The E-myth or Entrepreneurial Myth revisited
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. 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 – a visionary, innovator and creative who lives in the future and craves control.
- The Manager – a pragmatic, planner and organiser who clings to the status quo, lives in the past and craves order.
- The Technician – a doer and a worker who lives in the present and craves to be working on one thing at a time.
Michael suggests that the successful business leader is an incredibly competent individual with a balance between all three personalities. They can do good work, build a solid operational base and still forge ahead into new areas of interest.
The book goes on to explain that businesses go through three main phases as they develop and grow.
The infant business
Businesses 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
The business grows 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. Therefore, they have to deal with an increasing volume of issues which come at them from every direction (see below:)
- 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.
- Funders concerned at the unexpected cash and or profit decline.
- Suppliers who are explaining that the reason for the wrong delivery is that the order was incorrect.
- Staff who say they’re trying their best but they don’t understand how to do their job.
Michael says that one solution is to get small again. Yet, the strong-willed, stubborn and true entrepreneur uses a franchise prototype and a business development process 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. By having a clear and defined operating model, this business 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. The idea 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. 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. They do this with an agility that automated and rigid, documented systems often precludes.
Secondly, although 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 because, whilst I believe that both MD2MD and I are 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. In the decade since then, I have been sharing what I learned that worked – and what I learned that 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.
The catch ups have been a highlight of the week. It has been so useful to share experiences, understanding of the ever-changing regulations and receive sound advice from fellow Managing Directors. It’s enabled me to deliver clear and confident direction to the staff and fellow directors.
Managing Director - Bob Bradley
Bob is a specialist in running high value added service businesses, having run five such businesses as General Manager, Managing Director or Chief Executive. His last employed role was as Chief Executive of a £16M, 200 person family owned business having previously been Chief Executive of an AIM listed company for which he raised £5M funding and which he grew from £4M to £12M in three years through two acquisitions and organic growth, and a corporate PLC subsidiary where he was Managing Director responsible for delivering £10M profit on £45M turnover through 450 staff.
Bob is now following a portfolio career providing entrepreneurial business leaders with mentoring and coaching around business leadership, business growth, merger integration and exit planning.
Core to his portfolio is MD2MD. Having experienced for himself the value of having a strong sounding board of fellow Managing Directors he founded MD2MD in 2004 to provide groups of business leaders with a confidential environment within which they can support and challenge each other to raise their game as leaders and by doing so improve the success of their organisation.