; once know best suit to wear and best welcome greeting say it every single time
  


• Search for mastery by perfecting each step carefully
  
• Metaphor for going to work on your life
  

Ch 11 your bd program

• Imagine having to walk buyer of ur biz through each part to show that works perfectly without you
  
• 7 steps
  
• Your primary aim
  
• Strategic objective
  
• Org strategy
  
• Management strategy
  
• People strategy
  
• Marketing strategy
  
• Systems strategy
  

Ch 12 primary aim

• You (not biz) first order of agenda
  
• What value most
  
• What kind of life want to live
  
• What want to say about life after done
  
• Don't fear losing biz, fear losing life
  

Ch 13 ur strategic objective

• Business strategy and plan
  
• Set of standards that helps communicate
  
• Money: how big will be when done; can't know but need some standard; What standard will serve my primary aim; goal is to sell predictable business at end
  
• Opportunity worth pursuing standard; if reasonable to assume can meet aim; does business alleviate a frustration enough ppl have; people buy feelings and values; you sell the feeling not the commodity
  
• Who is my customer; demographic, psychographic
  
• When prototype completed
  
• Where in biz
  
• How in biz/retail
  
• What standards of clothing, etc
  

Ch 14 organizational strategy

• Org development shown in org chart
  
• Most organize around personalities and people instead of functions
  
• Without org chart all hinges on personalities and goodwill
  
• Need accountability for parts
  
• Share personal dreams and primary aim with partners
  
• See selves as shareholders from outside biz
  
• Inside biz see self as employee
  
• Create strategic objective for biz, do demographic research, create questionnaire, personal calls for needs analysis to 150 customers: what product mean to them, how have changed lives, if could have any product at all what would be like, what would good one feel like to use, what would it do for them
  
• Create financials pro forma for first year cash flow and income for bank
  
• Create operating plan
  
• Info on competition and consumer and pricing
  
• Create org chart based on strategic objective
  
• Create lots of boxes and then put names, even if overlap
  
• Description of all the work to be done, no matter who is in company 
  
• Write position contract for each position: results to achieve, work accountable for, objective standards, who will do it; contract creates accountability
  
• Name ppl to put in the boxes
  
• Pick one president/coo: only one can be in charge
  


• After organization designed, start working on the prototype
  
• Start from bottom of org chart whether started originally working in the business
  
• Must find others to do tactical work by prototyping each position as a mini business
  
• Use mini biz Dev process on each position: innovation, quantification, orchestration 
  
• While working in the position work on the position
  
• Test out clothing, call scripts, document what works best in manual
  
• Only when manual complete do u run ad for position
  
• But not for someone with that experience/master but for a novice/apprentice
  
• As soon as hires tactician at that moment promoted to managing the system
  
• Now strategic work instead of tactical
  

Ch 15 management strategy

• Not about finding competent managers
  
• Need management system
  
• System is the solution
  
• Every single part of operation in manual is a checklist
  
• Multiple checks of everything
  
• As much automation and timers as possible
  

Ch 16 your people strategy

• Cant get ppl to do what you want
  
• Must make environment where they want to shine
  
• Explain the idea behind the work that's more important than work itself
  
• How u do work reflection on how you are inside and how feel about self
  
• Business is extension of owner's values and must communicate idea behind those to new ppl
  
• Place you go to practice being best you can be
  
• Look for players in your dojo game where fight against themselves
  
• Explain this philosophy about work on first day
  
• Work about achieving self
  
• Very best business is well conceived game
  


• Rules of the game
  
• Never start with what want ppl to do and then make game out of it; start with game and values ideas
  
• Never create game for ppl unwilling to play self
  
• Make sure there are ways of winning the game without ending it
  
• Change the game from time to time: tactics, not strategy; strategy is game's ethic; results tell u when game over and needs to be changed
  
• Never expect game to be self sustaining; need to remind about it weekly; make exception to it daily to remind
  
• Game has to make sense and be verifiable
  
• Game needs to be fun from time to time; plan in fun as defined by ppl; once in 6 mo
  
• If u can't think of a good game, steal one but learn it by heart
  


• Logic of the game
  
• People missing values and standards and good game
  
• Provide organization and values ppl want
  



• Playing the game
  
• Boss communicated his ideas through documentation and orderly communication
  


• Hiring process key medium
  
• Hiring process
  
• Scripted presentation by boss to all candidates in group meeting explaining his idea and plan and game, business history implementing the idea, and attributes of successful candidate
  
• Meeting with each applicant individually to discuss reactions to and feelings about the idea, background, exp, why he feels capable implementing the boss's idea
  
• Notification of successful candidate by phone, scripted presentation
  
• Notification of unsuccessful thanking for interest, standard letter signed by interviewer
  
• First day of training for boss and employee including reviewing the boss's idea, summarize the systems that implement it, facility tour to show interdependence between systems and people, answering clearly and fully all employee questions, issuing uniform and operations manual, reviewing manual including strategic objective, org strategy, and position contract, completing the employment paperwork
  
• This is just first step requiring strategy and system
  


• How we do it here
  
• How we recruit, hire and train ppl to do it here
  
• How we manage it here
  
• How we change it here
  
• It is main biz idea
  
• Sum total of all systems Documented in manual and taught in school
  

Ch 17 your marketing strategy

• Irrational decision making customer
  
• Forget about you and focus on customer
  
• Customer absorbs all stimuli from environment
  
• Unconscious mind is where second step of buying process happens
  
• First is awareness
  
• Customer expectations unknown to him and u but matter
  
• Sale is made in first 3 min
  
• headline is all that matters in print ad
  
• Demographics and psychographics
  
• Construct prototype scientifically to appeal to perceived market reality
  
• IBM blue color of logo highly significant to results
  
• Navy dress suit most professional
  
• Find a perceived need and fill it
  
• Controlled experimentation
  
• Ask each and every customer for free goods questionnaire 
  
• who they are
  
• Where live: draw them on map, put line around them, that's your trading zone
  
• What car drive
  
• What perfume buy
  
• What read
  
• What colors shapes words they prefer
  
• Clothes jewelry food
  
• Match those brands to the colors and commercials and publications that sell them
  
• Become like the products they already like
  
• Buy a list of demographically correct ppl living in your zone
  

Ch 18 your systems strategy

• Hard systems physical
  
• Soft systems: selling system
  
• Scripts memorized
  
• Physical materials
  
• Delivery in identical fashion
  
• How u dress
  
• structure and substance
  
• Power point selling system
  
• Power point selling process is series of scripts
  
• Appt presentation just to make appt, get emotional commitment, hook
  
• Needs analysis presentation repeats appt presentation hook, establish credibility (company expertise positioning statement, personal willingness to do what can to help customer), ask if these things frustrate them, describe product system and why it works well/impact from customer perspective, not how it works, do questionnaire 
  
• Solution presentation: selling is opening, not closing; review custom prepared report; ask which of these options sounds best for you
  
• Use same words and steps every single time
  


• Information system
  
• Calls made
  
• Prospects reached
  
• Appts scheduled
  
• Appts confirmed
  
• Appts held
  
• Needs analyses presentations scheduled
  
• Needs analysis presentations confirmed
  
• Needs analysis presentations held
  
• Solutions presentations scheduled
  
• Confirmed
  
• Held
  
• Solutions sold
  
• Average value of sale
  


• This benchmark analysis tells u conversion rate and which steps most important to improve
  


• Things 
  
• Actions
  
• Ideas
  
• Hard soft and info systems
  
• All interdependent
  


• All words with any outsider of biz is a system
  
• Powerful when integrated carefully and planned and experimented
  

Ch 19 a letter

• search for meaning
  
• Meaning is product of caring
  
• Things we care about less significant than before
  
• Not serious ppl anymore
  
• Get In touch with your spirit that cares
  
• Stay out of comfort zone
  

Epilogue

• Chaos is only inside us
  
• Change our lives
  
• Learn about who we are in the dojo
  
• Learn attention and discipline
  
• Demands specifics not generalizations
  
• Business like dojo
  
• Intentionally and systematically
  

Afterward

• Step back from biz and see gap between where u are and need to be
  
• Gap always due to lack of systems
  

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