The Big Idea
Starting a
business of your own is just like joining a marathon race. You dream big
while you’re on the starting line but as the race progresses you see a
lot of fellow racers fall behind. Many are not able to endure the test
of stamina and agility of the race.
The same goes with
small businesses worldwide. Only a few are really able to reach the big
dream. Majority of them simply fail no matter how huge effort is put
into the undertaking. Why is this so? Michael Gerber reveals the answers
in this book. The discussions revolve around the philosophies that could
make or unmake the future of small businesses. These philosophies are:
entrepreneurial myth (e-myth), the turn-key revolution and the business
development process.
PART I: THE E-MYTH and
THE AMERICAN SMALL BUSINESS
WHAT IS THE E-MYTH?
The
e-myth, or the entrepreneurial myth, evolved from one very fatal
assumption-- an assumption that unfortunately up to now many aspiring
entrepreneurs still believe in. The assumption is that the success of
every business is simply achieved by summing up the following: an
entrepreneur’s desire to own a business plus the certain amount of
capital he puts in plus the knowing the amount of targeted profit. This
equation does not spell SUCCESS but DISASTER instead.
The
fact is, however, the success of a business whether small scale or large
scale is not ONLY dependent on that. It is clearly dependent on many
factors that are all interrelated and reliant on each other. It is
important then that all these intertwining factors are dissected and
connected so that the entrepreneur gets a whole perspective before he
even dares to venture on the thought of owning a business.
The
Entrepreneurial Seizure
Before you start plotting your entrepreneurial future, you should also
get a full grasp of the phenomenon called entrepreneurial seizure. An
entrepreneur who goes through such experiences feels exhilaration,
exhaustion, and despair. He subsequently develops a sense self-loss.
This
occurrence is usually brought about by another fatal assumption made by
aspiring businesspersons that by merely understanding and mastering the
technical work of the business, they already have the full grasp of the
nature of that business. Incidentally, however, he will be in a
crossroad when concerns other than those involving technical work props
up and he realizes he is not fully equipped to deal with it. He is now
faced with limited choices. More often than not, the entrepreneur side
of him will predictably back out and hide.
FOCUS ON THE BUSINESS: Who are the characters?
How does one avoid experiencing the entrepreneurial seizure? First, he
simply needs to understand that a business proprietorship does not only
entail him to be a technician. There are other roles to play. Basically,
they consist of three namely: the technician, the manager and the
entrepreneur. In the case of small-scale businesses, all these roles had
to be played by an individual all at the same time. It may be
complicated. But then, it all boils down to balance.
The
Technician
He is the present. The technician is in charge of the physical aspect of
the business. He is the doer, the builder, the labourer. He gets things
done and makes things happen. For emerging businesses, the technician is
usually the most visible character. This is one major flaw to watch out.
Letting the technician take over the business will simply bring the
business to its demise. Due to his overzealous nature, the technician
will only exhaust the life out of the business.
The Manager
He
represents past. The Manager is in charge of putting order to the
business. He does the planning. He is more on the practical side. He
always has problems in mind. He is always fussing over some things in
the business. He abhors change and opts to stick to time-tested formula
when solving business problems.
The
Entrepreneur
He is the
future. He is the visionary, the dreamer among the three. He likes to
play “what-if” and “if-when” games. He is the creative department of the
business and is always on the lookout for new, innovative things.
PHASES IN A BUSINESS’S LIFE
Infancy: The Technician’s Phase
The infancy stage is considered as the technician’s phase because it is
the technician’s character that is most prominent on the owner at this
stage. He’s main focus right now is simply to do what he wants with his
business. He and his business are fused together, highly dependent on
the former. You take out the owner and the business is gone.
In
order to move on to the next cycle, the owner should realize that the
business will not last if it is continuously run on this manner. He will
have to realize that he has to change his approach or else his business
ends there. When such realization comes, the business moves on to the
adolescent stage.
Adolescence: Getting Some Help
When the owner starts to call for outside reinforcement, this signals
that the business has moved on to the adolescent phase. Naturally, the
first help he will need would have to be technical expertise from
somebody who knows well his kind of business. When that somebody is
found, this is where the roles of the technician, the manager and the
entrepreneur are gradually introduced with each other. Then they start
developing this safety area, which can be referred to as the comfort
zone.
Beyond the Comfort Zone
There comes a point in the life of a business where limits are pushed
and chaos rules over. The business owner is now dragged out of his
comfort zone and is faced with the following choices: to get small
again, to go for broke or to fully survive this adolescent phase and
move on to the last phase.
Maturity and the Entrepreneurial Perspective
Although maturity is the last phase in a business’s life cycle, it is
not the end of the development process. The enthusiasm for growth must
still continue in order for the business to survive.
The
entrepreneurial perspective and the entrepreneurial model for the
business also reach their maturity at this phase. The former starts to
assume a broader view of the business’s future while the latter, the
model, becomes more balanced and could now provide the specific work
assignments for all three – the technician, the manager and the
entrepreneur.
PART II: THE TURN-KEY
REVOLUTION: A New View of Business
THE
TURN KEY REVOLUTION
As
signified by the terminology, the turnkey revolution indeed brought
about distinct transformations on the way businesses are managed and
should be managed. It paved the way leading to the development of
extraordinarily successful businesses.
The Franchise Phenomenon
One prominent example of a small franchise turned multi-billion earning
is McDonalds. It’s tagline “the most successful small business in the
world” speaks for itself. Earning $40-billion annually and with
approximately 28,707 stores worldwide and still growing, it is the model
of all existing franchises worldwide. It introduced the so-called
business format franchise to the business world.
The Business Format Franchise
The business format franchise spun off from the earlier franchise format
called “trade name “ franchise. From formerly selling purely marketing
rights, the franchisor now entitles the franchisee to owning rights to
his entire business system as well. It is anchored on the belief that
the real product of a business is its sales technique rather than what
it sells.
The Franchise Prototype
It was
the franchise prototype that made the business format franchise a
successful phenomenon. Such prototypes enabled the testing of the entire
business system before it becomes fully operational. Therefore,
franchisees are assured that the system indeed works once it is
presented to them.
Standards for Franchise Prototypes
1.
Build a model that will provide
prospective clients, suppliers, creditors, and employees continuous
value and even exceed expectations.
2.
Build a model that is user-friendly,
meaning a model can be functional even to people whose skill level is
low.
3.
Build a model that is free of defects.
4.
Build a model that is equipped with
Operations Manuals.
5.
Offer your clients a model that is
guaranteed to provide consistently predictable results.
6.
Build a model that will make use of
similar colour, dress and facilities code.
PART III: BUILDING A
SMALL BUSINESS THAT WORKS!
THE BUSINESS DEVELOPMENT PROCESS
The
business development process is the response to the unending dynamism of
the business world. It equips the entrepreneur with the necessary tools
to pre-empt the continuous changes happening around. The process is
comprised of three elemental stages: innovation, quantification and
orchestration.
1.
Innovation
although the term innovation is oftentimes associated with creativity,
the two represent totally different ideas. Creativity is the act of
thinking how to do things while innovation translates these thoughts
into actions. The focus should be on innovation. It is innovation that
will put a certain degree of distinction to your business. This will
help you establish your individuality.
2.
Quantification
The process of quantification will deal with impact measurement and put
value to your innovation. Using customer responses as gauge, you will be
able to tell whether or not your innovation indeed made a difference. By
quantifying the effect of your innovation, you are provided with a
myriad of possibilities with regard to the business’s future.
3.
Orchestration
After assessing the impact of your innovation, it is now time to narrow
down your choices. You now decide which ideas to discard and which ones
to keep. You now set your standards for the improvement of your
business. Since you already know which approach works best with the
customers, you now shift your focus to bringing quality to your
business.
THE
BUSINESS DEVELOPMENT PROGRAM
The business development program provides you with the systematic way of
moulding your existing business – or your prospective business for the
matter – into a model for thousand others similar to it. It consists of
seven specific questions, the answers to which would bring about the
creation of your Franchise Prototype.
These are the questions:
1. What is your primary aim?
2. What are your strategic objectives?
3. What is your organizational strategy?
4. What is your management
strategy?
5. What people strategy should you apply?
6. What is
your marketing strategy?
7. What is your Systems Strategy?
Your Primary Aim
The owner’s primary aim should centre on what he really wishes, needs
and wants for his life. It will serve as the true ignition that would
help start the realization of one’s entrepreneurial dream. It will bring
to the owner a sense of purpose and some energy for the pursuit of his
goals.
Your Strategic Objectives
The strategic objectives are essential towards the making of an
extraordinary business because it contains standards that help the owner
achieve his goals for his business. It is important to consider, though,
that these objectives should always answer the question: what purpose
will this serve my primary aim?
Here
are some possible standards to include in your strategic objective:
First Standard: Money
Setting up your monetary objectives would bring you to asking yourself,
how big do you wish your business to become in monetary terms?
Second Standard: An Opportunity Worth Pursuing
The question to ask here is, will this undertaking satisfy the
requirements set by the primary aim and the strategic objectives? If the
response is positive, then pursue the dream and if otherwise, drop it
immediately and move on to searching for better alternatives.
Note, however, that the standards you would set have no definite number.
It could be a longer list. The important thing is that you don’t miss
out details that are instrumental towards the achievement of your
primary aim.
Your Organizational Strategy
Business owners should learn how to appreciate the value of
organizational structures. They have more profound impacts on the
organization that what meets the eye.
Organizing Around Personalities
When lining up your business’s organizational structure, focus on the
functional elements in order for you to develop a structure that is
based on accountabilities or responsibilities and not around
individuals.
Organizing Your Company
No matter how small the business, owners should always learn to separate
their individual aims from the collective goal of the company as a
whole. Before making the chart itself, identify all possible roles and
task assignments that exist and might soon exist in the company. Once
these are identified, drawing the organizational chart would be a
breeze.
Position Contract
This is a tool that contains the list of results expected from the job
position, the accountabilities/responsibilities attached to the said
position, a list of standards as point of reference during evaluation,
and space for signatories to document the agreement all parties
involved.
Your Management Strategy
The management strategy is one of the most essential parts of the
business development program because it is results-oriented. As the
owner you should recognize the truth that the successful implementation
of a management strategy is not dependent on the people who could
implement it but on the system instead.
What is a Management System?
A Management System is set of standards that you create in order for the
business to produce the results you desire. These are standards that
your present and future business managers will follow so they should be
aligned properly with your business goals.
Your People Strategy
The people
strategy refers to the approach you take towards your people and their
work. To make people appreciate the work they do, you should make them
understand the idea behind each of their task assignments. In a
service-oriented business for instance, the employee should focus more
on surpassing the quality of work or service that is delivered to the
customer’s everyday.
As
the owner, try to hire an employee who wants something more than just a
job. More often than not, these are the people who are not afraid to
change and to grow. The burden of making your people realize the value
of their work lies on you.
Work – A Game Worth Playing
At this point, try to look at your business on a different perspective.
Try to think that you are simply in search for a game worth playing. Try
to engage yourself in that game. A game that has the following rules:
1.
Never figure out what you want your people
to do and then try to create a game out of it.
2.
Never create a game for your people that
you yourself are not willing to play.
3.
Make sure that there are ways of winning
the game without ending it.
4.
Change the game tactics from time to time
but not the strategy.
5.
Never expect the game to be
self-sustaining.
6.
Play a game that makes sense.
7.
The game needs to be fun from time to
time.
8.
If you can’t think of a good game, steal
one.
At
the end of this game, you will realize that your business can do more
than provide work for others. It can also become a place of community –
that place where people find order, meaning and a sense of purpose
towards their very own existence.
Your Marketing Strategy
Here is the stage where all attention suddenly shifts from OWNER to the
CUSTOMER. When planning out ways to capture the market, it is now the
customer’s needs and him alone that matters. You set aside your personal
goals first.
The
Two Pillars of a Successful Marketing Strategy
In order for you to be able to address your customer’s need
appropriately, you should be able to know their demographic profile and
psychographic profile. The demographic profile tells you who your
customers are while the psychographic profile tell you why your customer
buys. Knowing all these facts about your customer enables you to
construct a Prototype that would not only satisfy his conscious needs
but his unconscious needs as well.
Your Systems Strategy
There are three kinds of systems in a business: the hard systems, the
soft systems and the information systems. The hard systems refer to all
those in your business that are inanimate and has no life. The soft
systems refer to all those that could be living or inanimate. The
information systems are everything else in the business that provides
you with data relating to how the two earlier systems interact.
The
emphasis should be more on the soft systems because this includes the
selling system that your business adopts. In the selling system, only
two things are essential: structure and substance. Structure is what you
do to sell and substance is how you do the selling.
It
is important to note though the all three systems mentioned are not
stand alone systems. They exist co-dependently with each other. The same
goes for the whole Business Development Program. All strategies
mentioned here are interdependent with each other and their integration
is important in order for the program to be successful.
BRINGING THE DREAM BACK TO AMERICAN SMALL BUSINESS
This book is an attempt to answer the worldwide call to put order to
chaos. Chaos that is brought about by an unending stream of changes
within the environment that you currently live in. Boundaries are now
lost and putting order to a world full of chaos and disorder is indeed a
Herculean task. The book does not anymore wish to achieve such feat. In
the first place, the root of the disorder is not really from “out there”
but “in here”. “In here” meaning, within each individual in this world.
The
book aims then to bridge that change-induced gap through helping revive
small businesses worldwide. Small businesses are very much manageable
and can definitely be effective and practical testing grounds for
whatever innovations you hope to contribute to the world. Bear in mind
that no matter how small a good task is, there will always a big
possibility that they would create ripple effects and pre-empt changes
for everyone’s betterment.
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