THE E-MYTH REVISITED by MICHAEL GERBER Book Summary
Statistics
show that the majority of a small businesses will fail by the end of the first
year. What are reasons for a small business failure? How do you know whether
your business will survive its first year? How do you know whether or not you
are on the same path of business failure like thousands before you? Why lose
your money your precious time and energy if there is someone to share their
experience who have already been there? Why not learn lessons our business
failure from the person sharing the lifelong experience and wisdom? For them,
it took years of failure to learn those lessons. However, for us we can learn
them in minutes. Why small businesses don't work and what to do about it?
The
book called Emyth revisited by Michael Gerber has an answer for you. Michael
Gerber is the founder of a company called Emyth Worldwide. His company has
decades of experience in helping people grow their small businesses. The author
says the number one reason why small businesses fail is that it is started by a
technician. The technician only has specific and limited knowledge in certain
areas. This specialized knowledge means a technician doesn't know how the
business works. The reason for our business failure depends on what the
technician was doing in his previous job. As in most cases, the technician
turned business owner was doing the technical work in his previous job. The
technicians only know how to do a specific thing. As by definition, technicians
are the ones who has specialized in a chosen field. So the technician might
only know how to build a certain product or provide specific service. But they
may not know how the business works. The book says it's one thing to know the
technical work that the business does and entirely different thing how their
business work doing that technical work.
The
number two reason for a business failure is a technician building a product or
a service just because he or she knows how to build it. This becomes
problematic when that product or service doesn't solve any problems of a
customer or doesn't fulfill any need of customers. So the problem is the
technician builds a product or service first, only then tries to sell it. But
the customer may or may not want or need that product or service. So the book
revolves around this problems for the first 1/3. Then, the author provides
solutions to these problems The first solution is to create a business that is
customer centric. The book says first know your customers, their needs their
wants and their problems, then create a solution which is your business that
fulfills the need or solve the problem of your customers and not the other way
around. Jeff Bezos says that success of Amazon largely depends on this
principle: In Amazon they are obsessive about customer satisfaction. Start with
the customer and work backwards.
The
second solution the book provides is work on your business, not in your
business. You see, you have to start your business in a different way. From the
start work on your business. Think about how to create a business that works
without the owner. Think about how to create a business that gives consistent
results every single day. The main difference in a technician in an
entrepreneur is in their way of thinking. What is the product? For a technician
the product is what it delivers to the customer but for an entrepreneur the
business itself is the product. The entrepreneurial perspective has less to do
with what's done in a business and more to do with how it's done. I think this
is the main takeaway from this book. It's not the product or work itself that's
important. What's important is the business how it looks how it acts how it
does what it is planned to do.
The
commodity isn't what's important, the way it's delivered is. So how to create a
business that doesn't depend on you? How to create a business that works and
gives consistent results even in your absence. The answer is franchise
prototype. The franchise prototype is where all assumptions are subjected to
the test. The main reason why you test all assumptions about your business is
to find out whether your business will work or not before it becomes
operational in massive scale. You test all assumptions about your business by
creating a prototype or Minimum Viable Product. and only when your assumptions
are proved to be true, you can think about expanding your business otherwise
you keep tweaking your business to fit a specific customer need or want. Next
make your prototype system dependent rather than people dependent. So how do
you know whether your prototype or your business is system dependent or people
dependent? To know the answer ask these questions about your business: Will
your business work when all your original employees leave? Is your original
employees replaceable? Replaceable in the sense that even if all employees
leave the business will be able to provide consistent results every single
time. If your business works and if your business can provide consistent
results even if your all original employees leave then the business is system
dependent. So how to create a franchise prototype?
The
author talks about three steps for creating a franchise prototype:
Number
1: innovation.
Number
2: quantification.
Number
3: orchestration.
Innovation
is about doing new things. Not just thinking about it, but actually getting it
done. Doing things differently. To create a unique experience one has to
continuously experiment the things you see, hear, touch and feel. and that's
all innovation is about. Doing things differently. and seeing whether the
change or innovation or experiment is working or not. So now you have made some
changes, now you have experimented with the business about how it looks how it
acts how do you know whether that innovation or change is working or not? The
way to know whether the innovation or change is working on not is by
quantifying all the results from your innovation. For example, if you make
changes in the dress code of your employees or color theme of your companies or
some other customer touch points, you must have quantified all the results or
changes in the number of customers for certain test periods.
So
if there is a higher number of customers, higher retention rates, higher
profits resulting from the changes you have made then your innovation may be
working. and in order to replicate the success resulting from the changes you
have made, you have to document everything in operational manuals. Documentation
is the key for consistent results. With proper documentation, you can build a
business system that can be replicated over and over again. With proper
documentation your business can give consistent results to your customers. With
proper documentation your new employee can be trained to provide same result as
previous employees. so that your business will provide consistent results even
if your original employees leave. So that's how you make a business system
dependent. Your business will provide same result whoever might be the
employees.
The third is orchestration. Once you innovate a process and quantify
its impact on your business, once you find something that works better than
what preceded it, once you discover how to increase positive responses from
your customers, from your suppliers, from your lenders and from your employee at
that point it's time to orchestrate the whole thing. Building a prototype of
your business is the continuous process. you have to keep innovating keep
quantifying all the results of that innovation and keep orchestrating that
innovation to produce same results every single time. If you keep in your mind
all these ideas or knowledge that the author provides, then you are one step
closer to creating a successful business. and when your business doesn't need
your constant interference to run smoothly, then you are free to pursue other
things that you have always wished to do. And if you want to sell your
business, then people will buy it. People will buy your business because it
works without you.
People will buy your business because the business is system
dependent and provides consistent results every single time More importantly,
you'll save your time and your money, your investment and your business. Also a
business will survive if you keep innovating to meet a specific customer need
or want. So this is what I learned from the book Emyth revisited. Problems of
most small businesses, reasons for the failure and how to avoid it.
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