The E-Myth Revisited

By Michael Gerber

 

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Introduction

 

The E-myth is the mistaken belief that most people starting a small business are entrepreneurs risking capital to make a profit. In this book, author Michael Gerber makes the point that if your business depends on you, you don't own a business, you own a job, and he sets out his solution to a problem experienced by many just starting out – working in a business rather than working on a business.

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My Top 3 Takes from the Summary

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• Understanding the technical work in a business is not the same as understanding the business itself

• Everybody who goes into business is actually three-people-in-one – the Entrepreneur, the Manager, and the Technician

• Your business is not your life. Once you recognise that the purpose of your life is not to serve your business, but that the primary purpose of your business is to serve your life, you can then go to work on your business, rather than in it, with a full understanding of why it is absolutely necessary for you to do so

 

 

Why Most Small Businesses Don’t Work and What to Do About It

 

The key message contained in the chapters of the book is that most businesses are started by technicians (employees) who decide to quit their job and work for themselves – and the author believes this is why most small businesses don’t work. He explains that understanding the technical work in a business is not the same as understanding the business itself, stating that in the end “an entrepreneurial dream turns into a technician’s nightmare” as work that was enjoyed gets turned into a job. He uses the term “entrepreneurial seizure” to describe the moment a technician decides to be their own boss and run their own business, and states that the “fatal assumption” made by most is the belief that understanding the technical work of a business means understanding a business that does technical work.

 

These are two very different things:  

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• Technical Work of a Business – the application of technical knowledge and skills to perform specific tasks

• Business that does Technical Work – an organization that produces and sells goods and services for profit

 

 

The Entrepreneur, the Manager, and the Technician

 

The author writes: Everybody who goes into business is actually three-people-in-one – the Entrepreneur, the Manager, and the Technician. He believes that to succeed, all three roles need to be played.

 

 

The Entrepreneur:

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• The Entrepreneur lives in the future, never in the past, rarely in the present. He’s happiest when left free to construct images of ‘what-if’ and ‘if-when’

• The Entrepreneur is the innovator, the grand strategist, the creator of new methods for penetrating or creating new markets

• The Entrepreneur is our creative personality—always at its best dealing with the unknown, prodding the future, creating probabilities out of possibilities, engineering chaos into harmony

• The Entrepreneur has an extraordinary need for control. He needs control of people and events in the present so that he can concentrate on his dreams

• The Entrepreneur creates a great deal of havoc around him, which is predictably unsettling for those he enlists in his projects

• The Entrepreneur’s worldview is a world made up both of an overabundance of opportunities and dragging feet

• To The Entrepreneur, most people are problems that get in the way of the dream

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The Manager:

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• The Manager is pragmatic. Without him, there would be no planning, no order, no predictability

• If The Entrepreneur lives in the future, The Manager lives in the past

• Where The Entrepreneur craves control, The Manager craves order

• Where The Entrepreneur thrives on change, The Manager compulsively clings to the status quo

• Where The Entrepreneur invariably sees the opportunity in events, The Manager invariably sees the problems

• The Manager is the one who runs after The Entrepreneur to clean up the mess

• Without The Manager, there could be no business, no society

• 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

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The Technician:

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• The Technician is the doer, and the Technician loves to tinker

• If The Entrepreneur lives in the future and The Manager lives in the past, The Technician lives in the present. He loves the feel of things and the fact that things can get done

• 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. So he works steadily and is happiest when he is in control of the workflow

• The Technician mistrusts those he works for because they are always trying to get more work done than is either possible or necessary

• To The Technician, thinking is unproductive unless it’s thinking about the work that needs to be done.

• 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

• To The Technician, all ideas need to be reduced to methodology if they are to be of any value

• The Technician knows that if it weren’t for him, the world would be in more trouble than it already is

• Everyone gets in The Technician’s way and to The Technician, ‘the system’ is dehumanising, cold, antiseptic, and impersonal. It violates his individuality

 

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Working ON Your Business

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The author writes: The fact of the matter is that we all have an Entrepreneur, Manager, and Technician inside us. However, he goes on to explain that most people starting a small business are 70 per cent technician, 20 per cent manager, and 10 per cent entrepreneur, so most new businesses are operated according to the wants of the owner as opposed to the needs of the business.

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To succeed, a business needs to grow, and the author describes the three phases of a business’s growth as Infancy, Adolescence, and Maturity. He comments: 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! The purpose of going into business is to get free of a job so you can create jobs for other people. It is therefore a critical moment in every business when the owner hires his very first employee to do the work he doesn’t know how to do himself or doesn’t want to do. Your job is to prepare yourself and your business for growth.

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A Mature company is founded on a broader perspective, and it’s about building a business that works not because of you but without you. A Mature business knows how it got to be where it is, and what it must do to get where it wants to go. 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. Your business is not your life. Once you recognise that the purpose of your life is not to serve your business, but that the primary purpose of your business is to serve your life, you can then go to work on your business, rather than in it, with a full understanding of why it is absolutely necessary for you to do so.

 

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The 7-Step Program for Success

 

1. Your Primary Aim – successful people are those who know how they got where they are, and what they need to do to get where they’re going. What do you value most; who do you want to be; and what do you want your life to look like? Or to think of it another way, what do you want people to say about you at your funeral?

2. Your Strategic Objective – this is a very clear statement of what your business must do for you to achieve your Primary Aim. Ask yourself, what will serve my Primary Aim? How much money do I need to live the way I wish – not in income but in assets. In other words, how much money do you need in order to be independent of work, to be free?

3. Your Organisational Strategy – most companies organise around people rather than around accountability or responsibilities, and this more often than not results in chaos, according to the author. Without an Organisational Chart, everything hinges on luck and good feelings, on the personalities of the people and the goodwill they share

4. Your Management Strategy – a management system is needed to successfully implement a management strategy. A system is a set of things, actions, ideas, and information that interact with each other, and in so doing, alter other systems

5. Your People Strategy – people want to work for a boss who’s created a clearly defined structure for acting in the world. They want a structure through which they can test themselves and be tested, and the author calls this structure a game. The degree to which people buy into your game depends on how well you communicate the game to them at the outset of your relationship. Your People Strategy is the way you communicate this idea

6. Your Marketing Strategy – demographics and psychographics are the two essential pillars supporting a successful marketing program. If you know who your customer is – demographics – you can then determine why he buys – psychographics. The author makes the point that you should forget everything but your customer. If your customer doesn’t perceive he needs something, he doesn’t, even if he actually does

7. Your Systems Strategy – hard systems are inanimate things, soft systems are animate things or ideas, and information systems are those that provide us with information about the interaction between the other two. A successful business needs all three systems

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To help the reader understand the importance of the 7-steps in relation to working on your business, rather than in it, the author writes: Pretend that the business you own – or want to own – is the prototype, or will be the prototype, for 5,000 more just like it. Documentation says, ‘This is how we do it here'. Documentation provides your people with the structure they need and with a written account of how to ‘get the job done’ in the most efficient and effective way. What you do in your model is not nearly as important as doing what you do the same way, each and every time. Without documentation, all routinised work turns into exceptions.

 

He uses Ray Kroc, McDonald’s CEO from 1967-1973, as an example: Forced to create a business that worked in order to sell it, he also created a business that would work once it's sold, no matter who bought it. Armed with that realization, he set about the task of creating a fool proof, predictable business. A systems-dependent business, not a people-dependent business. A business that could work without him. Unlike most small business owners before him – and since – Ray Kroc went to work on his business, not in it. He began to think about his business like an engineer working on a pre-production prototype of a mass-produceable product."

 

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Conclusion

 

The information presented by the author is designed to help anyone struck by an “entrepreneurial seizure” or anyone struggling to get their business to work for them, not the other way around, to build a systems-dependent business rather than a people-dependent business. The questions posed and answered in detail include:

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• How can I get my business to work, but without me?

• How can I get my people to work, but without my constant interference?

• How can I systematise my business in such a way that it could be replicated 5,000 times, so the 5,000th unit would run as smoothly as the first?

• How can I own my business, and still be free of it?

• And how can I spend my time doing the work I love to do rather than the work I have to do?

 

 

Highlights

 

The author presents his ideas in simple language, and he uses relevant, relatable examples in the form of imagined scenarios and real-life case studies that help to illustrate his key points.

 

 

Bio of the Author

 

Michael Gerber is an American author and founder of Michael E Gerber Companies, a business skills training company. The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael Gerber, 1995, ISBN: 978-0-88730-728-7 is available to buy at Amazon.

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