Effective managementEntrepreneurial ambition & growth

The E-myth or Entrepreneurial Myth revisited

As usual this article is to share briefly some valuable thinking to save busy business leaders the task of reading the book themselves, but with the caveat that you’re reading my summary and my interpretation so if you wish to dig deeper please read the original thoughts of Michael Gerber by buying his book ‘The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It’ for yourself – which you can do by clicking this link.

In this book Michael Gerber challenges the idea that businesses are built by entrepreneurs that simply risk capital to make profit. The book suggests that believing this leads to business failure, as it assumes that if you understand the technical work of a business, you understand how to run a business.

The book begins by discussing the three personalities in business: The Entrepreneur, the Manager and the Technician.

  • The Entrepreneur is, he suggests, Visionary, an Innovator and a Creative who lives in the future and craves control.
  • By contrast the Manager is a Pragmatic, Planner and Organiser that clings to the status quo, lives in the past and craves order.
  • And by contrast again, the Technician is a Doer and a Worker who lives in the present and craves to be working on one thing at a time.

He suggests that the successful business leader is an incredibly competent individual with a balance between all three in that they can do good work, build a solid operatonal base and still forge ahead into new areas of interest.

The book goes on to suggest that businesses go through three main phases as they develop and grow.

The Infant business

They start as Infants. During this phase the owner and the business are one and the same thing. The owner is the business.

The Adolescent business

They grow through painful Adolescence as the founder recruits people to do things they don’t have the skills to do, or don’t want to do. This phase can be long and very painful as often the founder struggles to manage the growth and has to deal with an increasing volume of issues coming at them from every direction.

  • From customers who are unhappy that the product or service is not being delivered as promised by the founder – or the employed salesperson who doesn’t quite understand the offer as well as the founder.
  • From funders concerned at the unexpected cash and or profit decline.
  • From suppliers who are explaining that the reason for the wrong delivery is that the order was incorrect.
  • From staff who say they’re trying their best but they don’t understand how to do their job.

The author suggests that one solution is to get small again, but that the strong-willed and stubborn true entrepreneur uses a franchise prototype and a business development process (which I summarise here) to build a sustainable mature business.

The Mature or Adult business

He defines such a business as one that is a place of impeccable order with all work documented and delivering a uniformly predictable service to the customer. One that by having a clear and defined operating model can be operated by people with the lowest possible level of skill and still deliver consistent value to customers, employees, suppliers and lenders beyond what they expect.

The view of a post-Millennium English business leader

My own experience diverges slightly from the book – in a couple of ways.

Firstly, whilst I agree with the principles Gerber discusses I see his solution as only applicable to some businesses in the modern era. Whilst his solution of an entrepreneur building a de-skilled and replicable franchise-style business operating model may be right for simply making money quickly, many modern businesses are led by people with goals wider than simply maximising income, although clearly making a decent income is nearly always one of the goals. And in today’s world where physical and now intellectual activity is increasingly automated, many businesses succeed by finding ways to engage and retain high quality motivated staff who think for themselves and drive the business forwards with an agility that automated and rigid, documented systems often precludes.

Secondly, whilst I agree with the need to move beyond adolescence, my own perspective is that this phase can go on for a long time and sometimes for the rest of the founder’s life. I meet many people facing these challenges and most can’t quite extricate themselves from these challenges long enough to be able to develop the adult business they wish for. (Which does of course leave me with a degree of frustration as whilst both MD2MD and I personally are, I believe, well placed to help them, and indeed almost all that attend an MD2MD meeting as my guest recognise that, we cannot of course force them to do what in most cases they know they ‘should’ do.)

* My main career as an employed Managing Director and CEO was entirely spent leading plateauing (or declining) adolescent businesses back to sustainable growth as an adult business and in the decade since then I have been sharing what I learned worked – and what I learned didn’t – to help others facing similar changes.

By the way if you do face the challenge of leading an adolescent business and believe you can extricate yourself from fighting the fires long enough to stop them being lit, I would of course be delighted to discuss with you how MD2MD or I can help.  Click here for details about joining a meeting as our guest or simply fill in the enquiry form here and let’s have a chat.