The E-Myth Revisited

by Michael E. Gerber (1995)

Reviewed by Marti Benjamin, MBA, CPC

If you are a small business owner or work for a small business, this book is absolutely a must-read! It clearly describes the concepts of organizing for small business success so succinctly that it belongs in the personal library of every entrepreneur or aspiring business owner.

The E-Myth is the myth of the entrepreneur. Michael Gerber describes how most businesses are started by someone who is working for someone else; a technician who loves the work and excels at it, and, encouraged by well-meaning friends and family who say, "You're so good at what you do, you should go into business for yourself," goes off and starts a business in what Gerber describes as the "Entrepreneurial Seizure." The distinction between doing the work and owning a business that does that work becomes blurred and seems insignificant. "The technician suffering from an Entrepreneurial Seizure takes the work he loves to do and turns it into a job." (Page 17)

Gerber addresses the question, "What do the owners of extraordinary businesses know that the rest don't," saying that their businesses are extraordinary because the owner is not satisfied with what they know; they have an insatiable need to know more. (Page xiii) The extraordinary business owners are first and foremost learners—and they are, "…extraordinarily grounded, compulsive about detail, pragmatic, down-to-earth, in touch with the seamy reality of ordinary life." (Page xiv)

Gerber describes the three roles every business owner must fill: the Entrepreneur, the Manager and the Technician, each of these distinct roles striving to be free of a boss (Page 19). The competition for primacy begins and without recognizing it, the owner loses the ability to see when the wrong role is in charge of the wrong parts of the business. Here's how Gerber describes each role, or personality:

• The Entrepreneur: the visionary in us, the innovator, grand strategist and creator of new methods for reaching new markets; our creative personality; the part of us that creates havoc all around us. (Page 23-24)
  
  
• The Manager: the pragmatist that craves order and clings to the status quo. (Page 25)
  
  
• The Technician: the doer, who loves the fact that things can get done; is happy when working at one thing at a time; loves to be in control of the work flow and distrusts lofty ideas and abstractions. (Page 26-27)
  
  

According to Gerber, "The typical small business owner is only 10 percent Entrepreneur, 20 percent Manager and 70 percent Technician." (Page 29) What's needed is more of the Entrepreneur, the strategic visioning that will lead the business into the future. While the Technician enjoys the work, if it becomes the focus, there is nothing left for building the business, except for the wee hours of the night when the planning, marketing, sales, accounting, production, administration and every thing else required of the business must be done. With a Technician operating from an Entrepreneurial Seizure, the risk is that the work will consume the dream and there will be no time to see what the marketplace is looking for, what need has never before been satisfied and what opportunities are popping up all around the business. This is the infancy stage of the business.

Moving into the adolescence stage, the owner recognizes the need for some help, usually because there has been a crisis in the business. The owner usually looks to hire someone to do the technical work that is not getting done—the stuff the owner doesn't like. Rather than asking what the business needs, the owner asks, "What do I need? What do I dislike doing that someone else could do for me?" What results is a grand dump—the owner abdicates rather than delegates what he or she doesn't want to do and ignores it, relieved that finally, someone else will do it. (Page 46). Rather than, as Gerber suggests in this book, describing with detailed procedures how to do what needs to be done, the owner of a business in the adolescent phase typically hands it over and hopes that the new hire is doing the right thing. The crisis of accountability is brewing, even while the owner is relieved to no longer be going it all alone.

To transition from adolescence to maturity requires planning and articulating a vision for the future for the owner, employees and customers. It must be written down, clearly, so others can understand it; otherwise, you don't own the vision. (Page 65) The owner is responsible for dictating the business's rate of growth, by understanding the key processes that are required, the key objectives to be achieved and the key marketplace position. The Entrepreneurial perspective sees the business as a system for producing outside results for the customer, resulting in profits. The Entrepreneur starts with a vision of the well-defined future and works back to the present, changing the current reality to match the vision of the future envisioning the business as a whole, not a conglomeration of parts. (Page 71)

The true product of the business is the business itself and it's about selling the business, rather than selling the product. And this is the concept Gerber is best-known for: working on the business, not in it. (Page 85) The owner's work is to develop a prototype business that depends on systems, not people, that can thrive without the owner's involvement in producing product or service every single day, and that can be replicated with the same successful results. In this model, "The system runs the business. The people run the system." (Page 92)

Building a prototype requires a business development process based on innovation to identify the truly unique and proprietary way in which the business addresses a customer's need, quantification to measure the process and the outcomes of each and every step along the way, and orchestration to eliminate the variability and choice at the operating level of the business. These three components—innovation, quantification and orchestration—define the business development process; "…a proprietary way of doing business that successfully and preferentially differentiates every extraordinary business from every one of its competitors." (Page 96)>

The seven steps in the Business Development Program are as follows:

1. Your primary aim: this step is about you, the business owner. "What do I value most? What kind of life do I want? What do I want my life to look like, to feel like? Who do I wish to be?" (Page 136)
   
   
2. Your strategic objective: a clear statement of what your business has to ultimately do for you to achieve your Primary Aim, in terms of money, an opportunity worth pursuing, where your business will operate, and what standards will you establish? (Page 149-165)
   
   
3. Your organizational strategy: organize around the functions that are necessary, not the people you have or plan to hire, and develop position contracts for each functional role. (Page 167-178) Clearly differentiate between the tactical work done at the bottom of the organization and the strategic work done above the managerial line.
   
   
4. Your management strategy: the system designed into your business that produces a result in the marketplace, including the way to find and keep customers by hearing and anticipating their needs. (Page 187-196)
   
   
5. Your people strategy: creating an understanding in your employees that the idea behind the work they're doing is what's most important. Outline the process of recruiting, selecting, orienting, retaining and developing the people who will work the systems that make your company successful. (Page 197-211)
   
   
6. Your marketing strategy: "starts, ends, lives and dies with your customer." (Page 218) How will you appeal to your customer's unconscious mind, where the decision to buy or not buy is made? Know and describe clearly, your customer by demographic (who your customer is) and psychographic (why he buys). Learn your customer's language and then speak it clearly and well so that your voice is heard above the din in the marketplace. (Page 218-233)
   
   
7. Your systems strategy: "A system is a set of things, actions, ideas, and information that interact with each other, and in so doing, alter other systems." (Page 234) There are hard systems, the animate things; soft systems, the inanimate things and ideas; information systems, those that provide us with information about the interaction between the other two systems. (Page 234-252)
   
   

For the entrepreneur, whether in business today or aspiring to develop an enterprise, The E-Myth Revisited is a great handbook for organizing your thinking and doing in developing the business of your dreams.